1. Embassy Suites Ontario, CA October 26, 2013

2. Agenda 10:15 – 11:15 - Current Federal Estate Tax Law and Estate Planning post ATRA and Windsor 11:15 – 11:30 - Document Automation 11:30 – 11:45 - Questions

3. Current Federal Estate Tax Law and Estate Planning

4. On January 1, 2013, President Obama signed into law The American Taxpayer Relief Act of 2012 (“ATRA”), bringing closure to the main tax aspects of the so-called “fiscal cliff” negotiations that had been ongoing since the November elections.

5. Since January 1, 2013, among its many tax provisions, ATRA makes permanent the $5.0 million gift, estate, and GST tax exemption amount that was put in place temporarily for 2011 and 2012, plus inflation adjustments going forward [the current adjustment for 2013 is $250,000 per person.

6. For married couples in 2013, the aggregate exemption will be twice this amount (i.e., $10.5 million)]. Future years can also have similar inflation adjustments.

7. The gift tax is still unified with the estate tax; a unified estate and gift tax exemption means the $5.25M threshold is applied to total transfers, whether by gift during lifetime or by inheritance on death.

8. There is also an inflation adjustment to increase the annual gift tax exclusion from $13,000 to $14,000 per donee (again, for married couples, the annual gift exclusion is now double this amount - $28,000 for 2013).

9. The 2012 Act also provides for a flat 40% tax rate for any transfers in 2013 and future years that exceed the exemption amount.

10. ATRA makes the new laws “permanent” because there is no sunset provision in the law that would cause the current rules to expire. The 2002 law was scheduled to sunset at the end of 2010. Similarly, the 2010 extension was scheduled to sunset at the end of 2012.

11. But a “permanent” change does not mean the law will never change.

12. The word “permanent” really means “until they change it next time!”

13. Notably, ATRA also makes permanent the “portability” concept introduced in the Tax Relief Act of 2010.

14. “Portability”

15. Generally, “portability” allows a surviving spouse to elect to take advantage of the unused portion of the estate tax exclusion of his or her predeceased spouse, thereby providing the surviving spouse with a larger exclusion amount.

16. “Portability” NOTE: The “deceased spousal exclusion amount” is available to the surviving spouse only if an election is made on a timely filed estate tax return for the deceased spouse (even if an estate tax return would otherwise not be required).

17. Example Assume that Husband dies in 2013, leaving $1M to his daughter and the balance of his estate of $3M to Wife (no tax is due). An election is made on Husband’s estate tax return to permit Wife to use Husband’s unused exemption. Thereafter, Wife’s exemption is now $9.5M (her $5.25M basic exemption plus the $4.25M of Husband’s unused exemption), which she may use for lifetime gifts or for transfers at her death.

18. The biggest argument in support of portability is that it will prevent married couples from having to create "costly" estate plans that contain "complex" trusts.

19. But not so fast! There are still plenty of reasons why married couples should consider Trust planning and why unwed couples may need it too; portability is really a “get out of jail card” for those who don't do anything or if the totally unexpected should occur. There are a number of reasons for married clients to still create an estate plan which creates a trust or trusts after the first death:

20. PLANNING

21. Planning to “lock-in” the full exemption

22. Having an exemption trust will protect the full $5M amount if one spouse dies and the Democrats are later successful in "rolling-back" the exemption to $3.5. Portability may also be lost if the surviving spouse remarries and is later widowed again.

23. Planning to “lock-in” the full exemption Planning for appreciation

24. Funding an “exemption trust” also protects appreciating assets from estate tax at the survivor’s death.

25. Planning to “lock-in” the full exemption Planning for appreciation Planning for blended families and/or “control”

26. For a second/third marriage (or even for a first marriage), if one or both of the clients is concerned with the survivor being able to change the beneficiaries (e.g., remarriage, separate children, etc.), the irrevocable trust is still necessary (even when there are no estate tax issues).

27. Planning to “lock-in” the full exemption Planning for appreciation Planning for blended families and/or “control” Providing creditor protection for the surviving spouse

28. Creating an irrevocable trust at the first death provides asset protection from creditors, lawsuits and/or Medicaid “spend-down”. In addition, any assets owned by an irrevocable trust will be protected from a divorce settlement if the surviving spouse remarries and then later divorces.

