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Copyright 2003. Go Navy! Copyright 2003 ASSET ACCUMULATION, PROTECTION, PRESERVATION, and TRANSFER, LLC Registered Investment Advisory Firm John A. Cory,

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Presentation on theme: "Copyright 2003. Go Navy! Copyright 2003 ASSET ACCUMULATION, PROTECTION, PRESERVATION, and TRANSFER, LLC Registered Investment Advisory Firm John A. Cory,"— Presentation transcript:

1 Copyright 2003

2 Go Navy!

3 Copyright 2003 ASSET ACCUMULATION, PROTECTION, PRESERVATION, and TRANSFER, LLC Registered Investment Advisory Firm John A. Cory, Member Securities offered through Resources Horizons Group, LLC, broker-dealer, Member FINRA, SIPC

4 Copyright 2003 ASSET ACCUMULATION, PROTECTION, PRESERVATION, and TRANSFER, LLC 1981: 1987: 1992: 1999:

5 Copyright 2003 ASSET ACCUMULATION, PROTECTION, PRESERVATION, and TRANSFER, LLC 1981: Law/MBA 1987: CFP 1992: CPA 1999: AAPPT, LLC

6 Copyright 2003 Resource Horizons Group, LLC commission FINRA, SIPC APT fee SEC ADV COMPENSATION

7 Copyright 2003 FEE versus COMMISSION

8 Copyright 2003 Family Financial Philosophy Financial Independence: savings, income, liquidity Family Legacy Community Legacy: Church/College Avoid Tax Legacy

9 Copyright 2003 Life is like the game of Monopoly… When it’s all over, it all goes back into the box.

10 Copyright 2003

11 Investment Process 1. Determine Goals and Risk Level 2. Set Asset Allocation Strategy 3. Diversify Asset Classes and Styles 4. Rebalance and Reallocate 5. Monitor and Re-evaluate

12 Copyright 2003 Investment Process 1. Determine Goals and Risk 2. Set Asset Allocation Strategy 3. Diversify Asset Classes and Styles 4. Rebalance and Reallocate 5. Monitor and Re-evaluate

13 Copyright 2003 Investment Policy Statement OBJECTIVES: Return & Risk Tolerance Financial Independence College Charitable Giving Start Own Business CONSTRAINTS: Taxes, Debt, Liquidity, Time Horizon INVESTMENT POLICY STATEMENT

14 Copyright 2003 Investment Process

15 Copyright 2003 Investment Process

16 Copyright 2003 Investment Process

17 Copyright 2003 Investment Policy Statement

18 Copyright 2003

19 Asset Allocation Asset Category Selection Long range target percentage for each category Allowable percentage range increase Selection of actual securities

20 Copyright 2003 Asset Allocation 91.5% Asset Allocation 4.6% Security Selection 1.7% Market Timing 2.2% Other

21 Copyright 2003 INVESTMENT PYRAMID Aggressive: Leveraged stock/real estate Moderate: Growth stocks, Real estate Conservative: GNMA’s, Utility stocks Defensive: Treasuries, Certificates of Deposit Increased Risk/Reward

22 Copyright 2003 Qualified Plans/401(k) Profit Sharing/ 401(K) Defined Benefit 412(i) Money Purchase Simple IRA SEP IRA Uni K

23 Copyright 2003 IRA’s and TSA’s Traditional IRA Conversions Roth IRA Tax Sheltered Annuities 403(b)

24 Copyright 2003 The Right Investments Inside IRA Growth Mutual Funds Short-Hold Stocks Taxable Bonds Outside IRA Index/Low Turnover Mutual Funds Long-Hold Stocks Tax-Free Bonds

25 Copyright 2003 Judge Learned Hand “Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich and poor; and all do right, for nobody owes any public duty to pay more than the law demands; taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.”

