ilit-annual-premium-funding-letter.docx

1034-00004 · Group Strathmore Corp · ILIT Documents

ilit-annual-premium-funding-letter.docx DOCUMENT M&A / Corporate

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CALDERWOOD & HARKNESS LLP 375 Park Avenue, 42nd Floor New York, NY 10152 Telephone: (212) 554-8000 Facsimile: (212) 554-8001 www.calderwoodharkness.com

Matter No.: 1034-00004 Billing Code: 78412-JRC

[Date]

Mr. Jonathan R. Caldwell 418 East 72nd Street, Apt. 14A New York, NY 10021

Re: Caldwell Family Insurance Trust — Annual Premium Funding Procedures Beacon Life Assurance Company Policy No. BLA-2023-77419 ILIT Trust Agreement dated March 15, 2023

Dear Mr. Caldwell:

We are writing to provide you with this annual advisory letter regarding the procedures for funding the annual premium payment on the second-to-die universal life insurance policy held by the Caldwell Family Insurance Trust (the "ILIT"). This letter is intended to serve as a comprehensive guide for each year's premium funding cycle and should be reviewed carefully in advance of each premium due date. We have designed this letter as a template for annual use, to be updated and reissued each year as necessary to reflect any changes in applicable law, exemption amounts, premium amounts, or family circumstances.

1. Purpose of This Letter

This letter is provided annually to guide you through the procedures for funding the annual premium payment on the second-to-die universal life insurance policy held by the ILIT. As you will recall, the ILIT was established on March 15, 2023, pursuant to the Caldwell Family Insurance Trust Agreement of even date (the "Trust Agreement"), with Northgate Trust Company of Delaware serving as the institutional trustee. The ILIT was created as a central component of the comprehensive estate plan developed for you and Mrs. Eleanor V. Caldwell during our engagement concluded on September 29, 2023.

The life insurance policy held by the ILIT is issued by Beacon Life Assurance Company, Policy No. BLA-2023-77419 (the "Policy"). The Policy is a second-to-die universal life insurance policy insuring the joint lives of you, Jonathan R. Caldwell (date of birth: March 14, 1956), and your wife, Eleanor V. Caldwell (date of birth: September 22, 1958). The Policy provides a death benefit of $15,000,000, payable upon the death of the survivor of you and Mrs. Caldwell.

Proper adherence to the procedures set forth in this letter each year is critical to ensuring that:

(a) the Policy remains in force and the premium is paid in full and on time;

(b) the $15,000,000 death benefit remains excluded from both your taxable estate and Mrs. Caldwell's taxable estate for federal estate tax purposes; and

(c) the gift tax consequences of your annual premium contributions are minimized through proper use of annual exclusion gifts and the Crummey withdrawal rights available under the Trust Agreement.

The importance of following these procedures consistently and precisely each year cannot be overstated. Even a seemingly minor procedural misstep — such as a late Crummey notice or a premium payment made directly to the insurance carrier rather than through the trustee — could jeopardize the estate tax benefits of the ILIT structure or create unnecessary gift tax exposure. We therefore ask that you review this letter carefully each year and contact us with any questions before initiating the annual premium funding process.

2. Annual Premium Amount and Payment Timing

The annual premium due on the Policy is $187,500. The premium due date for each policy year should be confirmed with Beacon Life Assurance Company through your insurance broker, Glenmore Insurance Brokerage LLC (Nathan C. Freed, Senior Vice President, Private Client Division), or through Northgate Trust Company of Delaware (Philip A. Rossiter, Senior Vice President, Trust Administration). The exact due date may vary slightly from year to year depending on the carrier's billing cycle, and it is important to verify this date well in advance of each year's payment.

Timing of Transfer. You should plan to transfer the full premium amount of $187,500 to Northgate Trust Company of Delaware, as trustee of the ILIT, at least 45 days before the premium due date. This lead time is essential to allow sufficient time for the following sequential steps to occur before the premium must be remitted to the carrier:

(i) receipt and clearance of your wire transfer by Northgate;

(ii) issuance by Northgate of the required Crummey withdrawal notices to each of the three Crummey beneficiaries (discussed in detail in Section 4 below);

(iii) the running of the 30-day withdrawal period during which each beneficiary may exercise his or her Crummey withdrawal right; and

(iv) remittance of the premium payment by Northgate to Beacon Life Assurance Company.

