1. TAX PLANNING FOR THE MIDDLE CLASS ESTATE: EXAMPLES MARCH 9, 2016 ANNETTE K. EATON

2. FEDERAL GIFT TAX, FEDERAL ESTATE TAX, FEDERAL GENERATION SKIPPING TRANSFER TAX, AND MASSACHUSETTS ESTATE TAX: RATES AND EXEMPTIONS Federal Gift Tax Exemption Amount: $5,450,000 in 2016 (and adjusted each year for inflation). Federal Gift Tax Rate: 40%. Federal Estate Tax Exemption Amount: $5,450,000 in 2016 (and adjusted each year for inflation). Federal Estate Tax Rate: 40%. Federal Generation Skipping Transfer Tax Exemption Amount: $5,450,000 in 2016 (and adjusted each year for inflation). Federal Generation Skipping Transfer Tax Rate: 40%. Massachusetts Estate Tax Exemption Amount: $1,000,000. Rates: 0-16% (Vanishing Exemption).

3. EXAMPLE CLIENTS Sally & John -Married -Assets: $2 million Sally & John want to pay as little Massachusetts and Federal Estate Tax as possible.

4. “I LOVE YOU” WILLS Sally’s Will John’s Will $1.5 million$500,000 Sally’s Will $2 million Massachusetts Estate Tax: $99,600

5. TRUST TAX PLANNING John’s TrustSally’s Trust Marital TrustFamily Trust $1.5 million $1 million$500,000 Massachusetts Estate Tax: $0, Savings: $99,600 Requirements for Marital Trust: “Qualified Terminable Interest Property”. - No beneficiary other than spouse. - Spouse has qualifying income interest for life. - Elect to treat as qualified terminable interest property. - May grant spouse special power of appointment at death. Included in Sally’s Estate at Death: $500,000 + $500,000 Marital Trust $1,000,000

6. THE CASE OF THE TWO SALLYS: THE POWER OF GIFTING Sally’s Irrevocable Trust F/B/O Children and Grandchildren Sally #2 Transfers $500,000 Sally #1: Sally – Widowed Asset Value: $2 million Sally #1 Dies: Massachusetts Estate Tax: $99,600 Sally #2: Sally – Widowed Asset Value: $2 million Sally #2 Dies: Massachusetts Estate Tax: $64,400 Savings: $35,200

7. This presentation contains images used under license. Retransmission, republication, redistribution, and downloading of this presentation, including any of the images as stand-alone files, is prohibited. This presentation may be considered advertising under certain rules of professional conduct. The content should not be construed as legal advice, and readers should not act upon information in this publication without professional counsel. ©2015. Nixon Peabody LLP. All rights reserved. THANK YOU ANNETTE K. EATON, ESQ. 617-345-1363 aeaton@nixonpeabody.com NIXON PEABODY LLP Boston, Massachusetts www.nixonpeabody.com