26 Copyright 2003 Tax Act of 2003 Reduced income tax(10,15,25,28,33,35%) Reduced dividend taxation(max 15%) Reduced capital gains rates(5% - 15%) Marriage penalty relief Sunset provisions Winner: stocks

27 Copyright 2003 Tax Acts of 2004 Jobs Creation Act: Enron Favors manufacturing and farmers Subchapter S Corps: 100 shareholders Extends small business expensing: S 179 Tightens vehicle donation rules Reduces SUV loophole

28 Copyright 2003 Health Savings Accounts High Deductible($1,000 ind; $2,000 family) Contribution($2,600 ind; $5,150 family) Contributions less than deductible Tax deferred savings Penalty: 10% - non qualified distribution

29 Copyright 2003 Year End Planning Bunch deductions Prepay state income tax Prepay January mortgage Utilize home equity loans Utilize Section 179 business expensing ($102,000 for 2004; $25,000 in 2006) Donate used car before 2005 Beware of AMT

30 Copyright 2003 President Bush’s Agenda Permanent tax cuts(revenue neutral) Simplify/fair tax system(AMT:preference items) Partial privatization of Social Security Private oil exploration(Alaska) Care Act/IRA Rollover Act Ronald Reagan Alzheimer’s Act: $3K credit Tort reform(frivolous lawsuits)

31 Copyright 2003 Annuities Income tax deferral Fixed or Variable Equity Indexed Guarantees Fees Surrender Charges 10% penalty before age 59 1/2

32 Copyright 2003 Equity Indexed Annuities

33 Copyright 2003 Equity Indexed Annuities 2 – 3 % SAFETY EQUITY INDEXED ANNUITY Upside Market Potential STOCK 100% LOSS C D

34 Copyright 2003 Stock Options Section 83 of IRC Nonqualified stock options Incentive stock options Alternative minimum tax Analyze all alternatives Stock Options Stock Options

35 Copyright 2003 Income Tax Credits Low Income Housing Credit:over 10 years Offset $25,000 income/year(more passive) Historic Rehab(credit upfront, inc restrict) No reduction in tax basis AMT neutral(can’t reduce) Limited partnership

36 Copyright 2003 Why Invest In Natural Gas? Demand Continues to Grow Domestic Supply Challenges Positive Price Outlook

37 Copyright 2003 Natural Gas Demand Source: Department of Energy

38 Copyright 2003 Oil and Gas Tax Benefits Write-off % in current year(“at risk”) General Partner:Liability Insurance; six months Remaining 20% Depreciated Depreciation & Depletion of 25%:5 yrs Depletion Allowances: 15% for life Intangible drilling costs

39 Copyright 2003 Mutual Funds Scandal Consider Selling –Alger, Nations, Heartland, Raymond James, Fleet Boston Financial, AIM, Bank of America Don’t Send Money Now –Columbia, Excelsior, Federated, Scudder, Seligman, Freemont Proceed With Caution –Alliance Bernstein, Franklin Resources, One Group, MFS, PIMCO, Putnam International, Loomis, Alliance Capital, Acorn, PBHG, RS Investments, Janus, Evergreen, Invesco (Amvescap), ING Note: Also Banks, Broker-Dealers, and Hedge Funds

40 Copyright 2003 Insurance Companies Scandals Marsch & McLennan:broker corruption,conflict of interest American International Group, Inc: corruption, conflicts of interest, bid-rigging ACE Ltd: corruption, conflicts of interest, bid-rigging Hartford Financial Services Group, Inc: corruption, conflicts of interest, bid-rigging Munich-American Risk Partners: corruption, conflicts of interest, bid- rigging Spitzer has subpoenaed Prudential Financial, Cigna, Met Life; Aon & Willis Group(brokers);Universal Life Resources Zurich Financial: bid rigging, contingent fees, kickbacks GA Investigation: Travelers,Ace,Principal,Cigna,BXBS,United,Fortis

41 Copyright 2003 GA Broker/Dealer Investment Scandals Lehman Brothers Bear Stearns Credit Suisse 1st Boston Goldman Sachs J.P. Morgan Morgan Stanley Citicorp:Sol Smith Barney USB Securities:Warburg USB Financial:Paine Web Spitzer: NY & national Merrill Lynch:2002 RESEARCH & INVEST (Conflict of Interest) $5M Invest Protect Trust Pending Wachovia Capital Deutsche Bank Thomas Weisel Partners

42 Copyright 2003 Winners and Losers Energy Defense Domestic Drugs Health Care Small Business

43 Copyright 2003 Q: Are you a TARGET? Professional Malpractice Divorce Partner Officer, Director, Advisory Board (actual or implied) Accident at home Real estate (environmental) Car accident Employee action