If the premium contribution is not received by Northgate with sufficient lead time, there is a risk that the Crummey notice procedures cannot be completed before the premium must be paid, which could compromise the availability of the annual gift tax exclusion for that year's contribution.

Wire Transfer Instructions. All premium contributions should be made by wire transfer to Northgate Trust Company of Delaware using the following instructions:

Current wire transfer instructions for the Caldwell Family Insurance Trust account at Northgate are enclosed with this letter. Please verify the wire instructions with Mr. Rossiter prior to initiating each year's transfer, as banking details may change from time to time.

Notification. Upon making the wire transfer, you should promptly notify both of the following:

(a) Northgate Trust Company of Delaware — Philip A. Rossiter, at the address noted above or by telephone or email as provided to you separately; and

(b) Calderwood & Harkness LLP — Victoria Chambers, Partner, or Monica Reyes, Associate, at this firm.

This notification allows Northgate to begin the Crummey notice procedures immediately upon receipt of the funds and enables our firm to track the annual funding cycle and coordinate with your other advisors as needed.

3. Gift Tax Treatment of Premium Contributions

3.1 Overview. Each annual premium payment that you make to the ILIT constitutes a gift for federal gift tax purposes. Because the ILIT is an irrevocable trust of which you are neither a trustee nor a beneficiary, and because you retain no incidents of ownership in the Policy, your contribution of funds to the ILIT for the purpose of paying the premium is treated as a completed gift to the trust beneficiaries.

The total annual contribution of $187,500 is treated in two components for gift tax purposes:

(a) the portion sheltered by the annual gift tax exclusion under IRC § 2503(b), by virtue of the Crummey withdrawal rights held by the trust beneficiaries; and

(b) the portion that exceeds the available annual exclusion coverage and therefore reduces your remaining lifetime gift tax exemption under IRC § 2505.

Each of these components is discussed in detail below.

3.2 Annual Exclusion Gifts — Crummey Withdrawal Rights

The Trust Agreement names three Crummey beneficiaries who hold withdrawal rights with respect to contributions made to the ILIT:

• Thomas R. Caldwell (your son);

• Katherine C. Hartfield (your daughter); and

• Olivia G. Caldwell (your daughter).

Pursuant to the terms of the Trust Agreement, each Crummey beneficiary holds the right to withdraw up to $5,000 per beneficiary per year from the ILIT following each contribution. These withdrawal rights were structured in accordance with the principles set forth in Crummey v. Commissioner, 397 F.2d 82 (9th Cir. 1968), and subsequent IRS guidance, to convert what would otherwise be a future interest gift (ineligible for the annual exclusion) into a present interest gift eligible for the annual exclusion under IRC § 2503(b).

The federal annual gift tax exclusion amount for 2023 is $17,000 per donee. This amount is indexed for inflation under IRC § 2503(b)(2) and should be confirmed each year with Strathmore Corporation & Greaves LLP or with our firm. Because each Crummey beneficiary's withdrawal right ($5,000) is less than the applicable annual exclusion amount ($17,000), each beneficiary's withdrawal right qualifies in full as a present interest gift eligible for the annual exclusion. There is no risk that the withdrawal right will exceed the annual exclusion amount for any given year under current law.

The total annual exclusion coverage available with respect to your ILIT contributions is calculated as follows:

3 beneficiaries × $17,000 annual exclusion per donee = $51,000 total annual exclusion coverage

The portion of each beneficiary's contribution attributable to the Crummey withdrawal right is $5,000 per beneficiary, for a total of $15,000. This total Crummey amount is well within the aggregate annual exclusion available ($51,000), and therefore the full $51,000 of annual exclusion coverage may be applied against the $187,500 contribution. As a result:

$51,000 of the $187,500 annual premium contribution is covered by annual exclusion gifts and does not reduce your lifetime gift tax exemption.

We note that the annual exclusion coverage is maximized at $51,000 because, although each beneficiary's Crummey withdrawal right is limited to $5,000, the annual exclusion amount applicable to each beneficiary ($17,000) exceeds the withdrawal right, and the IRS and case law permit the annual exclusion to apply up to the lesser of the withdrawal right and the annual exclusion amount per beneficiary. In this case, because the total contribution allocated to each beneficiary exceeds $17,000 (i.e., $187,500 ÷ 3 = $62,500 per beneficiary), and each beneficiary has a Crummey right of at least $5,000, the full annual exclusion of $17,000 per beneficiary is available. Accordingly, the total annual exclusion sheltering your contribution is $51,000.