29. Planning to “lock-in” the full exemption Planning for appreciation Planning for blended families and/or “control” Providing creditor protection for the surviving spouse Planning for state estate taxes

30. Currently, there are 16 states (plus the DC) which impose a separate state estate tax, so trust planning may be necessary in order to “double” the state exemption and defer payment of state estate taxes until the death of the surviving spouse (so far, no state with an estate tax has adopted the concept of “portability” for the unused exemption of the first to die). Even if the client resides in a state currently without a separate estate tax, that state may subsequently elect to impose a tax or the survivor could later move to a state which does have a separate state estate tax (e.g., move to be closer to children/grandchildren).

31. Planning to “lock-in” the full exemption Planning for appreciation Planning for blended families and/or “control” Providing creditor protection for the surviving spouse Planning for state estate taxes Planning for the “generation-skipping tax”

32. Portability does not apply to the GST tax, so in order to fully leverage the GST exemptions of both spouses for GST trust planning, it will still be necessary to create a trust at the first spouse’s death. The so-called “Dynasty Trusts” are becoming increasingly popular.

33. Planning to “lock-in” the full exemption Planning for appreciation Planning for blended families and/or “control” Providing creditor protection for the surviving spouse Planning for state estate taxes Planning for the “generation-skipping tax” Planning for same sex or unwed couples

34. Planning for unwed couples Although same sex marriages are now recognized by the federal government, many same sex couples will need to use trust planning in order to be able to take full advantage of the exemption (state and federal) at both deaths (and the same goes for unwed man and woman couples).

35. Problems with “Portability” No planning to “lock-in” the full exemption No planning for appreciation No planning for blended families and/or “control” No creditor protection for the surviving spouse No planning for state estate taxes No planning for the “generation-skipping tax” No planning for unwed couples

36. US vs. WINDSOR United States vs. Windsor is a landmark case in which the US Supreme Court held that restricting federal interpretation of “marriage” and “spouse” to apply only to heterosexual unions under Section 3 of the Defense of Marriage Act (“DOMA”) is unconstitutional under the Due Process Clause of the Fifth Amendment.

37. US vs. WINDSOR Edith Windsor and Thea Spyer, a same-sex couple residing in New York, were lawfully married in Ontario, Canada in 2007. Spyer died in 2009, leaving her entire estate to Windsor.

38. US vs. WINDSOR Windsor sought to claim the federal estate tax exemption for surviving spouses. She was barred from doing so by DOMA which provided that the term “spouse” only applies to a marriage between a man and woman. The IRS found that the exemption did not apply to same-sex marriages, denied Windsor’s claim, and compelled her to pay over $350,000 in estate taxes.

39. US vs. WINDSOR If federal law had recognized the validity of their marriage, Windsor would have qualified for an unlimited spousal deduction and paid no federal estate taxes.

40. US vs. WINDSOR In 2010, a lawsuit was filed against the federal government, where Windsor sought a refund because DOMA singled out legally married same-sex couples for “differential treatment compared to other similarly situated couples without justification.” The lower courts agreed with Windsor and the decision was appealed to the U.S. Supreme Court.

41. US vs. WINDSOR On June 26, 2013, that court issued a 5–4 decision declaring Section 3 of DOMA to be unconstitutional “as a deprivation of the liberty of the person protected by the Fifth Amendment.”

42. US vs. WINDSOR On the same day, the court also issued a separate 5–4 decision in Hollingsworth v. Perry — a case related to California’s constitutional amendment initiative barring same-sex marriage. The decision effectively allowed same-sex marriages in California to resume after the court ruled that the proponents of the initiative lacked standing to appeal in federal court.

43. WHAT DOES THIS ALL MEAN?

44. Firstly, all same-sex couples should have proper estate planning.

45. Secondly, the proper “type” of trust or Will for married couples, whether same- sex or “traditional”, has dramatically changed.

46. As most of you know, there are many “types” of trusts for married couples. The correct type of trust can depend on a number of circumstances.

47. We have prepared a “matrix” of the different client scenarios with our recommendations for the appropriate type of estate planning trusts which may be appropriate for each scenario. Of course, this matrix also takes into account the existence of a separate state tax (when appropriate).