44 Copyright 2003 Asset Protection: Entity Selection C Corp: Medical Reimbursement Plan S Corp: Pass-through Entity LLC: % Owner/Profit – varies; real estate LLP: No Agreement; State-default LLLP: Limited General Partner Liability FLP: Estate tax, income tax, asset protect FLLP: All of the above

45 Copyright 2003 Asset Protection Relinquish control LLC, LLP, LLLP, FLP Spendthrift provisions Delaware, Nevada, Alaska, South Dakota Consider off-shore trusts

46 Copyright 2003 Prenuptial Agreements Protect children Avoid assumption of Debts of new spouse Dual attorneys Recording

47 Copyright 2003 Disability Insurance Definitions: “own occupation” Guaranteed renewable Waiting period Trigger,exclusions, term Inflation protection Portability

48 Copyright 2003 Long Term Health Care Insurance Tax qualified (or not) Noncancellable Guaranteed renewable Level of Care: skilled, intermediate, custodial Waiting period Trigger, exclusions, term Inflation protection

49 Copyright 2003 Activities of Daily Living Bathing Dressing Eating Toileting Transferring Continence

50 Copyright 2003 Who Pays for Nursing Home Care? Source:Centers for Medicare & Medicaid Services, Office of the Actuary, 2003 Projected Expenditures Data Released, January Out-of- Pocket 25.1% 50.3% 10.8% 4.0% 7.5% Other Public Funds Medicaid Medicare Other Private Funds Private Health Insurance 2.3%

51 Copyright 2003 Who Pays for Home Care? Source:Centers for Medicare & Medicaid Services, Office of the Actuary, 2003 Projected Expenditures Data Released, January Out-of- Pocket 18.6% 19.9% 32.1% 4.7% 19.7% Other Public Funds Medicaid Medicare Other Private Funds Private Health Insurance 5%

52 Copyright 2003 Who Pays for Care?

53 Copyright 2003 Who Pays for Care? SELF FAMILY Which CHILD? MEDICAID = WELFARE TRANSFER LTC Insurance

54 Copyright 2003 Life Insurance Cash value, investment control Term Whole Life Universal Variable: separate accounts Variable Universal

55 Copyright 2003 Variable Universal Life Potential income tax forgiveness Investment alternatives Investment Risks Fees Surrender Charges FEES!

56 Copyright 2003

57 Last Will and Testament If properly drafted and executed, avoids bond, returns and inventory Creditor claims resolved Simple Georgia probate Testamentary Trust

58 Copyright 2003 Revocable Living Trusts Avoid Probate and “red tape” Successor Trustee if not competent Privacy Pour-over Will needed Avoid ancillary jurisdiction

59 Copyright 2003 Powers of Attorney, Living Wills Financial Health Choice of Agent Successors Durable: Competency Powerful: Springing

60 Copyright 2003 Types of Joint Tenancy Joint Tenants with Rights of Survivorship Tenants in Common Passage/Estate includable Payable upon Death accounts

61 Copyright 2003 History of Estate Tax 1797: Stamp Act 1802: Repealed 1862: Civil War 1870: Repealed 1898: Spanish American War 1902: Repealed 1916: WW I 1924,1930’s,1976 – 1993 (9 Acts) 2001: EGTRRA

62 Copyright 2003 Tax Relief Act of 2001: Estate and Gift Tax Increased Unified Credit Reduced estate tax rates Segregate estate and gift tax Basis issues Increased qualified plan /IRA contribution and benefit limits Sunset provision: 1/1/2011

63 Copyright $3.5M 2002 $1M 2004 $1.5M 2006 $2M Unified Credit

64 Copyright 2003 Unlimited Marital Deduction Zero estate tax upon first spouse’s death Waste first spouse to die‘s unified credit

65 Copyright 2003 Marital Trust or Outright Spousal Distributions Same marital deduction and estate tax result Control income/principal Control ultimate disposition Trustee selection Consider QTIP

66 Copyright 2003 Unified Credit Trust Estate Children’s Trust Surviving Spouse Outright Personal property to spouse Residence to spouse Balance to spouse outright Unified Credit Trust All income to spouse or sprinkle with children Principal to spouse for health, support, and maintenance(and children) Spousal $5,000 or 5% power

