REVOCABLE vs. IRREVOCABLE TRUST and TAX PLANNING

J. Wesley Smith Principal Phone: (925) Fax: (925) After graduating from the University of California, Davis (BA, 1990), Mr. Smith attended the University of the Pacific McGeorge School of Law with concentration in Business and Estate Planning. He graduated with distinction in 1994 and was awarded the American Jurisprudence Award in Business Planning and Development. Mr. Smith was admitted to the California Bar in 1994 and is admitted to practice in federal courts. After graduating from the University of California, Davis (BA, 1990), Mr. Smith attended the University of the Pacific McGeorge School of Law with concentration in Business and Estate Planning. He graduated with distinction in 1994 and was awarded the American Jurisprudence Award in Business Planning and Development. Mr. Smith was admitted to the California Bar in 1994 and is admitted to practice in federal courts. Mr. Smith is a business, estate and real estate attorney whose practice includes: Mr. Smith is a business, estate and real estate attorney whose practice includes: Business, estate, probate and real estate litigation Business, estate, probate and real estate litigation Trust estate and tax planning, business planning and family succession planning. Trust estate and tax planning, business planning and family succession planning. General counsel to high net worth clients concerning family succession planning including serving clients as "Family Office" CEO. General counsel to high net worth clients concerning family succession planning including serving clients as "Family Office" CEO. Business and corporate transactions including entity formation and operation, business transactions, mergers and acquisitions and other business reorganizations. Business and corporate transactions including entity formation and operation, business transactions, mergers and acquisitions and other business reorganizations. Real estate transactions and counsel including commercial and residential purchase and sales, leases and options. Real estate transactions and counsel including commercial and residential purchase and sales, leases and options. Trust, estate and probate administration Trust, estate and probate administration Mr. Smith also serves as a mediator in disputes involving trusts and estates, business, real estate and corporate matters. Mr. Smith also serves as a mediator in disputes involving trusts and estates, business, real estate and corporate matters. Membership: Membership: Business, Trust and Estates, Probate and Real Estate Sections of the Contra Costa County Bar Association Business, Trust and Estates, Probate and Real Estate Sections of the Contra Costa County Bar Association Solano County Bar Association Solano County Bar Association American Bar Association American Bar Association State Bar of California State Bar of California Education: Education: McGeorge School of Law, University of the Pacific McGeorge School of Law, University of the Pacific University of California, Davis University of California, Davis Practice Areas: Practice Areas: Asset Protection Asset Protection Business Disputes Business Disputes Business Transfers and Combinations Business Transfers and Combinations Charitable Giving Charitable Giving Commercial Transactions Commercial Transactions Conservatorships Conservatorships Financial Institutions Financial Institutions Formation and Governance Formation and Governance Health Care Directives Health Care Directives Ownership of Real Property Ownership of Real Property Powers of Attorney Powers of Attorney Pre and Post-Marital Agreements Pre and Post-Marital Agreements Probate Probate Real Estate Disputes Real Estate Disputes Special Needs Trusts Special Needs Trusts Succession Planning Succession Planning Tax Planning Tax Planning Trust Administration Trust Administration Will Contests and Trust Disputes Will Contests and Trust Disputes Wills and Trusts Wills and Trusts

REVOCABLE PLANNING  INCLUDED IN GROSS ESTATE  GENERALLY FAMILY ESTATE PLANNING  GRANTOR GENERALLY RETAINS CONTROL OF ASSETS

ESTATE PLANNING AFTER THE 2013 TAX REFORM ACT  Estate Tax v. Income Tax

DOES THE ACT KILL A/B/C PLANNING?  Less than $10,000,000  More than $10,000,000

THE 2013 ACT AND ESTATE AND GIFT TAX LAWS ESTATE TAX EXEMPTION ESTATE TAX EXEMPTION RATE RATE GIFT TAX LAWS GIFT TAX LAWS

GIFT AND ESTATE TAX LAW  Annual Exclusion  Marital Deduction  Education/Medical TAXING TRANSFERS OF WEALTH COMMON GIFT TAX EXCLUSIONS

GIFT/ESTATE TAX EXCLUSION  Unified Credit Exemption  Marital Deduction  Portability