3.3 Lifetime Exemption Usage

The remaining portion of the annual premium contribution not covered by the annual exclusion is calculated as follows:

$187,500 − $51,000 = $136,500

This $136,500 constitutes a taxable gift and must be reported on your federal gift tax return (IRS Form 709) for the applicable tax year. This amount will reduce your remaining lifetime gift and estate tax exemption (the "applicable exclusion amount" under IRC § 2010(c) and § 2505(a)).

As of the completion of the 2023 estate plan, your remaining lifetime gift tax exemption was calculated as follows:

At the current annual usage rate of $136,500 per year, the remaining exemption of $1,170,000 would be consumed over approximately 8 to 9 years, assuming no changes in the exemption amount due to inflation adjustments or legislative changes. This projection is approximate and should be updated each year by Strathmore Corporation & Greaves LLP in connection with the preparation of your Form 709.

Sunset of the Lifetime Exemption. We wish to draw your particular attention to the following important legislative development: Under current law, the increased lifetime gift and estate tax exemption amount (currently $12,920,000 for 2023) is scheduled to sunset after December 31, 2025. If no legislation is enacted to extend the increased exemption, the basic exclusion amount would revert to approximately $5,000,000, as adjusted for inflation since 2011. This potential reduction in the exemption amount could significantly affect the overall estate and gift tax landscape for you and Mrs. Caldwell. We strongly recommend that you consult with Calderwood & Harkness LLP and Strathmore Corporation & Greaves LLP well in advance of the sunset date to assess the impact on your estate plan and to consider whether accelerated gifting strategies or other plan adjustments are advisable.

Form 709 Coordination. The annual Form 709 reporting your ILIT premium gifts should be prepared and filed by Strathmore Corporation & Greaves LLP. The responsible partner for your account is:

Martin J. Prescott, CPA Senior Partner, Private Client Group Strathmore Corporation & Greaves LLP 600 Third Avenue, 28th Floor New York, NY 10016

Each year, you (or Havensbrook Wealth Advisors LLC on your behalf) should provide Mr. Prescott with the following documentation in connection with the Form 709 filing: the amount contributed to the ILIT, copies of all Crummey withdrawal notices issued by Northgate, and the annual exclusion and lifetime exemption calculations set forth in this letter (as updated for the applicable year).

4. Crummey Withdrawal Notice Procedures

4.1 Requirement. Under established IRS guidance and the seminal decision in Crummey v. Commissioner, 397 F.2d 82 (9th Cir. 1968), in order for contributions to the ILIT to qualify for the annual gift tax exclusion under IRC § 2503(b), each Crummey beneficiary must receive timely written notice of his or her right to withdraw a portion of the contribution. The notice requirement is a critical procedural safeguard: it ensures that each beneficiary has a genuine, present opportunity to withdraw funds from the trust, thereby converting the gift from a future interest (which does not qualify for the annual exclusion) to a present interest (which does qualify).

The consequences of failing to provide proper Crummey notices are severe. If the IRS were to determine that the Crummey notices were not timely issued, were not sent to the correct beneficiary addresses, or were otherwise defective, the IRS could disallow the annual exclusion for the entire $187,500 contribution. In such event, the full contribution — rather than only $136,500 — would be treated as a taxable gift, accelerating the consumption of your remaining lifetime exemption and potentially triggering gift tax liability if your exemption has been fully utilized.

4.2 Notice Timing and Mechanics

Upon receipt of your annual premium contribution, Northgate Trust Company of Delaware, as trustee of the ILIT, is responsible for sending a Crummey withdrawal notice to each of the three Crummey beneficiaries at their respective addresses of record. The current addresses for the Crummey beneficiaries are as follows:

Thomas R. Caldwell 55 Perry Street, Unit 3 New York, NY 10014

Katherine C. Hartfield 210 Briarcliff Lane Greenwich, CT 06830

Olivia G. Caldwell 1240 North Dearborn Street, Apt. 807 Chicago, IL 60610

If any beneficiary's address has changed since the prior year, you should promptly notify Northgate and Calderwood & Harkness LLP so that the records may be updated before the next Crummey notice cycle.

