Financial Focus Estate Planning for Uncertain Times

1. Financial FocusEstate Planning for Uncertain Times Not FDIC, NCUA/NCUSIF insured * Not a deposit * No bank or credit union guarantee * Not insured by any federal government agency * May lose value

2. Important Note • This presentation is for informational purposes only. It represents our understanding of generally applicable rules. Lincoln Benefit Life, an Allstate Company, its agents and employees may not give tax or legal advice. We recommend everyone seek and rely upon the advice of his or her own professional advisors for such advice.

3. Introduction to Estate Planning • What is estate planning? • Why should you be interested in estate planning? • How much money should you have before you consider estate planning?

4. Estate Planning Goals – While Living • Provide for management of assets in the event of disability or incapacity • Provide instructions for healthcare decisions • Protect assets from long term care costs

5. Estate Planning Goals – Before Death • Determine who gets what, how and when after death • Maximize estate by reducing expenses and avoid delays • Minimize estate taxes • Provide liquidity

6. Who Should Plan? • EVERYBODY! Why? • Children • Assets (farm, business, etc.) • Incapacity • Healthcare • Elder Care • Expenses/Taxes

7. Planning All of Us Should Consider • Long term care planning • Provides a greater level of independence and dignity when long term care is needed • Affords assistance to maintain an accustomed standard of living • Promotes estate preservation

8. Planning All of Us Should Consider • Financial Decisions • Financial Durable Power of Attorney • Health Care Decisions • Power of Attorney for Healthcare • Living Will

9. Planning All of Us Should Consider • Will • Legal Document • Takes effect at death • State requirements vary • Benefits • Transfer of assets • Names guardians • Can establish trusts for beneficiaries

10. Distributing Your Assets • Probate • Court-supervised distribution of assets • Advantages • Distributes assets according to will • Limits time to challenge will • Limits time creditors can make claims

11. Distributing Your Assets • Probate • Disadvantages • Time • Cost • Publicity

12. Distributing Your Assets • Assets That Pass Outside of Probate • Joint tenancy with right of survivorship • Assets subject to a beneficiary designation • Assets owned by a Living Trust

13. Distributing Your Assets • Trusts • Parties to a Trust • Grantor – Creates Trust • Trustee – Manages Trust • Beneficiary – Benefits from Trust • Types of Trusts • Living vs. Testamentary • Revocable vs. Irrevocable

14. Distributing Your Assets • Living Trusts • Preferred primary estate planning document • Avoid probate • Time • Costs • Publicity • Financial guardianship • Provide protection and management of trust assets if the grantor becomes incompetent.

15. Estate Taxes and Your Estate… • All Tangible Assets • All Intangible Assets • At Fair Market Value!

16. Your Estate at Death

17. Estate Taxes • Estate Tax Examples (2006 Credit)

18. Economic Growth and Tax Relief Reconciliation Act of 2001 • Estate tax “repeal” in 2010 • Increased exemptions • $1 million in 2003 • $1.5 million in 2004-05 • $2 million in 2006-08 • $3.5 million in 2009

19. Deductions/Credits • Unified credit equivalent ($2,000,000 in 2006 increasing to $3.5 million in 2009) • Unlimited Marital deduction • Unlimited Charitable deduction • Annual gift tax exclusion ($12,000 in 2006) • Lifetime gift tax exemption of $1,000,000

20. A/B Trusts – How Do They Work?

21. Tax Payment Alternatives • Cash • Liquidity? • Sell business/farm/property? • Borrow • Interest? • Use life insurance proceeds

22. Planning Some of Us Should Consider

23. Charitable Remainder Trusts • Charitable Remainder Trusts (CRTs) are irrevocable trusts that provide: • an “income” stream during the lifetime of named beneficiaries • remaining property passes to charity at the death of beneficiaries • Income stream can be a set annuity payment (charitable remainder annuity trust – CRAT) or stated as a percentage of the value of the trust each year (charitable remainder unitrust – CRUT)

24. Charitable Remainder Trusts • Minimum value of income stream is 5% of the value of property transferred to trust • Trust can be set up for lifetime of beneficiary or beneficiaries or for a term of years • Term of years is limited to 20 years • Estate tax deduction limited to estimate of value of property passing to charity, not for value of property contributed to trust

25. Charitable Remainder Trusts – Example • John’s estate is $2.5 million. John wants to provide an income stream for Mary during her lifetime. John’s trust sets up a CRUT for Mary with $1,000,000 and provides that Mary is receive 7% of the value of the trust each year. At the time of John’s death in May 2005, Mary is 75 years old. • The charitable deduction is $510,200 based on IRS interest rate of 5.0% (November 2005)

26. Charitable Remainder Trusts – Example • For federal estate tax purposes, John’s estate is now $1,988,000 (2,500,000 – 510,200). • He has provided for Mary and reduced his estate below the estate tax exemption so there are no federal estate taxes to pay. • He has also provided for his favorite charity (or charities) at Mary’s death.

27. What Next? • Start with baby steps and review your assets and the titling of the assets. • Use all available resources to help. Your financial advisor is invaluable in this process. • Don’t put off until tomorrow what you should do today.

28. Conclusion Thank you for coming!