The Jack and Faith Daniels Estate The Daniels

The Jack and Faith Daniels Estate

The Daniels Family Tree

Jack & Faith Daniels’ Estate Cash & Checking Money Market Michigan Residence Florida Condo Traded Stocks Bonds Real Estate Auto Company Stock Pension Plan Daniels Manufacturing Total Assets 25’ 000 300’ 000 600’ 000 400’ 000 500’ 000 400’ 000 1’ 500’ 000 2’ 000 8’ 000 14’ 225’ 000 Condo Mortgage Real Estate Mortgage Total Liabilities 200’ 000 150’ 000 350’ 000 NET WORTH 13’ 875’ 000

Shareholder Ownership

Jack’s Main Concerns Business Related • Tax efficient transfer of company ownership to family members • Let Jane have the option of becoming a part owner of the family business Personal Estate Planning for Jack and Faith: • Provide sufficient income to cover Jack’s & Faith’s retirement needs • Provide Faith with stable income in the case of Jack’s death • Provisions for disabled grandchild • Strong interest in charity gift • Tax efficient and fair distribution of wealth and without providing to too much “easy money” to beneficiaries

The Jack & Faith Daniels Estate Planning Proposal Presented by: The Bankers Trust Co. And Rych Associates 29 th October, 1999

The Bankers Trust Co. : • Part of the Deutsche Bank Group • The largest bank in the world in terms of total assets • Large global network • Awarded the best Financial Planning outfit in the world, by MEC & Co. Rych Associates. : • Partners Robert, Yves, Christoph & Heiko, experts in Trust Management + Estate Planning • Estate Planning boutique, highly respected in this business

Our Recommendations

Jack’s Main Concerns Business Related • Tax efficient transfer of company ownership to family members • Let Jane have the option of becoming a part owner of the family business Personal Estate Planning for Jack and Faith: • Provide sufficient income to cover Jack’s & Faith’s retirement needs • Provide Faith with stable income in the case of Jack’s death • Provisions for disabled grandchild • Strong interest in charity gift • Tax efficient and fair distribution of wealth and without providing to too much “easy money” to beneficiaries Recommendation for Mrs. & Mr. Jack Daniels BT Co. & Rych Associates

Transfer of Company Ownership Recapitalization of Company Jack’s 70% stake General Partners (Common Stock) Family Limited Partnership Limited Partners (Preferred Stock) Convertible Bonds Recommendation for Mrs. & Mr. Jack Daniels BT Co. & Rych Associates

Transfer of Company Ownership Who Gets Which Stocks? • Common stock (voting rights) to Tim and Ted involved in business • Preferred stock (stable dividend) to Sam not involved in business • Bonds convertible into common stock to Jane Management Concerns: • Appointment of an external (non-family member) Chief Operating Officer (COO) Recommendation for Mrs. & Mr. Jack Daniels BT Co. & Rych Associates

Jack & Faith Daniels’ Estate Cash & Checking Money Market Michigan Residence Florida Condo Traded Stocks Bonds Real Estate Auto Company Stock Pension Plan Daniels Manufacturing Total Assets 25’ 000 300’ 000 600’ 000 400’ 000 500’ 000 400’ 000 1’ 500’ 000 2’ 000 1’ 000 7’ 225’ 000 Condo Mortgage Real Estate Mortgage Total Liabilities 200’ 000 150’ 000 350’ 000 NET WORTH 6’ 875’ 000 Recommendation for Mrs. & Mr. Jack Daniels BT Co. & Rych Associates

Jack’s Main Concerns Business Related • Tax efficient transfer of company ownership to family members • Let Jane have the option of becoming a part owner of the family business Personal Estate Planning for Jack and Faith: • Provide sufficient income to cover Jack’s & Faith’s retirement needs • Provide Faith with stable income in the case of Jack’s death • Provisions for disabled grandchild • Strong interest in charity gift • Tax efficient and fair distribution of wealth and without providing to too much “easy money” to beneficiaries Recommendation for Mrs. & Mr. Jack Daniels BT Co. & Rych Associates

Coverage of Retirement Needs Transfer of Residence: Primary residence: Michigan Secondary residence: Florida Condo J&F After 15 years Children Recommendation for Mrs. & Mr. Jack Daniels BT Co. & Rych Associates

Coverage of Retirement Needs Creation of a Qualified Personal Residence Trust (QPERT): Irrevocably transfer both residences for a term of 15 years. • Upon maturity of the term, the property is passed on to the children • If J&F die prior to the end of the trust term, the proceeds thereof are subject to estate tax. During the period of the term, J&F have the right to occupy and use the residences. Recommendation for Mrs. & Mr. Jack Daniels BT Co. & Rych Associates

