April 23, 2008 Conference Call and Webinar “The Power of a Properly Designed Retirement Plan” Jim Allfrey, Director of 401(k) Administration, and Del Hargis, Director of Client Development at American Pension Services Mathew N. Sorensen, Attorney at Law Hosted By: Mark J. Kohler, CPA, Attorney at Law Telephone / Facsimile © Kyler Kohler & Ostermiller, LLP 2008

Disclaimer- Although the information contained in this Presentation may be extremely useful and helpful, please understand that the presentation of this information does not constitute an attorney-client relationship. Moreover, the information contained in this Presentation is for general guidance only. It is strongly recommended that each individual or entity obtain their own legal advice, particularly applied to their own set of circumstances, facts and specific situation. Kyler Kohler & Ostermiller, LLP is not responsible or liable for any advice that is taken and applied in a situation without direct consultation and representation specific to that individual’s or company’s needs. Instructor Notes © Kyler Kohler & Ostermiller, LLP 2008

Advantages of a Properly Designed RP 1- Tax deductions 2- Investments grow tax-deferred or tax-free 3- Provide asset protection 4- Distribute wealth to heirs 5- Achieve financial freedom © Kyler Kohler & Ostermiller, LLP 2008

Top 10 RP Mistakes 10- Not having a RP 9- Not starting early 8- Not fully contributing to your RP © Kyler Kohler & Ostermiller, LLP 2008

Top 10 RP Mistakes 10- Not having a RP 9- Not starting early 8- Not fully contributing to your RP 7- Not listing beneficiaries individually 6- Making poor investment choices 5- Taking un-advised loans 4- Not rolling over RP properly 3- Not understanding the hidden fees © Kyler Kohler & Ostermiller, LLP 2008

Hidden Costs in Mutual Funds 1.Investments in an Annuity? 2. All Mutual Funds have expenses! 2. All Mutual Funds have expenses! 3. Other expenses may include… Annuity charge (1.25% of funds) Annuity charge (1.25% of funds) Annual operating expenses Annual operating expenses 12(b)1 fees (up to 2%) 12(b)1 fees (up to 2%) Front end loads Front end loads Contingent deferred sales charges Contingent deferred sales charges Redemption fees. Redemption fees. © Kyler Kohler & Ostermiller, LLP 2008

IRA’s vs. 401(k)’s IRA’s vs. 401(k)’s Maximum Contribution Maximum Contribution of $5,000 Annually of $5,000 Annually $1,000 Catch-up amount $1,000 Catch-up amount over age 50 over age 50 Contributions subject to Contributions subject to AGI limits & filing status AGI limits & filing status Tax deductible (Pre-Tax) Tax deductible (Pre-Tax) Roth Account (Post-tax) Roth Account (Post-tax) Conversion to Roth IRA Conversion to Roth IRA limited by AGI until 2010 limited by AGI until 2010 Maximum Contribution up to $46,000 Annually Maximum Contribution up to $46,000 Annually $5,000 Catch-up amount over age 50$5,000 Catch-up amount over age 50 No limits on AGI for your No limits on AGI for your contributions to the Plan contributions to the Plan Personal contributions of Personal contributions of 100% up to $15, % up to $15,500 Tax Deductible (Pre-Tax) Tax Deductible (Pre-Tax) Roth Account (Post-Tax) Roth Account (Post-Tax) © Kyler Kohler & Ostermiller, LLP 2008

IRA $30 Set-up fee $30 Set-up fee $40 Annual Acct. Fee $40 Annual Acct. Fee Variable Fee: Variable Fee: First $50,000.85% First $50,000.85% Next 200,000.55% Next 200,000.55% Next 200,000.15% Next 200,000.15% Over 450,000.10% Over 450,000.10% LESS THAN 1% 401k $499 - $999 Set up Fee $499 - $999 Set up Fee $40 Annual Acct. Fee $40 Annual Acct. Fee Variable Fee: Variable Fee: First $50,000.85% First $50,000.85% Next 200,000.55% Next 200,000.55% Next 200,000.15% Next 200,000.15% Over 450,000.10% Over 450,000.10% LESS THAN 1% Costs to Self-Direct at A.P.S. © Kyler Kohler & Ostermiller, LLP 2008

APS Contact Info American Pension Services, Inc West South Riverton, UT (801) © Kyler Kohler & Ostermiller, LLP 2008

Do’s and Don’ts of Structuring Your Self Directed Retirement Plan (“SDRP”) Investments © Kyler Kohler & Ostermiller, LLP 2008

