; daniels
Documents
Resources
Learning Center
Upload
Plans & pricing Sign in
Sign Out
Your Federal Quarterly Tax Payments are due April 15th Get Help Now >>

daniels

VIEWS: 7 PAGES: 35

  • pg 1
									The Jack and Faith Daniels Estate
The Daniels Family Tree
Jack & Faith Daniels’ Estate
   Cash & Checking             25’000
   Money Market               300’000
   Michigan Residence         600’000
   Florida Condo              400’000
   Traded Stocks              500’000
   Bonds                      400’000
   Real Estate              1’500’000
   Auto Company Stock         500’000
   Pension Plan             2’000’000
   Daniels Manufacturing    8’000’000
   Total Assets            14’225’000

   Condo Mortgage            200’000
   Real Estate Mortgage      150’000
   Total Liabilities         350’000

   NET WORTH               13’875’000
Shareholder Ownership
              Jack’s Main Concerns
Business Related
• Tax efficient transfer of company ownership to family members
• Let Jane have the option of becoming a part owner of the family
  business

Personal Estate Planning for Jack and Faith:
• Provide sufficient income to cover Jack’s & Faith’s retirement
  needs
• Provide Faith with stable income in the case of Jack’s death
• Provisions for disabled grandchild
• Strong interest in charity gift
• Tax efficient and fair distribution of wealth and without providing
  to too much “easy money” to beneficiaries
   The Jack & Faith Daniels
   Estate Planning Proposal

                     Presented by:
                     The Bankers Trust Co.
                     And
                     Rych Associates

29th October, 1999
The Bankers Trust Co.:
•   Part of the Deutsche Bank Group
•   The largest bank in the world in terms of total assets
•   Large global network
•   Awarded the best Financial Planning outfit in the world, by MEC & Co.




Rych Associates.:
•  Partners Robert, Yves, Christoph & Heiko, experts in Trust
Management + Estate Planning
•   Estate Planning boutique, highly respected in this business
Our Recommendations
              Jack’s Main Concerns
Business Related
• Tax efficient transfer of company ownership to family members
• Let Jane have the option of becoming a part owner of the family
  business

Personal Estate Planning for Jack and Faith:
• Provide sufficient income to cover Jack’s & Faith’s retirement
  needs
• Provide Faith with stable income in the case of Jack’s death
• Provisions for disabled grandchild
• Strong interest in charity gift
• Tax efficient and fair distribution of wealth and without providing
  to too much “easy money” to beneficiaries

                                   Recommendation for Mrs.& Mr. Jack Daniels
                                                 BT Co. & Rych Associates
Transfer of Company Ownership


        Recapitalization of Company


                                   Family
     Jack’s 70%
                                   Limited
       stake
                                 Partnership




                 General             Limited              Convertible
                 Partners           Partners                Bonds
              (Common Stock)    (Preferred Stock)


                               Recommendation for Mrs.& Mr. Jack Daniels
                                             BT Co. & Rych Associates
Transfer of Company Ownership



 Who Gets Which Stocks?
 • Common stock (voting rights) to Tim and Ted
   involved in business
 • Preferred stock (stable dividend) to Sam not involved
   in business
 • Bonds convertible into common stock to Jane


  Management Concerns:
 • Appointment of an external (non-family member)
   Chief Operating Officer (COO)

                              Recommendation for Mrs.& Mr. Jack Daniels
                                            BT Co. & Rych Associates
Jack & Faith Daniels’ Estate
   Cash & Checking               25’000
   Money Market                 300’000
   Michigan Residence           600’000
   Florida Condo                400’000
   Traded Stocks                500’000
   Bonds                        400’000
   Real Estate                1’500’000
   Auto Company Stock           500’000
   Pension Plan               2’000’000
   Daniels Manufacturing      1’000’000
   Total Assets               7’225’000

   Condo Mortgage               200’000
   Real Estate Mortgage         150’000
   Total Liabilities            350’000

   NET WORTH                  6’875’000

                           Recommendation for Mrs.& Mr. Jack Daniels
                                         BT Co. & Rych Associates
              Jack’s Main Concerns
Business Related
• Tax efficient transfer of company ownership to family members
• Let Jane have the option of becoming a part owner of the family
  business

