Copyright 2003

Copyright 2003

Go Navy!

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ASSET ACCUMULATION, PROTECTION, PRESERVATION,

and TRANSFER, LLC

• Registered Investment Advisory Firm

John A. Cory, Member

• Securities offered through Resources Horizons Group, LLC, broker-dealer, Member FINRA, SIPC

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ASSET ACCUMULATION, PROTECTION, PRESERVATION,

and TRANSFER, LLC

• 1981:

• 1987:

• 1992:

• 1999:

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ASSET ACCUMULATION, PROTECTION, PRESERVATION,

and TRANSFER, LLC

• 1981: Law/MBA

• 1987: CFP

• 1992: CPA

• 1999: AAPPT, LLC

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ResourceHorizons

Group, LLCcommission

FINRA, SIPC

APTfee

SECADV

COMPENSATION

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FEE versus COMMISSION

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Family Financial Philosophy

• Financial Independence: savings, income,

liquidity

• Family Legacy

• Community Legacy: Church/College

• Avoid Tax Legacy

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Life is like the game of Monopoly…

When it’s all over, it all goes back into the box.

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Investment Process

1. Determine Goals and Risk Level

2. Set Asset Allocation Strategy

3. Diversify Asset Classes and Styles

4. Rebalance and Reallocate

5. Monitor and Re-evaluate

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Investment Process

1. Determine Goals and Risk

2. Set Asset Allocation Strategy

3. Diversify Asset Classes and Styles

4. Rebalance and Reallocate

5. Monitor and Re-evaluate

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Investment Policy Statement

• OBJECTIVES: Return & Risk Tolerance• Financial Independence• College• Charitable Giving• Start Own Business

CONSTRAINTS:Taxes, Debt, Liquidity, Time Horizon

INVESTMENT POLICYSTATEMENT

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Investment Process

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Investment Process

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Investment Process

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Investment Policy Statement

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Asset Allocation

• Asset Category Selection

• Long range target percentage for each category

• Allowable percentage range increase

• Selection of actual securities

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Asset Allocation

• 91.5% Asset Allocation• 4.6% Security Selection• 1.7% Market Timing• 2.2% Other

Asset Allocation

Stock Selection

Market Timing

Other

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INVESTMENT PYRAMID

• Aggressive: Leveraged stock/real estate

• Moderate: Growth stocks, Real estate

• Conservative: GNMA’s, Utility stocks

• Defensive: Treasuries, Certificates of Deposit

Aggressive

Moderate

Conservative

Defensive

Increased Risk/R

eward

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Qualified Plans/401(k)

• Profit Sharing/ 401(K)• Defined Benefit 412(i)• Money Purchase• Simple IRA• SEP IRA• Uni K

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IRA’s and TSA’s

• Traditional IRA• Conversions• Roth IRA• Tax Sheltered

Annuities• 403(b)

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The Right Investments

Inside IRA• Growth Mutual Funds• Short-Hold Stocks• Taxable Bonds

Outside IRA• Index/Low Turnover

Mutual Funds• Long-Hold Stocks• Tax-Free Bonds

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Judge Learned Hand

“Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich and poor; and all do right, for nobody owes any public duty to pay more than the law demands; taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.”

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Tax Act of 2003

• Reduced income tax(10,15,25,28,33,35%)

• Reduced dividend taxation(max 15%)

• Reduced capital gains rates(5% - 15%)

• Marriage penalty relief

• Sunset provisions

• Winner: stocks

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Tax Acts of 2004

• Jobs Creation Act: Enron

• Favors manufacturing and farmers

• Subchapter S Corps: 100 shareholders

• Extends small business expensing: S 179

• Tightens vehicle donation rules

• Reduces SUV loophole

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Health Savings Accounts

• High Deductible($1,000 ind; $2,000 family)

• Contribution($2,600 ind; $5,150 family)

• Contributions less than deductible

• Tax deferred savings

• Penalty: 10% - non qualified distribution

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Year End Planning

• Bunch deductions• Prepay state income tax• Prepay January mortgage• Utilize home equity loans• Utilize Section 179 business expensing