Prohibited Transactions Cannot Buy From Or Sell To…  The IRA Owner.  Plan Decision Maker.  Plan Service Provider.  Spouse, Parents, Children & their Spouses.  Corporation, Partnership, Trust, or Estate where 50% or more is owned by a prohibited party.  Officer, Director, 10% or more share holder, or highly compensated employee (highest paid).  Partner of Related Party. © Kyler Kohler & Ostermiller, LLP 2008

Wiggle Room  The IRS allows your IRA to sell to and buy from brothers, sisters, aunts, uncles, cousins, nieces, brothers, sisters, aunts, uncles, cousins, nieces, nephews, and step Relatives. nephews, and step Relatives.  IRS Ruling : In a Roth IRA, brother and sister are considered a Prohibited Party, so you sister are considered a Prohibited Party, so you cannot sell to or buy from them in your Roth IRA. cannot sell to or buy from them in your Roth IRA. © Kyler Kohler & Ostermiller, LLP 2008

Real Estate is the “Key” Rules are specific to real estate  Must be Real Estate Operating Company if the Retirement Plan and IRA Owner own more than 25% of the LLC/LP. See 29 CFR Section  Cannot have 100% control of LLC/LP.  If not Real Estate or you want to take a salary for managing the company, you, your SDRPs and Prohibited Parties Cannot own 50% or more of the company. © Kyler Kohler & Ostermiller, LLP 2008

The Right Structure for You Option 1 Tax Qualified Plan $$ Self Directed Retirement Plan $$ Raw Land $$ LOAN Secured by Real Estate - No Debt - No LLC/LP - No Partners - Direct Investment in name of IRA For Illustration Purposes Only May not be reproduced without the Express written permission of KKO Lawyers © Create or Transfer © Kyler Kohler & Ostermiller, LLP 2008

Option 2 Rental Property (Income Producing) Non-Recourse Loan Mortgage Company - Non-Recourse Debt - No Personal Guaranty - No Sweat Equity - No LLC/LP - No Partners - Direct Investment in name of IRA The Right Structure for You Tax Qualified Plan $$ Self Directed Retirement Plan $$ For Illustration Purposes Only May not be reproduced without the Express written permission of KKO Lawyers © Create or Transfer © Kyler Kohler & Ostermiller, LLP 2008

Option 3 - Non-Recourse Debt - Single Member LLC - No Personal Guaranty - No Sweat Equity - No Partners - Direct Investment in name of IRA Single Member LLC The Right Structure for You Raw Land $$ LOAN Secured by Real Estate Tax Qualified Plan $$ Self Directed Retirement Plan $$ For Illustration Purposes Only May not be reproduced without the Express written permission of KKO Lawyers © Create or Transfer Real Estate Operating Company © Kyler Kohler & Ostermiller, LLP 2008

Option 4 Rental Property (Income Producing) Non-Recourse Loan Mortgage Company - Non-Recourse Debt - Single Member LLC - No Personal Guaranty - No Sweat Equity - No Partners - Direct Investment in name of IRA Single Member LLC The Right Structure for You Tax Qualified Plan $$ Self Directed Retirement Plan $$ For Illustration Purposes Only May not be reproduced without the Express written permission of KKO Lawyers © Create or Transfer Real Estate Operating Company © Kyler Kohler & Ostermiller, LLP 2008

Option 5 50% Limited Liability Co. or Limited Php. IRA Owner 40-45% Mortgage Company Guarantor Rental Properties 3 rd Party Owner 5-10% - Recourse Debt - YES - Partners -YES - LLC/LP- Yes The Right Structure for You Tax Qualified Plan $$ Self Directed Retirement Plan $$ For Illustration Purposes Only May not be reproduced without the Express written permission of KKO Lawyers © Create or Transfer Real Estate Operating Company © Kyler Kohler & Ostermiller, LLP 2008

Self Directed IRA Issues Prohibited Transactions Transactions with Prohibited parties Use of Property Compensation of IRA owner Unrelated Business Taxable Income (“UBTI”) 1.Rents, interest, dividends and capital gains exempt. 2.Watch out for development activities and non-real estate activities. Unrelated Debt Financed Income (“UDFI”) 1.Tax is paid on the portion of gains attributable to the debt on the property. Administration Duties Annual report/valuation to Custodian Bookkeeping and tax return © Kyler Kohler & Ostermiller, LLP 2008

For more information, please contact us at: KYLER KOHLER & OSTERMILLER, LLP Tel: Fax: THANK YOU!! © Kyler Kohler & Ostermiller, LLP 2008