The Crummey withdrawal notice must be sent promptly after the contribution is received by the trustee — ideally within 3 to 5 business days of receipt. Each notice must contain the following information:

(a) a statement that a contribution of $[amount] has been made to the Caldwell Family Insurance Trust;

(b) a statement that the beneficiary has the right to withdraw up to $5,000 from the trust;

(d) a description of the procedure for exercising the withdrawal right (i.e., by written notice to Northgate Trust Company of Delaware).

A form Crummey Withdrawal Notice has been prepared by Calderwood & Harkness LLP and provided to Northgate for annual use. A copy of this form notice is enclosed with this letter for your reference (see separate document: ILIT — Form Crummey Withdrawal Notice). The form notice should be used by Northgate each year without modification, except as to the date, contribution amount, and any updated beneficiary addresses.

If the 30-day withdrawal period lapses without the beneficiary exercising the withdrawal right, the withdrawal right expires automatically by its terms under the Trust Agreement, and the contribution remains in the trust to be applied toward the premium payment. It is expected in the ordinary course that none of the beneficiaries will exercise the withdrawal right, as the primary purpose of the Crummey power is to qualify the contribution for the annual gift tax exclusion rather than to provide immediate access to trust funds.

4.3 Record Retention

Proper documentation of the Crummey notice process is essential. In the event of an IRS audit or examination of your Form 709, the burden of establishing that proper Crummey notices were issued falls on you as the donor. Accordingly, the following record-keeping practices should be followed:

(a) Northgate must retain copies of all Crummey notices sent, along with proof of mailing (by certified mail, return receipt requested, or equivalent delivery method providing proof of dispatch and delivery), for each year. Northgate should maintain these records for a minimum of six years following the filing of the applicable Form 709, consistent with the general statute of limitations for gift tax returns under IRC § 6501.

(b) You should request and retain copies of all Crummey notices from Northgate for your own records and for inclusion with the annual Form 709 filing package provided to Strathmore Corporation & Greaves LLP.

(c) Calderwood & Harkness LLP recommends that you, or your financial advisor, Havensbrook Wealth Advisors LLC (Diana R. Linden, CFP®, Managing Director, 900 Third Avenue, 18th Floor, New York, NY 10022), maintain a separate file for all ILIT-related documents. This file should include, at a minimum, the following for each year:

• premium payment wire transfer confirmations;

• copies of all Crummey withdrawal notices issued by Northgate;

• proof of mailing for each Crummey notice;

• annual policy statements from Beacon Life Assurance Company;

• copies of the filed Form 709; and

• any correspondence with Northgate, Beacon Life, or Glenmore Insurance Brokerage regarding the Policy or the ILIT.

The maintenance of a comprehensive ILIT file will be invaluable in the event of any future IRS inquiry and will simplify the annual coordination among your advisors.

5. Three-Year Lookback Rule — IRC § 2035

An important consideration in the administration of the ILIT is the three-year lookback rule under IRC § 2035. Under this provision, if an insured transfers a life insurance policy — or any incidents of ownership in a life insurance policy — to an irrevocable trust within three years of the insured's death, the full death benefit of the policy may be included in the insured's gross estate for federal estate tax purposes, thereby defeating one of the primary purposes of the ILIT structure.

Because the Policy (Policy No. BLA-2023-77419) was assigned to the ILIT on March 15, 2023, the three-year lookback period with respect to the original policy transfer runs through March 15, 2026. If you were to die before March 15, 2026, there is a risk that the $15,000,000 death benefit could be pulled back into your gross estate for federal estate tax purposes under IRC § 2035(a). However, this risk is substantially mitigated by the fact that the Policy is a second-to-die policy: no death benefit is payable until both you and Mrs. Caldwell have died. Accordingly, even if you were to die before March 15, 2026, the death benefit would not become payable at that time, and the estate tax inclusion issue would arise only if Mrs. Caldwell were to die during the same three-year period or shortly thereafter such that the death benefit becomes payable while the § 2035 taint remains relevant.

After March 15, 2026, the § 2035 risk with respect to the original policy assignment will be fully extinguished, and the death benefit should be excluded from both your taxable estate and Mrs. Caldwell's taxable estate, provided that neither of you holds any incidents of ownership in the Policy at the time of death.

Annual Premium Contributions and the Three-Year Rule. It is important to understand that each annual premium contribution does not restart the three-year lookback period, so long as you hold no incidents of ownership in the Policy. Your annual premium payments are treated as gifts of cash to the ILIT — not as transfers of the Policy itself. The three-year rule applies to transfers of the policy or incidents of ownership therein, not to subsequent contributions of cash to the trust.