48. This “matrix” is one of the referenced documents in the list of on-line PDF files which you can download.

49. However, for today, let’s assume that your clients reside in California (which has no separate estate tax) and neither spouse has an estate over $3.5M.

50. WHAT IS THE BEST FORM OF TRUST?

51. THE ANSWER: A “Disclaimer Trust” OR an “Intentionally Defective Marital Deduction Trust”

52. THE ANSWER: It now depends mostly on the amount of control the surviving spouse should have over the deceased spouse’s estate

53. What type of trust should be used if “control” is NOT an issue?

54. Why not a simple “probate avoidance trust”?

55. With the Probate Avoidance Trust, there is no flexibility – everything stays under the survivor’s control and power of revocation.

56. The “Disclaimer Trust”:

57. Again, use IF there are no issues of “control” (e.g., no separate children, etc.).

58. The “Disclaimer Trust”: Everything goes to the survivor but the survivor can, within 9 months, disclaim any or all of the deceased spouse’s interest into an irrevocable trust.

59. The “Disclaimer Trust”: There may be factors at the time of the first death which makes the irrevocable trust worthwhile:

60. The “Disclaimer Trust”: “Hit the Lottery” Creditor Issues Possible Medi-Cal needs for the survivor

61. What type of trust should be used if “control” is an issue?

62. What about an “A/B Trust”?

63. The “A/B Trust”:

64. “A” Trust is the survivor’s portion of the trust which remains revocable

65. The “A/B Trust”: “A” Trust is the survivor’s revocable trust “B” Trust is an irrevocable trust

66. The “A/B Trust”: “A” Trust is the survivor’s revocable trust “B” Trust is the irrevocable trust  Must be funded with decedent’s estate up to the exemption amount

67. The “A/B Trust”: “A” Trust is the survivor’s revocable trust “B” Trust is the irrevocable trust  Funded with decedent’s estate up to the exemption amount  Purpose is to keep “B” Trust out of the survivor’s taxable estate

68. Problems with the “A/B Trust”:

69. “B” Trust is the irrevocable trust  Funded with decedent’s estate up to the exemption amount

70. Problems with the “A/B Trust”: “B” Trust is the irrevocable trust  Funded with decedent’s estate up to the exemption amount If control is an issue and the decedent’s estate exceeds the exemption, the balance goes to the survivor

71. Problems with the “A/B Trust”: “B” Trust is the irrevocable trust  Purpose is to keep “B” Trust out of the survivor’s taxable estate

72. Problems with the “A/B Trust”: “B” Trust is the irrevocable trust  Purpose is to keep “B” Trust out of the survivor’s taxable estate This will lose the “stepped-up basis” on the assets in the “B” Trust at the survivor’s death

73. The “step-up” means that inherited property receives a new cost basis equal to the property's fair market value on the date of the decedent's death. In other words, the heirs can sell the inherited assets and pay no capital gains tax.

74. Problems with the “A/B Trust”: “B” Trust is the irrevocable trust  Purpose is to keep “B” Trust out of the survivor’s taxable estate ONLY ASSETS INCLUDED IN THE TAXABLE ESTATE ARE ELIGIBLE FOR THE STEP- UP

75. The “Intentionally Defective Marital Deduction Trust”:

76. Creates an irrevocable trust for all of the decedent spouse’s assets

77. The “Intentionally Defective Marital Deduction Trust”: Creates an irrevocable trust for all of the decedent spouse’s assets SOLVES THE CONTROL ISSUE

78. The “Intentionally Defective Marital Deduction Trust”: Creates an irrevocable trust for all of the decedent’s assets “Intentionally” designed to be included in the survivor’s taxable estate

79. The “Intentionally Defective Marital Deduction Trust”: “Intentionally” designed to be included in the survivor’s taxable estate SOLVES THE STEPPED-UP BASIS ISSUE -- NOW THE ENTIRE ESTATE RECEIVES A STEP-UP AT THE SECOND DEATH

80. The “Intentionally Defective Marital Deduction Trust”: Creates an irrevocable trust for all of the decedent’s assets “Intentionally” designed to be included in the survivor’s taxable estate Has “disclaimer” option to fund “Exemption Trust” if needed.

81. The “Intentionally Defective Marital Deduction Trust”: Has “disclaimer” option to fund “Exemption Trust” if needed. PROTECTS IF THE CLIENTS HIT THE LOTTERY!