Coverage of Retirement Needs Commercial Building owned by Jack & Faith Sale of Property to children for $2, 000 Lease of 10 Years DMC Rent of $200, 000 p. a. Gradual Payments via Notes Receivable ($200, 000 p. a. ) Lease of 10 Years Children Rent of $200, 000 p. a. Recommendation for Mrs. & Mr. Jack Daniels BT Co. & Rych Associates

Coverage of Retirement Needs Sell Real Estate to children and have them lease it back to the company • With the collected rent paid by the company, the children gradually pay back the sum via notes receivable Advantages: • The Real Estate exits the parent’s estate • The parents continue to receive fixed income • Only gift tax on the residual Recommendation for Mrs. & Mr. Jack Daniels BT Co. & Rych Associates

Jack & Faith Daniels’ Estate Cash & Checking Money Market Michigan Residence Florida Condo Traded Stocks Bonds Real Estate Auto Company Stock Pension Plan Daniels Manufacturing Total Assets 25’ 000 300’ 000 0 0 500’ 000 400’ 000 0 500’ 000 2’ 000 1’ 000 4’ 725’ 000 Condo Mortgage Real Estate Mortgage Total Liabilities 200’ 000 150’ 000 350’ 000 NET WORTH 4’ 375’ 000 Recommendation for Mrs. & Mr. Jack Daniels BT Co. & Rych Associates

Jack’s Main Concerns Business Related • Tax efficient transfer of company ownership to family members • Let Jane have the option of becoming a part owner of the family business Personal Estate Planning for Jack and Faith: • Provide sufficient income to cover Jack’s & Faith’s retirement needs • Provide Faith with stable income in the case of Jack’s death • Provisions for disabled grandchild • Strong interest in charity gift • Tax efficient and fair distribution of wealth and without providing to too much “easy money” to beneficiaries Recommendation for Mrs. & Mr. Jack Daniels BT Co. & Rych Associates

Coverage for Faith upon Jack’s Death • Faith’s 10% stake in the company will be changed into preferred stock in order to increase the stability of dividend income • Creation of a Delaware Trust* which will be funded by the defined contribution plan valued at 2’ 000 (Unified Credit Exemption). Amount in trust to be invested in a growth portfolio. * The Delaware Trust is perpetual, therefore has an unlimited trust term. Recommendation for Mrs. & Mr. Jack Daniels BT Co. & Rych Associates

Jack & Faith Daniels’ Estate Cash & Checking Money Market Michigan Residence Florida Condo Traded Stocks Bonds Real Estate Auto Company Stock Pension Plan Daniels Manufacturing Total Assets 25’ 000 300’ 000 0 0 500’ 000 400’ 000 0 500’ 000 0 1’ 000 2’ 725’ 000 Condo Mortgage Real Estate Mortgage Total Liabilities 200’ 000 150’ 000 350’ 000 NET WORTH 2’ 375’ 000 Recommendation for Mrs. & Mr. Jack Daniels BT Co. & Rych Associates

Jack’s Main Concerns Business Related • Tax efficient transfer of company ownership to family members • Let Jane have the option of becoming a part owner of the family business Personal Estate Planning for Jack and Faith: • Provide sufficient income to cover Jack’s & Faith’s retirement needs • Provide Faith with stable income in the case of Jack’s death • Provisions for disabled grandchild • Strong interest in charity gift • Tax efficient and fair distribution of wealth and without providing to too much “easy money” to beneficiaries Recommendation for Mrs. & Mr. Jack Daniels BT Co. & Rych Associates

Provisions for Disabled Child & Charity Charitable Remainder Trust Non charitable income beneficiary (Jack & Faith) Auto Company Stocks $500’ 000 Charitable Remainder Trust Bonds $400’ 000 Charitable Remainder Recommendation for Mrs. & Mr. Jack Daniels BT Co. & Rych Associates

Provisions for Disabled Child & Charity Irrevocable Life Insurance Trust “ 2 nd to Die Policy” Purpose: Replace the principle of the C. R. T. at Jack’s and Faith’s death in order to provide further income to the disabled child* + other grandchildren which will be managed by trustee for children’s benefit. * The Public Benefits Programme for disabled individuals should be considered before determining the distribution to the disabled child. Recommendation for Mrs. & Mr. Jack Daniels BT Co. & Rych Associates

Jack & Faith Daniels’ Estate Cash & Checking Money Market Michigan Residence Florida Condo Traded Stocks Bonds Real Estate Auto Company Stock Pension Plan Daniels Manufacturing Total Assets 25’ 000 300’ 000 0 0 500’ 000 0 0 1’ 000 1’ 825’ 000 Condo Mortgage Real Estate Mortgage Total Liabilities 200’ 000 150’ 000 350’ 000 NET WORTH 1’ 475’ 000 Recommendation for Mrs. & Mr. Jack Daniels BT Co. & Rych Associates