Personal Estate Planning for Jack and Faith:
• Provide sufficient income to cover Jack’s & Faith’s
  retirement needs
• Provide Faith with stable income in the case of Jack’s death
• Provisions for disabled grandchild
• Strong interest in charity gift
• Tax efficient and fair distribution of wealth and without providing
  to too much “easy money” to beneficiaries

                                   Recommendation for Mrs.& Mr. Jack Daniels
                                                 BT Co. & Rych Associates
Coverage of Retirement Needs



  Transfer of Residence:
   Primary residence: Michigan
   Secondary residence: Florida Condo



                        After 15 years
       J&F                                          Children




                                  Recommendation for Mrs.& Mr. Jack Daniels
                                                BT Co. & Rych Associates
Coverage of Retirement Needs


Creation of a Qualified Personal Residence Trust (QPERT):
Irrevocably transfer both residences for a term of 15 years.
• Upon maturity of the term, the property is passed on to
the children
• If J&F die prior to the end of the trust term, the proceeds
thereof are subject to estate tax.


During the period of the term, J&F have the right to occupy
and use the residences.


                               Recommendation for Mrs.& Mr. Jack Daniels
                                             BT Co. & Rych Associates
 Coverage of Retirement Needs



       Commercial                         Lease of 10 Years

       Building
       owned by                                                                   DMC
                                          Rent of $200,000 p.a.
       Jack & Faith

Sale of Property   Gradual Payments via
                   Notes Receivable
to children for
                   ($200,000 p.a.)
$2,000,000




                                                        Lease of 10 Years

            Children
                                                   Rent of $200,000 p.a.



                                                         Recommendation for Mrs.& Mr. Jack Daniels
                                                                       BT Co. & Rych Associates
Coverage of Retirement Needs


   Sell Real Estate to children and have
    them lease it back to the company


 • With the collected rent paid by the company, the children
   gradually pay back the sum via notes receivable

 Advantages:
 • The Real Estate exits the parent’s estate
 • The parents continue to receive fixed income
 • Only gift tax on the residual

                                   Recommendation for Mrs.& Mr. Jack Daniels
                                                 BT Co. & Rych Associates
Jack & Faith Daniels’ Estate
   Cash & Checking                  25’000
   Money Market                    300’000
   Michigan Residence                    0
   Florida Condo                         0
   Traded Stocks                   500’000
   Bonds                           400’000
   Real Estate                           0
   Auto Company Stock              500’000
   Pension Plan                  2’000’000
   Daniels Manufacturing         1’000’000
   Total Assets                  4’725’000

   Condo Mortgage                 200’000
   Real Estate Mortgage           150’000
   Total Liabilities              350’000

   NET WORTH                     4’375’000

                           Recommendation for Mrs.& Mr. Jack Daniels
                                         BT Co. & Rych Associates
              Jack’s Main Concerns
Business Related
• Tax efficient transfer of company ownership to family members
• Let Jane have the option of becoming a part owner of the family
  business

Personal Estate Planning for Jack and Faith:
• Provide sufficient income to cover Jack’s & Faith’s retirement
  needs
• Provide Faith with stable income in the case of Jack’s death
• Provisions for disabled grandchild
• Strong interest in charity gift
• Tax efficient and fair distribution of wealth and without providing
  to too much “easy money” to beneficiaries

                                   Recommendation for Mrs.& Mr. Jack Daniels
                                                 BT Co. & Rych Associates
Coverage for Faith upon Jack’s Death



  • Faith’s 10% stake in the company will be changed into
    preferred stock in order to increase the stability of
    dividend income

  • Creation of a Delaware Trust* which will be funded by
    the defined contribution plan valued at 2’000’000
    (Unified Credit Exemption). Amount in trust to be
    invested in a growth portfolio.


   * The Delaware Trust is perpetual, therefore has an unlimited trust term.