($102,000 for 2004; $25,000 in 2006)• Donate used car before 2005• Beware of AMT

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President Bush’s Agenda

• Permanent tax cuts(revenue neutral)• Simplify/fair tax system(AMT:preference items) • Partial privatization of Social Security• Private oil exploration(Alaska)• Care Act/IRA Rollover Act• Ronald Reagan Alzheimer’s Act: $3K credit• Tort reform(frivolous lawsuits)

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Annuities

• Income tax deferral• Fixed or Variable• Equity Indexed• Guarantees• Fees• Surrender Charges• 10% penalty before

age 59 1/2

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Equity Indexed Annuities

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Equity Indexed Annuities

2 – 3 %

SAFETY

EQUITY INDEXED ANNUITY

Upside

Market

Potential

STOCK

100%

LOSS

C D

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Stock Options

• Section 83 of IRC

• Nonqualified stock options

• Incentive stock options

• Alternative minimum tax

• Analyze all alternatives

StockOptions

StockOptions

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Income Tax Credits

• Low Income Housing Credit:over 10 years

• Offset $25,000 income/year(more passive)

• Historic Rehab(credit upfront, inc restrict)

• No reduction in tax basis

• AMT neutral(can’t reduce)

• Limited partnership

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Why Invest In Natural Gas?

Demand ContinuesDemand Continuesto Growto Grow

Domestic Supply Domestic Supply ChallengesChallenges

Positive Price Positive Price OutlookOutlook

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Natural Gas Demand

20

22

24

26

28

30

32

2002 2010 2015 2020 2025

DemandSource: Department of Energy

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Oil and Gas Tax Benefits

Write-off 70 - 80% in current year(“at risk”)

General Partner:Liability Insurance; six months

Remaining 20% Depreciated

Depreciation & Depletion of 25%:5 yrs Depletion Allowances: 15% for life Intangible drilling costs

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Mutual Funds Scandal

• Consider Selling– Alger, Nations, Heartland, Raymond James, Fleet

Boston Financial, AIM, Bank of America• Don’t Send Money Now

– Columbia, Excelsior, Federated, Scudder, Seligman, Freemont

• Proceed With Caution– Alliance Bernstein, Franklin Resources, One Group,

MFS, PIMCO, Putnam International, Loomis, Alliance Capital, Acorn, PBHG, RS Investments, Janus, Evergreen, Invesco (Amvescap), ING

• Note: Also Banks, Broker-Dealers, and Hedge Funds

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Insurance Companies Scandals

• Marsch & McLennan:broker corruption,conflict of interest• American International Group, Inc: corruption, conflicts of interest,

bid-rigging• ACE Ltd: corruption, conflicts of interest, bid-rigging• Hartford Financial Services Group, Inc: corruption, conflicts of

interest, bid-rigging• Munich-American Risk Partners: corruption, conflicts of interest, bid-

rigging• Spitzer has subpoenaed Prudential Financial, Cigna, Met Life; Aon

& Willis Group(brokers);Universal Life Resources• Zurich Financial: bid rigging, contingent fees, kickbacks• GA Investigation: Travelers,Ace,Principal,Cigna,BXBS,United,Fortis

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GA Broker/Dealer Investment Scandals

• Lehman Brothers• Bear Stearns• Credit Suisse 1st Boston• Goldman Sachs• J.P. Morgan• Morgan Stanley• Citicorp:Sol Smith Barney• USB Securities:Warburg• USB Financial:Paine Web

• Spitzer: NY & national • Merrill Lynch:2002• RESEARCH & INVEST

(Conflict of Interest)

• $5M Invest Protect Trust

Pending• Wachovia Capital • Deutsche Bank• Thomas Weisel Partners

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Winners and Losers

• Energy

• Defense

• Domestic Drugs

• Health Care

• Small Business

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Q: Are you a TARGET?