INCOME TAX LAW Step-up in tax basis on “owned” assets at death of first spouse Step-up in tax basis on “owned” assets at death of first spouse Double step-up in tax basis upon death of second spouse with proper planning Double step-up in tax basis upon death of second spouse with proper planning “Owned” assets are those that are includible in a decedent’s gross estate for tax purposes “Owned” assets are those that are includible in a decedent’s gross estate for tax purposes

PLANNING AFTER 2013 ACT FOCUS SHIFTS FOR ESTATES UNDER $10 MILLION FROM ESTATE TAX TO INCOME TAX PLANNING FOCUS SHIFTS FOR ESTATES UNDER $10 MILLION FROM ESTATE TAX TO INCOME TAX PLANNING

ESTATES UNDER $10 MILLION SINGLE TRUSTS SINGLE TRUSTS DISCLAIMER TRUSTS (A PLAN) DISCLAIMER TRUSTS (A PLAN) TWO TRUSTS TWO TRUSTS SURVIVOR’S & MARITAL TRUST (A/C PLAN) SURVIVOR’S & MARITAL TRUST (A/C PLAN) INCOME TAX FOCUS INCOME TAX FOCUS

Survivor’s Gross Estate Marital THE A/C PLAN Portability of Marital Deduction TRUST HusbandWife RevocableIrrevocable 1/2 CP 1/1 SP 1/2 CP 1/1 SP 1. Step- Up basis on CP 2. File 706 & elect portability 1. Step- Up basis on CP 2. File 706 & elect portability 2nd Step-Up basis on Survivor’s/Marital Trust Children

Survivor’s Gross Estate THE A PLAN TRUST HusbandWife RevocableIrrevocable 1/2 CP 1/1 SP 1/2 CP 1/1 SP 1. Step- Up basis on CP 2. File 706 & elect portability 1. Step- Up basis on CP 2. File 706 & elect portability 2nd Step-Up basis on Survivor’s Trust only! Children Disclaimer Trust 9 month deadline!

ESTATES OVER $10 MILLION CONTINUED FOCUS ON ESTATE TAX SYSTEM CONTINUED FOCUS ON ESTATE TAX SYSTEM A/B PLANNING A/B PLANNING A/B/C PLANNING A/B/C PLANNING NO SECOND STEP-UP ON BASIS (B Trust) NO SECOND STEP-UP ON BASIS (B Trust)

Survivor’s Trust A Marital Trust CBypass Trust B Survivor’s Estate IRS 2 nd Death Children A/B/C PLAN FAMILY TRUST HusbandWife Revocable Trusts Irrevocable Trusts 1/1 SP 1/2 CP 1/1 SP 1/2 CP 1 st Death

NEW TAX ACT PLANNING OPPORTUNITIES Irrevocable Planning BUSINESSES BUSINESSES REAL ESTATE REAL ESTATE LIFE INSURANCE LIFE INSURANCE FINANCIAL ACCOUNTS FINANCIAL ACCOUNTS

IRREVOCABLE PLANNING EXCLUDED FROM GROSS ESTATE EXCLUDED FROM GROSS ESTATE GENERALLY LESS CONTROL OVER ASSETS GENERALLY LESS CONTROL OVER ASSETS ESTATE TAX PLANNING ESTATE TAX PLANNING

IRREVOCABLE TRUSTS  ILIT/SLAT – Irrevocable Life Insurance Trusts  QPRT – Qualified Personal Residence (or second home) Trust  Dynasty/GST Trusts and GST Exemption  Multi-generational planning  Charitable Trusts  IDGT – “Intentionally Defective Grantor Trusts”  Children’s Trusts

OUR CLIENTS Business Owners Business Owners Real Estate Investors Real Estate Investors High Net Worth Individuals High Net Worth Individuals Life Insurance Portfolios Life Insurance Portfolios Professionals Professionals Clients Requiring General Estate Plans Clients Requiring General Estate Plans

PRACTICE AREAS Business Business Real Estate Real Estate Wealth Succession and Estate Wealth Succession and Estate Tax Tax Employment Employment Business, Real Estate, Estate and Commercial Litigation Business, Real Estate, Estate and Commercial Litigation