                                                    Recommendation for Mrs.& Mr. Jack Daniels
                                                                  BT Co. & Rych Associates
Jack & Faith Daniels’ Estate
   Cash & Checking             25’000
   Money Market               300’000
   Michigan Residence               0
   Florida Condo                    0
   Traded Stocks              500’000
   Bonds                      400’000
   Real Estate                      0
   Auto Company Stock         500’000
   Pension Plan                     0
   Daniels Manufacturing    1’000’000
   Total Assets             2’725’000

   Condo Mortgage             200’000
   Real Estate Mortgage       150’000
   Total Liabilities          350’000

   NET WORTH                2’375’000

                           Recommendation for Mrs.& Mr. Jack Daniels
                                         BT Co. & Rych Associates
              Jack’s Main Concerns
Business Related
• Tax efficient transfer of company ownership to family members
• Let Jane have the option of becoming a part owner of the family
  business

Personal Estate Planning for Jack and Faith:
• Provide sufficient income to cover Jack’s & Faith’s retirement
  needs
• Provide Faith with stable income in the case of Jack’s death
• Provisions for disabled grandchild
• Strong interest in charity gift
• Tax efficient and fair distribution of wealth and without providing
  to too much “easy money” to beneficiaries

                                   Recommendation for Mrs.& Mr. Jack Daniels
                                                 BT Co. & Rych Associates
Provisions for Disabled Child & Charity

              Charitable Remainder Trust



     Auto                                     Non charitable income
   Company                                          beneficiary
    Stocks                                        (Jack & Faith)
   $500’000
                     Charitable
                     Remainder
                       Trust


    Bonds                                       Charitable Remainder
   $400’000



                                  Recommendation for Mrs.& Mr. Jack Daniels
                                                BT Co. & Rych Associates
Provisions for Disabled Child & Charity

              Irrevocable Life Insurance Trust
                                       “2nd to Die Policy”



  Purpose:
    Replace the principle of the C.R.T. at Jack’s and
    Faith’s death in order to provide further income to the
    disabled child* + other grandchildren which will be
    managed by trustee for children’s benefit.
  * The Public Benefits Programme for disabled individuals should be considered before determining the distribution
  to the disabled child.




                                                           Recommendation for Mrs.& Mr. Jack Daniels
                                                                         BT Co. & Rych Associates
Jack & Faith Daniels’ Estate
   Cash & Checking             25’000
   Money Market               300’000
   Michigan Residence               0
   Florida Condo                    0
   Traded Stocks              500’000
   Bonds                            0
   Real Estate                      0
   Auto Company Stock               0
   Pension Plan                     0
   Daniels Manufacturing    1’000’000
   Total Assets             1’825’000

   Condo Mortgage             200’000
   Real Estate Mortgage       150’000
   Total Liabilities          350’000

   NET WORTH                1’475’000

                           Recommendation for Mrs.& Mr. Jack Daniels
                                         BT Co. & Rych Associates
              Jack’s Main Concerns
Business Related
• Tax efficient transfer of company ownership to family members
• Let Jane have the option of becoming a part owner of the family
  business

Personal Estate Planning for Jack and Faith:
• Provide sufficient income to cover Jack’s & Faith’s retirement
  needs
• Provide Faith with stable income in the case of Jack’s death
• Provisions for disabled grandchild
• Strong interest in charity gift
• Tax efficient and fair distribution of wealth and without providing
  to too much “easy money” to beneficiaries

                                   Recommendation for Mrs.& Mr. Jack Daniels
                                                 BT Co. & Rych Associates
Tax Efficient Distribution of Personal Wealth


                                       DMC buys back
                                       stock from J &
                                       F’s estate
                   DMC Corp.                                 DMC Stock still in
                                                              J & F’s Estate




  DMC buys                Upon J & F’s
                          death, the
  Insurance for J & F                                                      Money received
                          proceeds from
                          the insurance go                                 from the sale of
                          to the company                                   stocks to DMC is
                                                                           used to cover
                                                                           estate costs



              Life Insurance on
                 Jack & Faith                                  Estate Costs




                                                   Recommendation for Mrs.& Mr. Jack Daniels
                                                                 BT Co. & Rych Associates
Tax Efficient Distribution of Personal Wealth


  Liquidity Provision for Payment of Estate Tax

  •   Company buys life insurance for Jack and Faith Daniels with “second to
      die” clause.
  •   Establishment of contract between Jack and company obliging
      company (upon the death of both Jack and Faith) to buy back enough
      stock from the estate in order to cover the estate tax and administrative
      costs.
  •   Company pays for stock with proceeds of life insurance.