Avoidance of Incidents of Ownership. To preserve the estate tax exclusion of the death benefit, it is essential that you do not retain or exercise any incidents of ownership over the Policy. Incidents of ownership include, but are not limited to:

(a) the right to change the beneficiary designation of the Policy;

(b) the right to borrow against the Policy or pledge the Policy as collateral;

(d) the right to assign or transfer the Policy; and

(e) the right to select settlement options under the Policy.

All such actions must be taken exclusively by Northgate Trust Company of Delaware, as trustee of the ILIT, in accordance with the terms of the Trust Agreement. You should not contact Beacon Life Assurance Company directly regarding any policy administration matters; all communications with the carrier should be directed through Northgate or through your insurance broker, Glenmore Insurance Brokerage LLC (Nathan C. Freed).

6. Annual Checklist — Summary of Steps

For your convenience, the following is a numbered checklist summarizing the steps you should take each year in connection with the annual premium funding cycle. We recommend that you (and Ms. Linden at Havensbrook Wealth Advisors) refer to this checklist approximately 60 days before the anticipated premium due date to ensure that all steps are completed in a timely manner.

1. Confirm premium amount and due date. Contact Northgate Trust Company of Delaware (Philip A. Rossiter, Senior Vice President, Trust Administration, 1201 North Market Street, Suite 1600, Wilmington, DE 19801) or Glenmore Insurance Brokerage LLC (Nathan C. Freed, Senior Vice President, Private Client Division, 44 Wall Street, Suite 1200, New York, NY 10005) to confirm the annual premium amount ($187,500, subject to any adjustments by Beacon Life Assurance Company) and the exact premium due date for the current policy year.

2. Transfer funds to Northgate. Wire $187,500 to the Caldwell Family Insurance Trust account at Northgate Trust Company of Delaware at least 45 days before the premium due date. Include the reference: "Policy No. BLA-2023-77419 — Annual Premium." Verify wire instructions with Mr. Rossiter before initiating the transfer.

3. Notify Northgate and Calderwood & Harkness LLP. Upon completing the wire transfer, confirm the transfer with Philip A. Rossiter at Northgate and with Victoria Chambers or Monica Reyes at Calderwood & Harkness LLP.

4. Crummey notices issued. Confirm with Northgate that Crummey withdrawal notices have been sent to each of the three beneficiaries — Thomas R. Caldwell, Katherine C. Hartfield, and Olivia G. Caldwell — within 3 to 5 business days of Northgate's receipt of the contribution. Request copies of the notices and proof of mailing for your records.

5. 30-day withdrawal period lapses. No action is required on your part during the 30-day withdrawal period unless a beneficiary exercises the withdrawal right. Exercise of the withdrawal right is not expected in the ordinary course. If a beneficiary does exercise the right, Northgate will notify you and Calderwood & Harkness LLP, and additional planning may be required.

6. Premium paid by Northgate. Confirm with Northgate that the premium payment has been remitted to Beacon Life Assurance Company before the premium due date. Request written confirmation from Northgate of the date and amount of the payment.

7. Policy confirmation. Request an annual policy statement from Beacon Life Assurance Company (through Glenmore Insurance Brokerage LLC, Nathan C. Freed) confirming that the Policy is in force, the current cash surrender value, and the death benefit of $15,000,000. Review the statement for any discrepancies and forward a copy to Calderwood & Harkness LLP and Havensbrook Wealth Advisors LLC.

8. Gift tax return coordination. Provide the following documentation to Strathmore Corporation & Greaves LLP (Martin J. Prescott, CPA) for inclusion on your annual Form 709:

• the amount contributed to the ILIT;

• copies of all Crummey withdrawal notices issued by Northgate;

• annual exclusion and lifetime exemption calculations (as set forth in this letter, updated for the applicable year); and

• any other documentation requested by Mr. Prescott.

9. File records. Retain all correspondence, wire transfer confirmations, Crummey withdrawal notices, proof of mailing, policy statements, and Form 709 copies in your dedicated ILIT file. Provide copies to Havensbrook Wealth Advisors LLC (Diana R. Linden) for inclusion in your comprehensive financial records.