Professional

Malpractice

Divorce

Partner

Officer, Director, Advisory Board (actual or implied)

Accident at home

Real estate (environmental)

Car accident

Employee action

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Asset Protection:Entity Selection

• C Corp: Medical Reimbursement Plan• S Corp: Pass-through Entity• LLC: % Owner/Profit – varies; real estate• LLP: No Agreement; State-default• LLLP: Limited General Partner Liability• FLP: Estate tax, income tax, asset protect• FLLP: All of the above

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Asset Protection

• Relinquish control

• LLC, LLP, LLLP, FLP

• Spendthrift provisions

• Delaware, Nevada, Alaska, South Dakota

• Consider off-shore trusts

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Prenuptial Agreements

• Protect children

• Avoid assumption of Debts of new spouse

• Dual attorneys

• Recording

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Disability Insurance

• Definitions: “own occupation”• Guaranteed renewable• Waiting period• Trigger,exclusions, term• Inflation protection• Portability

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Long Term Health Care Insurance

• Tax qualified (or not)• Noncancellable• Guaranteed renewable• Level of Care: skilled,

intermediate, custodial• Waiting period• Trigger, exclusions, term• Inflation protection

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Activities of Daily Living

• Bathing

• Dressing

• Eating

• Toileting

• Transferring

• Continence

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Who Pays for Nursing Home Care?

Source: Centers for Medicare & Medicaid Services, Office of the Actuary, 2003 Projected Expenditures Data Released, January 2002

http://cms.hhs.gov/statistics/nhe/projections-2001/proj2001.pdf

Out-of-Pocket

25.1%25.1%

50.3%50.3%

10.8%10.8%

4.0%4.0%7.5%7.5%

OtherPublic Funds

Medicaid

Medicare

Other Private Funds

Private Health Insurance

2.3%

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Who Pays for Home Care?

Source: Centers for Medicare & Medicaid Services, Office of the Actuary, 2003 Projected Expenditures Data Released, January 2002

http://cms.hhs.gov/statistics/nhe/projections-2001/proj2001.pdf

Out-of-Pocket

18.6%18.6%

19.9%19.9%

32.1%32.1%

4.7%4.7%

19.7%19.7%

OtherPublic Funds

Medicaid

Medicare

Other Private Funds

Private Health Insurance

5%

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Who Pays for Care?

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Who Pays for Care?

SELF FAMILY

Which CHILD?

MEDICAID

=

WELFARE

TRANSFER

LTC Insurance

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Life Insurance

• Cash value, investment control

• Term

• Whole Life

• Universal

• Variable: separate accounts

• Variable Universal

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Variable Universal Life

• Potential income tax forgiveness

• Investment alternatives

• Investment Risks

• Fees

• Surrender Charges FEES!

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Last Will and Testament

• If properly drafted and executed, avoids bond, returns and inventory

• Creditor claims resolved

• Simple Georgia probate

• Testamentary Trust

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Revocable Living Trusts

• Avoid Probate and “red tape”

• Successor Trustee if not competent

• Privacy

• Pour-over Will needed

• Avoid ancillary

jurisdiction

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Powers of Attorney, Living Wills

• Financial

• Health

• Choice of Agent

• Successors

• Durable: Competency

• Powerful: Springing

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Types of Joint Tenancy

• Joint Tenants with Rights of Survivorship

• Tenants in Common

• Passage/Estate includable

• Payable upon Death accounts

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History of Estate Tax

• 1797: Stamp Act• 1802: Repealed• 1862: Civil War• 1870: Repealed• 1898: Spanish American War• 1902: Repealed• 1916: WW I• 1924,1930’s,1976 – 1993 (9 Acts)• 2001: EGTRRA

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Tax Relief Act of 2001: Estate and Gift Tax

• Increased Unified Credit

• Reduced estate tax rates

• Segregate estate and gift tax

• Basis issues

• Increased qualified plan /IRA contribution and benefit limits

• Sunset provision: 1/1/2011

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2009$3.5M

2002$1M

2004$1.5M

2006$2M

Unified Credit

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Unlimited Marital Deduction

• Zero estate tax upon first spouse’s death

• Waste first spouse to die‘s unified credit

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Marital Trust or Outright Spousal Distributions

• Same marital deduction and estate tax result

• Control income/principal

• Control ultimate disposition

• Trustee selection

• Consider QTIP

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Unified Credit Trust

Estate

Children’s Trust

Surviving Spouse Outright • Personal property to spouse• Residence to spouse• Balance to spouse outright

Unified Credit Trust• All income to spouse or sprinkle with children• Principal to spouse for health, support, and maintenance(and children)• Spousal $5,000 or 5% power