82. As mentioned, besides “control”, there are other advantages to creating an Irrevocable Trust at the first death:

83. Other advantages to creating an Irrevocable Trust at the first death: Creditor Protection

84. Other advantages to creating an Irrevocable Trust at the first death: Creditor Protection Medi-Cal Planning

85. Other advantages to creating an Irrevocable Trust at the first death: Creditor Protection Medi-Cal Planning Protects assets from a divorce if the survivor remarries

86. Document Automation

87. A document automation system is used to automate all conditional text, variable text, and data contained within a set of documents

88. Document Automation “Cut and Paste”

89. Document Automation “Cut and Paste” In its simplest approach, “Cut and Paste” as document automation uses a blank document as the starting point for the project. The user then opens other word processing documents that are already in storage, locating sections or segments that are relevant to the purpose of the new document; the user copies the desired text from the older documents and pastes that same text onto the new document.

90. Document Automation “Cut and Paste” “Document Assembly Software”

91. Document Automation Document Assembly Software: The basic function is to replace the manual filling in of repetitive documents with template-based systems where the user answers software-driven interview questions or data entry screens. The information collected then populates the document to form a good first draft.

92. Problems with Document Automation Cut and Paste:  “Cookie cutter” approach  Potential incorrect genders and missing sections  Requires extensive proof reading  You are responsible to maintain current status of documents for changes in the law  Requires extensive knowledge of subject matter  Revisions of multiple documents for changes  Document Assembly Software:  Cost  “Learning Curve”  Time to “automate” existing forms and documents  Still requires extensive knowledge of subject matter  Still necessary to make revisions to templates

93. Published Template Sets  Advantages:  “Plug and Play”  “Help” screens and the interview process make it easier for a user with less experience in the subject matter  Logic and options should provide total customization for client (“square peg in round hole”)  Multiple documents can be generated from a single input (“interview”)  Finished document is fully formatted and ready to go  Minimal proofing needed  Updates should be immediate for changes in laws  Text and concepts designed by specialists in field  Disadvantages:  Cost  Formatting and text is not your own

94. Current Technology Stand-alone Software:  Installed on workstations or network  Problems with syncing files when working remotely  Remote access software (“VPN”) can make things easier (GoToMyPC or LogMeIn)  Back-up  Often is limited to a particular Operating System (e.g. works on a PC but not a Mac)

95. Current Technology  Virtual:  Web based application  No installation  Results are stored on a remote server  Client does the input  Review can be from any location  Delivery of finished documents can be in person or electronic

96. New Technology  Cloud:  Web based application (i.e., works with any OS)  No installation  Revisions are immediate  Results are stored on a remote server  Can be accessed from any computer without the need for “syncing”.  Can be accessed through a mobile device

97. Fore! Trust Software  Stand-alone:  Trusts & Wills  Irrevocable Trusts  Coming: Trust Administration Business Entities (“LLC’s)

98. Fore! Trust Software  Trusts & Wills Complete estate planning package for normal practice; all versions of revocable living trusts (“RLT’s”) and stand-alone Wills

99. Fore! Trust Software  Trusts & Wills Options for individuals (whether married or single), married couples preparing a joint package or a “non- traditional” couple

100. Fore! Trust Software  Trusts & Wills All supporting documents as appropriate; e.g., “pour-over Wills, P of A’s, healthcare powers, HIPAA waivers, burial instructions, Certification of Trust, transfer documents (including deeds)

101. Fore! Trust Software  Trusts & Wills Miscellaneous trusts such as an “IRA Beneficiary Trust”, a “NFA Gun Trust” and a “Realty Trust”

102. Fore! Trust Software  Trusts & Wills Package also includes correspondence, “finishing documents” and miscellaneous documents (e.g., amendments, codicils, resignations, affidavits of death, etc.)

103. Fore! Trust Software  Trusts & Wills Option to designate in the User Set-up that this set-up is for a Document Preparer which then automatically modifies the language in the correspondence to avoid any UPL issues

104. Fore! Trust Software  Trusts & Wills Completely state specific depending on client’s state of residence (except for state of signing which controls the notary language)

105. Fore! Trust Software  Trusts & Wills The one package supports all 49 states plus the District of Columbia (we don’t consider Louisiana to be a real state!)