67 Copyright 2003 Estate Tax Returns Detailed Balance Sheet: CUSIP #s Due nine months after death Payment in Cash Appraisals Form 706

68 Copyright 2003 Unified Credit Trusts Two spouses: two unified credits Principal: health, education, support, and maintenance Trustee selection

69 Copyright 2003 Qualified Terminable Interest Property Trusts Control distribution of assets after second spouse’s death Protect children of prior marriage Doesn’t pass to second spouse QTIP

70 Copyright 2003 QTIP Trusts Estate Children’s Trust Surviving Spouse QTIP All income to spouse Principal to only spouse for health, support, and maintenance First to die spouse controls ultimate beneficiaries Unified Credit Trust All income to spouse or sprinkle with children Principal to spouse for health, support, and maintenance (and children) Spousal $5,000 or 5% power

71 Copyright 2003 Disclaimer Trusts Estate Disclaimer Surviving Spouse All to spouse outright Unified Credit Trust All income to spouse or sprinkle with children Principal to spouse for health, support, and maintenance (and children) Spousal $5,000 or 5% power

72 Copyright 2003 Disclaimers Decline ownership Passes to next beneficiaries No interest Nine months after death Flexibility … but I don’t want it …

73 Copyright 2003 Incentive Trusts Flexibility versus ruling from the grave Education, ministry, teaching, matching income, Eagle Scout

74 Copyright 2003 Life Insurance Trusts Not includable in estate Effectively increases unified credit Crummey provisions (30 day beneficiary notice and rights) Trustee/separate bank account

75 Copyright 2003 Generation Skipping Trusts/Dynasty Trusts Rule Against Perpetuities Dynasty Trusts $1 Million Grandchildren’s Exemption Georgia: vest within 90 years Delaware, Nevada, Alaska, South Dakota

76 Copyright 2003 Charitable Remainder Trusts Win-Win situation Charitable Deduction: FMV of future interest Avoid capital gains tax Retain income Variable annuity: defer income Remainder to charity Irrevocable: not beneficiary

77 Copyright 2003 Donor Advised Funds/Community Foundations/Private Foundations Control versus administrative costs Prohibited transactions: Self-dealing, excise tax Sponsoring institutions

78 Copyright 2003 Grantor Retained Annuity/Income Trusts Leverage Unified Credit Future appreciation to children Remainder to children

79 Copyright 2003 Personal Residence Trusts Residence and vacation home Leverage unified credit Future appreciation to children Remainder to children

80 Copyright 2003 Gifts to Minors $11,000 per year Avoid guardianships Section 2503 C Trusts Uniform Gifts to Minors Form 709 AGE 18? AGE 21?

81 Copyright 2003 Section 529 Plans Income tax deferral/forgiveness No income limit Student not legal owner Five year / $55,000 Transfer to another relative State specific Alternative to Educational Accounts/IRA’s 529

82 Copyright 2003 Family Limited Partnerships Estate tax reduction: valuation discounts Maintain Control Asset protection Income tax spreading Business purpose Charging order

83 Copyright 2003 Lump Sum Distributions Entire account paid within single calendar year Unrealized appreciation of Company Stock is excluded (upon death get step-up) Study your options and seek tax advice

84 Copyright 2003 Rollovers versus Ten Year Averaging Ten year averaging available if age 50 before 1/1/86 Five year averaging no longer Lump sums within single year

85 Copyright 2003 Qualified Plan/IRA Distributions Taxed as ordinary income Before age 59 ½: 10% penalty Age 55: substantial equal pay Age 70 ½: minimum distributions “Stretch” beneficiaries (i.e. grandchildren) utilizing Trusts

86 Copyright 2003 Qualified Plan/IRA TRUSTS Irrevocable upon death Identifiable beneficiaries Documentation to plan administrator Avoid payment of debts, admin expenses, estate tax 1. Terms 2. Beneficiaries 3. Trustee 4. Termination

87 Copyright 2003 Qualified Plan/IRA Trust Statistics say that when children are the sole beneficiaries, 80% of all IRA’s are depleted within two years, resulting in immediate income taxation. Question: Should you consider a trust as the beneficiary of your qualified plan/IRA? Answer: Stretch IRA (Primary Beneficiary: Spouse; Contingent Beneficiary: IRA or Disclaimer Trust)

88 Copyright 2003 Final Minimum Distribution Rule Regulations 2002 Simple distribution calculation Reduced required distributions Facilitates beneficiary changes Facilitates disclaimers Still age 70 ½ 1. Age 59 ½ 2. Age 70 ½ 3. PENALTIES

89 Copyright 2003

90 Life is like the game of Monopoly… When it’s all over, it all goes back into the box.

91 Copyright 2003 He was a great man, but… The one scenario he forgot to consider in his forecast, was the certainty of Death.