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Estate Tax Returns

• Detailed Balance Sheet: CUSIP #s

• Due nine months after death

• Payment in Cash

• Appraisals

• Form 706

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Unified Credit Trusts

• Two spouses: two unified credits

• Principal: health, education, support, and maintenance

• Trustee selection

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Qualified Terminable Interest Property Trusts

• Control distribution of assets after second spouse’s death

• Protect children of prior marriage

• Doesn’t pass to second spouse

QTIP

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QTIP Trusts

Estate

Children’s Trust

Surviving Spouse QTIP • All income to spouse• Principal to only spouse for health, support, and maintenance• First to die spouse controls ultimate beneficiaries

Unified Credit Trust• All income to spouse or sprinkle with children• Principal to spouse for health, support, and maintenance (and children)• Spousal $5,000 or 5% power

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Disclaimer Trusts

Estate

Disclaimer

Surviving Spouse• All to spouse outright

Unified Credit Trust• All income to spouse or sprinkle with children• Principal to spouse for health, support, and maintenance (and children)• Spousal $5,000 or 5% power

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Disclaimers

• Decline ownership

• Passes to next beneficiaries

• No interest

• Nine months after death

• Flexibility

… but I don’t want it …

… but I don’t want it …

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Incentive Trusts

• Flexibility versus ruling from the grave

• Education, ministry, teaching,

matching income, Eagle Scout

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Life Insurance Trusts

• Not includable in estate• Effectively increases unified

credit• Crummey provisions (30 day

beneficiary notice and rights)

• Trustee/separate bank account

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Generation Skipping Trusts/Dynasty Trusts

• Rule Against Perpetuities

• Dynasty Trusts

• $1 Million Grandchildren’s Exemption

• Georgia: vest within 90 years

• Delaware, Nevada, Alaska, South Dakota

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Charitable Remainder Trusts

• Win-Win situation • Charitable Deduction: FMV of

future interest• Avoid capital gains tax• Retain income• Variable annuity: defer income• Remainder to charity• Irrevocable: not beneficiary

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Donor Advised Funds/Community Foundations/Private Foundations

• Control versus administrative costs

• Prohibited transactions: Self-dealing, excise tax

• Sponsoring institutions

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Grantor Retained Annuity/Income Trusts

• Leverage Unified Credit

• Future appreciation to children

• Remainder to children

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Personal Residence Trusts

• Residence and vacation home

• Leverage unified credit

• Future appreciation to children

• Remainder to children

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Gifts to Minors

• $11,000 per year

• Avoid guardianships

• Section 2503 C Trusts

• Uniform Gifts to Minors

• Form 709

AGE 18?

AGE 21?

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Section 529 Plans

• Income tax deferral/forgiveness• No income limit• Student not legal owner• Five year / $55,000• Transfer to another relative• State specific• Alternative to Educational

Accounts/IRA’s529

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Family Limited Partnerships

• Estate tax reduction: valuation discounts

• Maintain Control

• Asset protection

• Income tax spreading

• Business purpose

• Charging order

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Lump Sum Distributions

• Entire account paid within single calendar year

• Unrealized appreciation of Company Stock is excluded (upon death get step-up)

• Study your options and seek tax advice

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Rollovers versus Ten Year Averaging

• Ten year averaging available if age 50 before 1/1/86

• Five year averaging no longer

• Lump sums within single year

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Qualified Plan/IRA Distributions

• Taxed as ordinary income

• Before age 59 ½: 10% penalty

• Age 55: substantial equal pay

• Age 70 ½: minimum distributions

• “Stretch” beneficiaries (i.e. grandchildren) utilizing Trusts

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Qualified Plan/IRA TRUSTS

• Irrevocable upon death

• Identifiable beneficiaries

• Documentation to plan administrator

• Avoid payment of debts,

admin expenses, estate tax

1. Terms 2. Beneficiaries3. Trustee 4. Termination

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Qualified Plan/IRA Trust

Statistics say that when children are the sole beneficiaries, 80% of all IRA’s are depleted within two years, resulting in immediate income taxation.

Question: Should you consider a trust as the beneficiary of your qualified plan/IRA?

Answer: Stretch IRA (Primary Beneficiary: Spouse; Contingent Beneficiary: IRA or Disclaimer Trust)

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Final Minimum Distribution Rule

Regulations• 2002

• Simple distribution calculation

• Reduced required distributions

• Facilitates beneficiary changes

• Facilitates disclaimers

• Still age 70 ½1. Age 59 ½2. Age 70 ½3. PENALTIES

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Copyright 2003

Life is like the game of Monopoly…

When it’s all over, it all goes back into the box.

