Contract analysis

I. PURPOSE AND EXECUTIVE SUMMARY This memorandum analyzes the optimal marital deduction planning structure for the Amended and Restated Jonathan R. Caldwell Revocable Trust (originally established October 3, 2010; to be amended and restated effective April 1, 2023) (the "Revocable Trust") in the context of the comprehensive generational estate plan being implemented for Jonathan R. Caldwell ("Jonathan" or the "Granto

1. Credit Shelter Trust (also referred to herein as the "Bypass Trust" or "Family Trust") — funded with assets equal to the then-available federal estate tax exemption amount (the "applicable exclusion amount" under IRC § 2010(c)), reduced by adjusted taxable gifts and specific bequests. This trust will be designed to be excluded from the surviving spouse's gross estate at the second death, thereby sheltering the tru

2. Marital QTIP Trust — funded with the balance of the Revocable Trust estate remaining after funding the Credit Shelter Trust. The Marital QTIP Trust will qualify for the unlimited marital deduction under IRC § 2056(b)(7), deferring all federal estate tax on the marital portion until the surviving spouse's subsequent death. The executor will elect qualified terminable interest property ("QTIP") treatment on the fede

II. BACKGROUND — CLIENT PROFILE AND ESTATE CONTEXT A. Jonathan R. Caldwell — Personal and Financial Overview Jonathan R. Caldwell is a United States citizen and resident of New York. His personal details are as follows: • Date of Birth: March 14, 1956 (age 67) • Residence: 418 East 72nd Street, Apt. 14A, New York, NY 10021 • Social Security Number (last four): 4781 • Marital Status: Married to Eleanor V. Caldwell sin

1. Thomas R. Caldwell • Date of Birth: June 7, 1985 (age 38) • Residence: 55 Perry Street, Unit 3, New York, NY 10014 • Occupation: Vice President of Acquisitions, Meridian Crest Partners LLC • Marital Status: Married to Dr. Sarah P. Caldwell (physician, NYU Langone) • Children: • Lucas T. Caldwell (date of birth: approximately 2020; age 3) • Nora E. Caldwell (date of birth: approximately 2022; age 1) Thomas is activ

2. Katherine C. Hartfield • Date of Birth: November 19, 1987 (age 35) • Residence: 210 Briarcliff Lane, Greenwich, CT 06830 • Occupation: Freelance interior designer • Marital Status: Married to Dr. Andrew W. Hartfield (physician, Preswick Medical Center) • Children: • James W. Hartfield (date of birth: approximately 2015; age 8) • Charlotte M. Hartfield (date of birth: approximately 2018; age 5) Katherine has been d

3. Olivia G. Caldwell • Date of Birth: April 2, 1993 (age 30) • Residence: 1240 North Dearborn Street, Apt. 807, Chicago, IL 60610 • Occupation: Associate at Linden & Fairchild LLP (environmental law practice) • Marital Status: Unmarried; no children Olivia has been included as a Crummey withdrawal beneficiary of the ILIT and is a remainder beneficiary of the Credit Shelter Trust and the Marital QTIP Trust. Summary o

1. Caldwell 2023 Securities GRAT ("GRAT A") GRAT A is a two-year grantor retained annuity trust to be funded on April 15, 2023, with $60,000,000 in publicly traded securities from Jonathan's liquid securities portfolio. The annuity payment is $32,195,122 per year, calculated based on the IRC § 7520 rate in effect at the time of funding (currently 5.0%) and designed to result in a gift value as close to zero as possib

2. Caldwell 2023 Realty GRAT ("GRAT B") GRAT B is a three-year grantor retained annuity trust to be funded on May 1, 2023, with membership interests in Stonecrest Realty Holdings LLC valued at $80,000,000 (representing approximately 59.7% of Stonecrest). The annuity payment is $29,375,859 per year, similarly designed as a zeroed-out GRAT based on the § 7520 rate. The Stonecrest interests will be valued for gift tax p

3. Caldwell 2023 Carried Interest GRAT ("GRAT C") GRAT C is a three-year grantor retained annuity trust to be funded on June 1, 2023, with Jonathan's carried-interest and limited partner positions in CRC Funds IV, V, and VI, valued at $38,000,000. The annuity payment is $13,953,759 per year. As with the other GRATs, this is designed as a zeroed-out GRAT. The carried-interest positions are inherently speculative and i

