October 18, 2006 Webinar “Asset Protection Strategies that Actually Work” Mat Sorensen, JD “Important Year-end Tax Strategies” Mark Kohler, CPA, JD kkolawyers.com 856 South Sage Dr., Suite 2, Cedar City, Utah Telephone / Facsimile © Kyler Kohler & Ostermiller, LLP 2006

Disclaimer- Although the information contained in this Presentation may be extremely useful and helpful, please understand that the presentation of this information does not constitute an attorney-client relationship. Moreover, the information contained in this Presentation is for general guidance only. It is strongly recommended that each individual or entity obtain their own legal advice, particularly applied to their own set of circumstances, facts and specific situation. Kyler Kohler & Ostermiller, LLP is not responsible or liable for any advice that is taken and applied in a situation without direct consultation and representation specific to that individual’s or company’s needs. Instructor Notes © Kyler Kohler & Ostermiller, LLP 2006

Asset Protection Summary 1. Protect your personal assets from your business. Corporate veil. 2. Protect your business assets from yourself. Charging order for LP and LLC. Problems with single member LLC. 3. Protecting personal assets such as cabins, 2 nd homes, etc… FLP or irrevocable trusts. 4. Protecting the equity in your Home. Equity stripping. 5. What doesn’t work? Land Trusts and Fraudulent Transfers. 6. Quick and Easy Asset protection. Exemptions and exempt assets (homestead, retirement accounts, tenants by the entirety). 7. What is new in Asset Protection? The Series LLC. Asset Protection Strategies That Actually Work © Kyler Kohler & Ostermiller, LLP 2006

Series LLC Series 1Series 2Series 3 Series 4Series 5 Master LLC Series LLC Basics 1) Must treat each series as a separate entity. -Hold property and contract in name of the series (e.g, Series 1 of Jones Real Estate, LLC). -Maintain separate accounts and records for each series. 2) States where the Series LLC is recognized. More and more states are considering adopting the Series LLC statute. -Delaware, Illinois, Nevada, Iowa, Oklahoma, Tennessee, and Utah. © Kyler Kohler & Ostermiller, LLP 2006 Asset Protection Strategies That Actually Work

Benefits and Concerns of the Series LLC Concerns Careful consideration should be used before using the Series LLC in states that do not have a Series LLC statute. This is a new area of the law and there is no specific guidance from the IRS on whether one tax return for the mater LLC will be required or whether a separate tax return will be required for each Series within the LLC. The practical approach seems to be to treat each series of the LLC as a wholly owned subsidiary company and thus only do a single LLC tax return for the multiple entities. Caution in California. The Franchise Tax Board Revenue Ruling requires that each Series of the LLC pay the minimum $800 franchise tax. Benefits Avoid the problem of having “all of your eggs in one basket”. Each series is treated as a separate entity from the other series so that when a lawsuit occurs in one series the creditor plaintiff can only attack the assets in the series being sued. For example, if you had a lawsuit regarding a property in Series 1, then only the assets in Series 1 would be available to a creditor. The assets in Series 2-5 would be protected from the liability created in Series 1. Reduce costs and expenses from setting up multiple entities. Traditional approach to obtain separate treatment is to set up multiple entities. Asset Protection Strategies That Actually Work © Kyler Kohler & Ostermiller, LLP 2006

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1.Start a Small Business 2. Pay your Family for Services they Provide 3. Adopt a self-directed Retirement Plan 4. Rental Property AND Cost Segregation 5. Properly Deduct Medical Costs 6.Purchase a larger vehicle for your business Important Year-End Tax Strategies © Kyler Kohler & Ostermiller, LLP 2006

Paying spouse or children in advantageous ways… S-Corp or C-Corp Director fee No SE Tax Employee 15.3% FICA Family Sole Prop or SMLLC Pay Children- NO FICA Standard Deduction $5, $5,150 – 2006 for earned income Service or management Fee Family LLC Over age 18Under age 18 Must be owned 100% by Mom and/or Dad Retirement Planning OPTION 1 OPTION 2 OPTION 3 College Savings Retirement Planning Important Year-End Tax Strategies © Kyler Kohler & Ostermiller, LLP 2006

Retirement Plans Individual Retirement Accounts Profit Sharing PlansDefined Benefit Plans - Simple IRA - Traditional IRA - Educational IRA - Simplified Employee Plan IRA - Roth IRA - Straight P.S. - Traditional 401(k) - Roth 401(k) (i) - Self Directed DB Government Retirement Plans B Important Year-End Tax Strategies © Kyler Kohler & Ostermiller, LLP 2006

The 4 Most Commonly Used Defined Contribution S.D.R.P.’s Traditional IRA Roth IRA Traditional 401(k) Roth 401(k) Important Year-End Tax Strategies © Kyler Kohler & Ostermiller, LLP 2006

Traditional IRA Contributions are deductible $4,000 annual contribution (06). $5,000 annual contribution if 50+ (06). Distributions are generally taxable. Important Year-End Tax Strategies © Kyler Kohler & Ostermiller, LLP 2006

Roth IRA Contributions are non-deductible. $4,000 annual contribution (06). $5,000 annual contribution if 50+ (06). Distributions are non-taxable! Important Year-End Tax Strategies © Kyler Kohler & Ostermiller, LLP 2006

Traditional 401(k) - Distributions are taxable. - Limits: 25% up to $44,000 per year. - Contain a tremendous borrowing provision. - May contain a profit sharing plan. - Portion of paycheck is withheld each month. - Contributions are not taxed. - May contain employer match. Important Year-End Tax Strategies © Kyler Kohler & Ostermiller, LLP 2006

Roth 401(k) - Distributions will be taxable and non-taxable! - Limits: 25% up to $44,000 per year. - Contains a tremendous borrowing provision. - May contain a profit sharing plan. - Portion of paycheck is withheld each month. - Employee contributions are taxable. - May include employer match. - Employer contributions non-taxable. Important Year-End Tax Strategies © Kyler Kohler & Ostermiller, LLP 2006

Maximizing Your Contributions IRA’s: Invest $4,000 of new money every year, $5,000 if you are 50 or older. $5,000 if you are 50 or older. 401(k)’s: Employee Max $15,000 (up to 100% of income) $20,000 if you are 50 or older. $20,000 if you are 50 or older. 401(k)’s: Employer may match up to 100%, limited to 25% of income. 25% of income. SEPs: $44,000, or 25% of your income, whichever is less. Important Year-End Tax Strategies © Kyler Kohler & Ostermiller, LLP 2006

Comparing the 401(k) and SEP Important Year-End Tax Strategies Salary- 36,000 - FICA cost - $5,508 Salary- 36,000 - FICA cost - $5, (k)SEP Employee Cont. - $15,000 Company Match - $9,000 Total Deferral - $24,000 Total Deferral- $9,000 In order to obtain a $24,000 Deferral, Salary would have To equal $96,000 at a FICA Cost of $14,465. (diff of $8,957) To obtain a $44,000 deferral Salary would have to be $176,000 at a FICA cost of $16,785. © Kyler Kohler & Ostermiller, LLP 2006

Thank You!! Mark J. Kohler, CPA, Attorney at Law kkolawyers.com 856 South Sage Dr., Suite 2, Cedar City, Utah Telephone / Facsimile © Mark J. Kohler, CPA, JD, PC, 2006