Copyright 2003

He was a great man, but…

The one scenario he forgot to consider in his forecast, was the certainty of Death.

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Death is the last big move of your Life.

Copyright 2003

Probate

• Prove Validity of Will

• Notice

• Public filing

• Instant Acknowledgment and Assent

• Creditor Conclusion

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Retitling Assets

• Deeds of Assent

• Letters of Instruction

• New account forms

Copyright 2003

Funding Testamentary Trusts

• Flexibility

• Basis step-up

• Growth or Income

• Trustee discretion

Copyright 2003

What Happens to Your IRA When You Die

• Spousal rollover• Inherited IRA: only spouse recalculates

(others: minus one)• Rules depends if death

occurs before age 70 ½• Avoid 5 year rule (pre 70 ½)• Avoid ESTATE as beneficiary

Copyright 2003

IRA Distribution RulesDeath Occurs Before 70 1/2

Individual Beneficiary

Spouse Beneficiary

Multiple Beneficiary

• Rollover

• Recalculate as

Inherited IRA

• Beneficiary’s life expectancy

• Begin Dec 31st of year following

• Avoid penalties

•Oldest age dictates

• Begin Dec 31st of

year following

• Avoid penalties

NO BENEFICIARY: Dec 31st of Fifth calendar yearfollowing death

• Beneficiary’s life expectancy

• Begin Dec 31st of year following

• Avoid penalties

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IRA Distribution RulesDeath Occurs After 70 1/2

Individual Beneficiary

Spouse Beneficiary

Multiple Beneficiary

• Rollover

• Recalculate as Inherited IRA

• Rollover

• Continue

• Oldest age dictates

• Begin Dec 31st of year following

• Avoid penalties

• Beneficiary’s life expectancy

• Begin Dec 31st of year following

• Avoid penalties

NO BENEFICIARY: Continue annually over the deceased’s lifetime

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Stretch IRA

No Stretch IRA

• Loses Tax Deferral• Taxes Due on Full Amount• No Legacy Left for Children

®

IRAACCOUNTS

OWNER SON GRANDCHILDIRA

ACCOUNTSIRA

ACCOUNTS

IRAACCOUNTS

OWNER

SON

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American Family Philanthropic Blue Plot

Plat

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DON’TPROCRASTINATE

Because,…WHY?

Copyright 2003

YOU CAN’T TAKE IT

WITH YOU!

Copyright 2003

MANKIND’S DILEMMA

“This is mankind’s age-old dilemma in the face of death: What man really fears is not so much extinction, but extinction with insignificance. Man wants to know that his life has somehow counted, that he has left a trace, a trace that has meaning. And in order for anything once alive to have meaning, its effects must remain alive in eternity some way.”

Ernest Becker

Copyright 2003

QUESTION

What are you doing with your Life’s resources, gifts, talents, opportunities,

and abilities?

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COMPLIMENT

The highest compliment we can be paid is the trust you exhibit when providing us the names of friends and associates who might also benefit from the services we provide.

John A. Cory, J.D.,CPA,MBA

Copyright 2003

ASSET ACCUMULATION, PROTECTION,

PRESERVATION, AND TRANSFER, LLC.(A registered Investment Advisory firm)

• Other than spiritual and humanitarian issues, (which are by far, more important) that’s what life is all about. Do YOU have your act together? Call and make an appointment for a free consultation (or we’ll mail you our 45 point questionnaire). Don’t procrastinate. Remember You Can’t Take It With You. Visit our website at www.APTjac.com.

• Is your financial/investment/retirement/estate/business act together?

Securities offered through Resources Horizons Group, LLC, broker-dealer, Member FINRA , SIPC.

John A. Cory, Sole MemberAttorney, CPA,and Financial ConsultantU of GA Law/MBA, US Naval Academy

Captain, US Naval ReserveCertified Financial Planner in 1986

Copyright 2003

ASSET ACCUMULATION, PROTECTION , PRESERVATION, AND TRANSFER, LLC

Copyright 2003

Go Dawgs!!!