92 Copyright 2003 Death is the last big move of your Life.

93 Copyright 2003 Probate Prove Validity of Will Notice Public filing Instant Acknowledgment and Assent Creditor Conclusion

94 Copyright 2003 Retitling Assets Deeds of Assent Letters of Instruction New account forms

95 Copyright 2003 Funding Testamentary Trusts Flexibility Basis step-up Growth or Income Trustee discretion

96 Copyright 2003 What Happens to Your IRA When You Die Spousal rollover Inherited IRA: only spouse recalculates (others: minus one) Rules depends if death occurs before age 70 ½ Avoid 5 year rule (pre 70 ½) Avoid ESTATE as beneficiary

97 Copyright 2003 IRA Distribution Rules Death Occurs Before 70 1/2 Individual Beneficiary Spouse Beneficiary Multiple Beneficiary Rollover Recalculate as Inherited IRA Beneficiary’s life expectancy Begin Dec 31 st of year following Avoid penalties Oldest age dictates Begin Dec 31st of year following Avoid penalties NO BENEFICIARY: Dec 31 st of Fifth calendar year following death Beneficiary’s life expectancy Begin Dec 31 st of year following Avoid penalties

98 Copyright 2003 IRA Distribution Rules Death Occurs After 70 1/2 Individual Beneficiary Spouse Beneficiary Multiple Beneficiary Rollover Recalculate as Inherited IRA Rollover Continue Oldest age dictates Begin Dec 31 st of year following Avoid penalties Beneficiary’s life expectancy Begin Dec 31 st of year following Avoid penalties NO BENEFICIARY: Continue annually over the deceased’s lifetime

99 Copyright 2003 Stretch IRA No Stretch IRA Loses Tax Deferral Taxes Due on Full Amount No Legacy Left for Children ® IRA ACCOUNTS OWNERSONGRANDCHILD IRA ACCOUNTS IRA ACCOUNTS IRA ACCOUNTS OWNER SON

100 Copyright 2003 American Family Philanthropic Blue Plot Plat 

101 Copyright 2003 DON’T PROCRASTINATE Because,… WHY?

102 Copyright 2003 YOU CAN’T TAKE IT WITH YOU!

103 Copyright 2003 MANKIND’S DILEMMA “ This is mankind’s age-old dilemma in the face of death: What man really fears is not so much extinction, but extinction with insignificance. Man wants to know that his life has somehow counted, that he has left a trace, a trace that has meaning. And in order for anything once alive to have meaning, its effects must remain alive in eternity some way.” Ernest Becker

104 Copyright 2003 QUESTION What are you doing with your Life’s resources, gifts, talents, opportunities, and abilities?

105 Copyright 2003 COMPLIMENT The highest compliment we can be paid is the trust you exhibit when providing us the names of friends and associates who might also benefit from the services we provide. John A. Cory, J.D.,CPA,MBA

106 Copyright 2003 ASSET ACCUMULATION, PROTECTION, PRESERVATION, AND TRANSFER, LLC. (A registered Investment Advisory firm) Other than spiritual and humanitarian issues, (which are by far, more important) that’s what life is all about. Do YOU have your act together? Call and make an appointment for a free consultation (or we’ll mail you our 45 point questionnaire). Don’t procrastinate. Remember You Can’t Take It With You. Visit our website at Is your financial/investment/retirement/estate/business act together? Securities offered through Resources Horizons Group, LLC, broker-dealer, Member FINRA, SIPC. John A. Cory, Sole Member Attorney, CPA,and Financial Consultant U of GA Law/MBA, US Naval Academy Captain, US Naval Reserve Certified Financial Planner in 1986

107 Copyright 2003 ASSET ACCUMULATION, PROTECTION, PRESERVATION, AND TRANSFER, LLC

108 Copyright 2003 Go Dawgs!!!


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