  Advantages:
  • Enough funds to cover estate and administration costs
  • Estate does not need to be liquidated
  • Insurance proceeds to cover costs are not taxed if the value of stock
    redeemed does not exceed the estate tax and administration espense
    costs (Section 303)
                                                Recommendation for Mrs.& Mr. Jack Daniels
                                                              BT Co. & Rych Associates
The Story of Yvette Daniels:


Present Status Study and
Recommended Solutions for
Mrs. Yvette Daniels (wife of Tim
Daniels), a French citizen



                     Recommendation for Mrs.& Mr. Jack Daniels
                                   BT Co. & Rych Associates
The Story of Yvette Daniels:


Considerations:

•Transfer of wealth upon Tim’s death would result in US Estate Taxes
•Gifts of upto $100,000 per year during the lifetime of Tim are not subject
to US Estate Taxes




                                         Recommendation for Mrs.& Mr. Jack Daniels
                                                       BT Co. & Rych Associates
The Story of Yvette Daniels:



 Proposed Structure:
 Tim creates a Limited Partnership with Yvette and gifts her with limited
 partnership interest with value $100,000 p.a.



 Advantages:
 •More value (of stock) can be transferred due to permitted discount for
 lack of control and marketability.
 •Yvette cannot cash in or transfer her limited partnership interests
 without Tim’s consent, i.e. she cannot spend it while Tim is alive.




                                        Recommendation for Mrs.& Mr. Jack Daniels
                                                      BT Co. & Rych Associates
Conclusion




             Recommendation for Mrs.& Mr. Jack Daniels
                           BT Co. & Rych Associates
Jack & Faith Daniels’ Estate
   Cash & Checking             25’000
   Money Market               300’000
   Michigan Residence               0
   Florida Condo                    0
   Traded Stocks              500’000
   Bonds                            0
   Real Estate                      0
   Auto Company Stock               0
   Pension Plan                     0
   Daniels Manufacturing    1’000’000
   Total Assets             1’825’000

   Condo Mortgage             200’000
   Real Estate Mortgage       150’000
   Total Liabilities          350’000
                                         Net Taxable worth of the estate
                                         has reduced dramatically
   NET WORTH                1’475’000    therefore cutting down the
                                         estate tax to a great extent



                           Recommendation for Mrs.& Mr. Jack Daniels
                                         BT Co. & Rych Associates
Benefits of the Proposed Financial Plan:

Actual tax and wealth transfer expenses on the                                                 60% *
estate of $ 13,875,000


Taxes and Expenses with the proposed plan:
43% estate and wealth transfer tax on an
amount of $1,475,000.
15% Gift Tax on the QPERT ($1,000,000)
payable by the beneficiaries upon maturity of                                                  14%     (+/- 3%)

the QPERT.
8% Consultation and Management Fee on total
present net worth


 * 5% Surcharge applicable over the standard 55% for amounts between 10,000,000 - 24,000,000


                                                                      Recommendation for Mrs.& Mr. Jack Daniels
                                                                                    BT Co. & Rych Associates
 BT Co.

  Erika Belloni                       Melissa Dolan                     Chetana Munot
  +1 212 454 8697                     +1 212 454 8456                   +1 212 454 3453
  erika.belloni@bt.com                melissa.dolan@bt.com              chetana.munot@bt.com




Rych Associates

Robert Sorio             Yves Windey             Christoph De Wilde           Heiko Jungmann
                                                                              +1 210 739 0234
+1 210 739 0405          +1 210 739 0343         +1 210 739 3533
                                                                              heiko.jungmann@bt.com
robert.sorio@rych.com    yves.windey@rych.com    christoph.dewilde@rych.com

								
To top