4. Caldwell Family Dynasty Trust The Caldwell Family Dynasty Trust (the "Dynasty Trust") is a Delaware-situs irrevocable trust established to benefit multiple generations of the Caldwell family in perpetuity under Delaware's perpetual trust statute (12 Del. C. § 3556). Northgate Trust Company of Delaware serves as the institutional co-trustee, and Thomas R. Caldwell serves as the family trustee. The Dynasty Trust has

5. The Caldwell Family Foundation The Caldwell Family Foundation is a New York not-for-profit corporation established for charitable purposes, initially funded with $10,000,000 ($5,000,000 contributed by Jonathan and $5,000,000 contributed by Eleanor). The Foundation has received its determination letter from the IRS (EIN 88-3021547; determination letter received July 14, 2023) and operates as a private foundation un

6. Caldwell Family Insurance Trust (ILIT) The Caldwell Family Insurance Trust (the "ILIT") is an irrevocable trust that owns a $15,000,000 second-to-die universal life insurance policy issued by Beacon Life Assurance Company (Policy No. BLA-2023-77419). The annual premium is $187,500. Northgate Trust Company of Delaware serves as trustee. The policy insures the joint lives of Jonathan and Eleanor, with the death bene

III. FEDERAL ESTATE TAX EXEMPTION — CURRENT LAW AND 2025 SUNSET The design of the Credit Shelter Trust and Marital QTIP Trust is fundamentally driven by the federal estate and gift tax exemption amount — the "applicable exclusion amount" under IRC § 2010(c) — available at the date of Jonathan's death. Because this amount is subject to legislative change, and because a major change is currently scheduled for January 1

IV. CREDIT SHELTER TRUST DESIGN The Credit Shelter Trust (also referred to as the "Bypass Trust" or "Family Trust") is the cornerstone of the marital deduction planning structure. Its primary purpose is to shelter an amount equal to the available federal estate tax exemption from estate tax at both Jonathan's death and Eleanor's subsequent death. By designing the Credit Shelter Trust to be excluded from Eleanor's gro

V. MARITAL QTIP TRUST DESIGN The Marital QTIP Trust is the second component of the two-trust structure. Its primary purpose is to qualify for the unlimited marital deduction under IRC § 2056, thereby deferring all federal estate tax on the marital portion of the estate until Eleanor's subsequent death. The Marital QTIP Trust will hold the balance of the Revocable Trust estate after funding the Credit Shelter Trust —

1. All Income to Surviving Spouse. Eleanor must be entitled to all income of the Marital QTIP Trust, payable at least annually. IRC § 2056(b)(7)(B)(ii)(I). The trust instrument must not grant anyone the power to accumulate income or divert income to any person other than Eleanor during her lifetime. Consistent with this requirement, the trust instrument provides that Eleanor is entitled to receive all net income of t

2. No Power to Appoint to Others During Eleanor's Lifetime. No person (including any trustee) may have a power to appoint any part of the trust property to any person other than Eleanor during her lifetime. IRC § 2056(b)(7)(B)(ii)(II). The trust instrument must be carefully drafted to ensure that no such power exists. Discretionary principal distribution authority in favor of Eleanor is permissible, but distributions

3. Executor Election. The executor must elect QTIP treatment on the estate tax return (Form 706). The election is made on Schedule M of Form 706 and is irrevocable once the return is filed. The election may be made with respect to all or a specific fractional or percentage share of the qualifying property. The trust instrument has been drafted to satisfy each of these requirements. Particular care has been taken to e

VI. PORTABILITY ELECTION ANALYSIS A. Overview of Portability The portability provision, enacted as part of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 and made permanent by the American Taxpayer Relief Act of 2012, allows a surviving spouse to use the "deceased spousal unused exclusion amount" ("DSUE") of the last deceased spouse. Under IRC § 2010(c)(4), if the executor of the

VII. COORDINATION WITH THE DYNASTY TRUST A. GRAT Remainders Flowing to Dynasty Trust A central feature of the comprehensive estate plan is the use of the three GRATs (A, B, and C) to transfer excess appreciation to the Caldwell Family Dynasty Trust. Upon termination of each GRAT, any appreciation in the GRAT assets above the IRC § 7520 hurdle rate (currently 5.0%) passes to the Dynasty Trust, free of gift and estate