1. 1 Estate Planning – Retirement Benefits

2. 2 The Nuts & Bolts Rules Introduction to Estate Taxes Unlimited Marital Deduction Exemption amounts (Unified Credit)

3. 3 Federal Exemption Amounts & Rates Estate Transfer Exempt Amount (Applicable Exclusion Amount) and GST Exemption Year Lifetime Gift Exempt Amount Highest and Gift Tax Rates 2002 $1 million 50%* 2003 $1 million 49% 2004 $1.5 million$1 million 48% 2005 $1.5 million $1 million 47% 2006 $2 million $1 million 46% 2007 $2 million $1 million 45% 2008 $2 million $1 million 45% 2009 3.5 million $1 million 45% 2010 Tax Repealed $1 million 35% (gift tax) 2011 $1 million** $1 million 55% Economic Growth Tax Revenue & Recovery Act of 2001 * Reflecting repeal of the 5% surtax ** The GST Exemption will be as indexed for inflation. IRC § 2631(c).

4. 4 State Exemption Amounts Comparison of Federal & Massachusetts Exemptions Year Mass. ExemptionFederal Exemption 2003 $700,000$1 million 2004 $850,000$1.5 million 2005 $950,000$1.5 million 2006 $1 million$2 million 2007 $1 million$2 million 2008 $1 million$2 million 2009 $1 million$3.5 million 2010 $1 millionNo Federal Estate Tax 2011 $1 million$1 million

5. 5 Hot Assets IRAs are subject to double taxation Referred to as “Hot Assets” Assume IRA of $5,000,000 Estate tax is$2,500,000(@50%) Income Tax on the balance is$1,125,000(@45%) Net after taxes$1,375,000 Only 27.5% remains after taxes

6. 6 Solutions Leave IRA to the University upon death Simply change the beneficiary designation No estate tax or income taxes $5,000,000 goes to the University instead of $3,625,000 to the Government (one charity is much better than the other) Cost to the family is only $1,375,000 In many situations, Donor will purchase life insurance for $1,500,000 in trust for children to replace after tax amount family would have otherwise received.

7. 7 Married Couples with Large IRAs Consider using Charitable Remainder Trusts to provide income to the spouse for his/her life. Any funds remaining will go to the University upon the second death Great for couples with no children Donor can control final destination of funds to University rather than relying on the surviving spouse to leave funds to University

8. 8 Steps Establish Charitable Remainder Trust NOW (CRT) Designate CRT as beneficiary of IRA (rather than the spouse) Upon death, the IRA is paid over to CRT CRT pays fixed percentage of assets to spouse for his/her life each year Income interest for spouse is eligible for marital deduction so no estate taxes are due on either death

9. 9 Uniform Distribution Table This table is the new life expectancy table to be used by all IRA owners to calculate lifetime distributions (unless your beneficiary is your spouse who is more than 10 years younger than you). In that case, you would not use this table, you would use the actual joint life expectancy of you and your spouse based on the regular joint life expectancy table. The Uniform Distribution Table is never used by IRA beneficiaries to compute required distributions on their inherited IRAs. Age of IRA Owner or Plan Participant Life Expectancy (in years) 7027.4 7126.5 7225.6 7324.7 7423.8 7522.9 7622.0 7721.2 7820.3 7919.5 8018.7 8117.9 8217.1 8316.3 8415.5 8514.8 8614.1

10. 10 Age of IRA Owner or Plan Participant Life Expectancy (in years) 8713.4 8812.7 8912.0 9011.4 9110.8 9210.2 939.6 949.1 958.6 968.1 977.6 987.1 996.7 1006.3 1015.9 1025.5 1035.2 1044.9 1054.5

11. 11 Age of IRA Owner or Plan Participant Life Expectancy (in years) 1064.2 1073.9 1083.7 1093.4 1103.1 1112.9 1122.6 1132.4 1142.1 115 and older1.9

12. 12 Single Life Expectancy Table for Inherited IRAs (to be used for calculating post-death required distributions to beneficiaries) Designated beneficiaries use this single life expectancy table based on their age in the year after the IRA owner's death. That factor is reduced by one for each succeeding distribution year. Spouse beneficiaries who do not elect to the roll the IRA over or treat it as their own, also use the single life table, but they can recalculate each year. 082.4 181.6 280.6 379.7 478.7 577.7 676.7 775.8 874.8 973.8 1072.8 1171.8 1270.8 1369.9 1468.9 1567.9 1666.9

13. 13 1766.0 1865.0 1964.0 2063.0 2162.1 2261.1 2360.1 2459.1 2558.2 2657.2 2756.2 2855.3 2954.3 3053.3 3152.4 3251.4 3350.4 3449.4 3548.5

14. 14 3647.5 3746.5 3845.6 3944.6 4043.6 4142.7 4241.7 4340.7 4439.8 4538.8 4637.9 4737.0 4836.0 4935.1 5034.2 5133.3 5232.3 5331.4 5430.5

15. 15 5529.6 5628.7 5727.9 5827.0 5926.1 6025.2 6124.4 6223.5 6322.7 6421.8 6521.0 6620.2 6719.4 6818.6 6917.8 7017.0 7116.3 7215.5

16. 16 7314.8 7414.1 7513.4 7612.7 7712.1 7811.4 7910.8 8010.2 819.7 829.1 838.6 848.1 857.6 867.1 876.7 886.3 895.9 905.5

17. 17 915.2 924.9 934.6 944.3 954.1 963.8 973.6 983.4 993.1 1002.9 1012.7 1022.5 1032.3 1042.1 1051.9 1061.7 1071.5 1081.4

18. 18 1091.2 1101.1 111+1.0