106. Fore! Trust Software  Trusts & Wills Updated constantly through-out the year; new features and options plus any law changes

107. Fore! Trust Software  Virtual Estate Planning System:  Trusts & Wills Only

108. Fore! Trust Software  Virtual Estate Planning System:  Accessed off of your website; client never know he/she has left your site

109. Fore! Trust Software  Virtual Estate Planning System:  Client inputs all the information using an interview designed for the end-user with complete “help screens”

110. Fore! Trust Software  Virtual Estate Planning System:  Avoids problems with UPL

111. Fore! Trust Software  Virtual Estate Planning System:  Client can re-access the interview as many times as necessary

112. Fore! Trust Software  Virtual Estate Planning System:  Same “attorney quality” documents as in the stand-alone product with most of the same options

113. Fore! Trust Software  Virtual Estate Planning System:  You download completely formatted package for delivery to client (in office or virtual)

114. Fore! Trust Software  Stand-alone:  Trusts & Wills One-time cost of $995 Unlike competition, the software does not “lock-up” at the end of each year Annual subscription available at the end of first year for $250 per year

115. Fore! Trust Software  Stand-alone:  Irrevocable Trusts Retail cost of $700 Purchased with Trusts & Will set or by an existing Trusts & Wills user, cost is discounted to $550 Annual subscription available at the end of first year for $150 per year

116. Fore! Trust Software  Virtual Estate Planning System:  One-time set-up cost of $299  Monthly maintenance fee of $50  “Pay-as-you-go” $95 per download (discount for volume) Only one charge per client Only charged when client has finished interview

117. CALDA DISCOUNT $50 discount off normal purchase price of the “stand-alone” software

118. CALDA DISCOUNT $50 discount off normal purchase price of the “stand-alone” software Enter “CALDA Discount” in the “Special Code” box on the Check-out page or contact us directly

119. Fore! Trust Software Announcing our new Platform

120. Fore! Trust Software Announcing our new Platform Cloud Based

121. Fore! Trust Software Announcing our new Platform Cloud Based:  Accessible from any computer including Mac’s

122. Fore! Trust Software Announcing our new Platform Cloud Based:  Accessible from any computer  Accessible from mobile devices including tablets

123. Fore! Trust Software Announcing our new Platform Cloud Based:  Accessible from any computer  Accessible from mobile devices including an iPad App  All updates and revisions happen instantaneously and in “real time”

124. Fore! Trust Software Announcing our new Platform Cloud Based Built-in Client Management capabilities

125. Fore! Trust Software Announcing our new Platform Cloud Based Built-in Client Management capabilities Built-in Internet Marketing features

126. Fore! Trust Software Announcing our new Platform Cloud Based Built-in Client Management capabilities Built-in Internet Marketing features:  Including Web Forms and automated email follow-up (“drip system”)

127. Fore! Trust Software Announcing our new Platform Cloud Based Built-in Client Management capabilities Built-in Internet Marketing features Client Portal

128. Fore! Trust Software Announcing our new Platform Cloud Based Built-in Client Management capabilities Built-in Internet Marketing features Client Portal:  “Dropbox” for review but with security options preventing download and/or printing

129. Fore! Trust Software Announcing our new Platform Cloud Based Built-in Client Management capabilities Built-in Internet Marketing features Client Portal:  “Dropbox” for review but with security options preventing download and/or printing  Client questionnaire or “interview” (e.g.,VEPS)

130. Fore! Trust Software Announcing our new Platform Cloud Based Built-in Client Management capabilities Built-in Internet Marketing features Client Portal Document Assembly

131. Fore! Trust Software Announcing our new Platform Cloud Based Built-in Client Management capabilities Built-in Internet Marketing features Client Portal Document Assembly “eDoc Store”

132. Fore! Trust Software Announcing our new Platform Cloud Based Built-in Client Management capabilities Built-in Internet Marketing features Client Portal Document Assembly “eDoc Store”:  Complete “suite” of templates and template sets all configured to work from one platform

133. Fore! Trust Software Announcing our new Platform Seamless merge with our existing products

134. Fore! Trust Software Announcing our new Platform Seamless merge with our existing products Coming 2014

135. Thank You! www.ForeTrustSoftware.com or email me at dennis@4trustsoftware.com