Jack’s Main Concerns Business Related • Tax efficient transfer of company ownership to family members • Let Jane have the option of becoming a part owner of the family business Personal Estate Planning for Jack and Faith: • Provide sufficient income to cover Jack’s & Faith’s retirement needs • Provide Faith with stable income in the case of Jack’s death • Provisions for disabled grandchild • Strong interest in charity gift • Tax efficient and fair distribution of wealth and without providing to too much “easy money” to beneficiaries Recommendation for Mrs. & Mr. Jack Daniels BT Co. & Rych Associates

Tax Efficient Distribution of Personal Wealth DMC Corp. DMC buys Insurance for J & F DMC buys back stock from J & F’s estate Upon J & F’s death, the proceeds from the insurance go to the company Life Insurance on Jack & Faith DMC Stock still in J & F’s Estate Money received from the sale of stocks to DMC is used to cover estate costs Estate Costs Recommendation for Mrs. & Mr. Jack Daniels BT Co. & Rych Associates

Tax Efficient Distribution of Personal Wealth Liquidity Provision for Payment of Estate Tax • • • Company buys life insurance for Jack and Faith Daniels with “second to die” clause. Establishment of contract between Jack and company obliging company (upon the death of both Jack and Faith) to buy back enough stock from the estate in order to cover the estate tax and administrative costs. Company pays for stock with proceeds of life insurance. Advantages: • Enough funds to cover estate and administration costs • Estate does not need to be liquidated • Insurance proceeds to cover costs are not taxed if the value of stock redeemed does not exceed the estate tax and administration espense costs (Section 303) Recommendation for Mrs. & Mr. Jack Daniels BT Co. & Rych Associates

The Story of Yvette Daniels: Present Status Study and Recommended Solutions for Mrs. Yvette Daniels (wife of Tim Daniels), a French citizen Recommendation for Mrs. & Mr. Jack Daniels BT Co. & Rych Associates

The Story of Yvette Daniels: Considerations: • Transfer of wealth upon Tim’s death would result in US Estate Taxes • Gifts of upto $100, 000 per year during the lifetime of Tim are not subject to US Estate Taxes Recommendation for Mrs. & Mr. Jack Daniels BT Co. & Rych Associates

The Story of Yvette Daniels: Proposed Structure: Tim creates a Limited Partnership with Yvette and gifts her with limited partnership interest with value $100, 000 p. a. Advantages: • More value (of stock) can be transferred due to permitted discount for lack of control and marketability. • Yvette cannot cash in or transfer her limited partnership interests without Tim’s consent, i. e. she cannot spend it while Tim is alive. Recommendation for Mrs. & Mr. Jack Daniels BT Co. & Rych Associates

Conclusion Recommendation for Mrs. & Mr. Jack Daniels BT Co. & Rych Associates

Jack & Faith Daniels’ Estate Cash & Checking Money Market Michigan Residence Florida Condo Traded Stocks Bonds Real Estate Auto Company Stock Pension Plan Daniels Manufacturing Total Assets 25’ 000 300’ 000 0 0 500’ 000 0 0 1’ 000 1’ 825’ 000 Condo Mortgage Real Estate Mortgage Total Liabilities 200’ 000 150’ 000 350’ 000 NET WORTH 1’ 475’ 000 Net Taxable worth of the estate has reduced dramatically therefore cutting down the estate tax to a great extent Recommendation for Mrs. & Mr. Jack Daniels BT Co. & Rych Associates

Benefits of the Proposed Financial Plan: Actual tax and wealth transfer expenses on the estate of $ 13, 875, 000 60% * Taxes and Expenses with the proposed plan: 43% estate and wealth transfer tax on an amount of $1, 475, 000. 15% Gift Tax on the QPERT ($1, 000) payable by the beneficiaries upon maturity of the QPERT. 14% (+/- 3%) 8% Consultation and Management Fee on total present net worth * 5% Surcharge applicable over the standard 55% for amounts between 10, 000 - 24, 000 Recommendation for Mrs. & Mr. Jack Daniels BT Co. & Rych Associates

BT Co. Erika Belloni +1 212 454 8697 erika. belloni@bt. com Melissa Dolan +1 212 454 8456 melissa. dolan@bt. com Chetana Munot +1 212 454 3453 chetana. munot@bt. com Rych Associates Robert Sorio +1 210 739 0405 robert. sorio@rych. com Yves Windey +1 210 739 0343 yves. windey@rych. com Christoph De Wilde +1 210 739 3533 christoph. dewilde@rych. com Heiko Jungmann +1 210 739 0234 heiko. jungmann@bt. com