7. Coordination with Advisors

The proper administration of the ILIT requires ongoing coordination among several professional advisors. This letter should be shared with each of the following individuals for coordination purposes:

Strathmore Corporation & Greaves LLP — Martin J. Prescott, CPA, Senior Partner, Private Client Group, 600 Third Avenue, 28th Floor, New York, NY 10016. Mr. Prescott is responsible for the preparation and filing of your annual federal gift tax return (Form 709), including the reporting of the ILIT premium gifts, annual exclusion calculations, and lifetime exemption usage.

Havensbrook Wealth Advisors LLC — Diana R. Linden, CFP®, Managing Director, 900 Third Avenue, 18th Floor, New York, NY 10022. Ms. Linden assists with liquidity planning to ensure the availability of $187,500 annually from your liquid investment portfolio. Based on the information provided during our engagement, your liquid portfolio (consisting of public equities, fixed income securities, and cash equivalents) has an approximate current value of $112,000,000, and the annual premium obligation represents a modest percentage of available liquid assets. Nevertheless, the premium payment should be incorporated into your annual cash flow and liquidity projections prepared by Havensbrook.

Glenmore Insurance Brokerage LLC — Nathan C. Freed, Senior Vice President, Private Client Division, 44 Wall Street, Suite 1200, New York, NY 10005. Mr. Freed serves as your insurance broker and is the primary point of contact for all policy administration matters, premium billing inquiries, and communications with Beacon Life Assurance Company.

Northgate Trust Company of Delaware — Philip A. Rossiter, Senior Vice President, Trust Administration, 1201 North Market Street, Suite 1600, Wilmington, DE 19801. Northgate serves as the institutional trustee of the ILIT and is responsible for receiving your premium contributions, issuing Crummey withdrawal notices, and remitting premium payments to Beacon Life Assurance Company.

Any change to the beneficiary addresses, the terms of the Policy, the premium amount, or any other material development affecting the ILIT should be communicated promptly to Calderwood & Harkness LLP so that we may assess the implications and update this letter and related procedures as necessary.

8. Important Reminders and Caveats

We wish to emphasize the following important reminders and caveats in connection with the annual premium funding process:

(a) Annual Review of This Letter. This letter is designed as a template for annual use and should be reviewed each year to reflect any changes in applicable law, exemption amounts, annual exclusion amounts, premium amounts, or family circumstances. Examples of circumstances that may necessitate an update include the birth of additional grandchildren (who may be added as Crummey beneficiaries), the marriage of Olivia G. Caldwell (which may affect her address and other planning considerations), or the death of a Crummey beneficiary.

(b) Annual Gift Tax Exclusion Amount. The annual gift tax exclusion amount ($17,000 for 2023) is indexed for inflation under IRC § 2503(b)(2) and may increase in future years. The applicable exclusion amount should be confirmed each year with Strathmore Corporation & Greaves LLP or Calderwood & Harkness LLP, and the calculations in this letter should be updated accordingly.

(c) Gift Splitting. If Mrs. Eleanor V. Caldwell wishes to elect to split gifts with you under IRC § 2513, thereby treating one-half of the ILIT premium contribution as having been made by Mrs. Caldwell for gift tax purposes, additional Form 709 coordination with Strathmore Corporation & Greaves LLP will be required. Gift splitting, if elected, would effectively double the available annual exclusion coverage (from $51,000 to $102,000) and reduce the annual charge against your individual lifetime exemption. However, gift splitting requires that both you and Mrs. Caldwell file separate Forms 709 for the applicable year, and Mrs. Caldwell must consent to the election. Please consult with Mr. Prescott and this firm if you wish to explore this option.

(d) No Direct Payments to Beacon Life. Under no circumstances should you make premium payments directly to Beacon Life Assurance Company. All premium payments must flow through the ILIT trustee, Northgate Trust Company of Delaware, to avoid any argument that you have retained or exercised incidents of ownership over the Policy. A direct payment to the carrier could be construed as an exercise of ownership rights, potentially resulting in the inclusion of the $15,000,000 death benefit in your taxable estate.

(e) Contact Information at Calderwood & Harkness LLP. Calderwood & Harkness LLP remains available to assist you with any questions regarding the ILIT, Crummey withdrawal procedures, gift tax implications, or any other aspect of your estate plan. Your primary contacts at this firm are:

Victoria Chambers, Partner (Responsible Partner) Sylvia Hartwell, Partner (Specialist Partner, Tax) Monica Reyes, Associate

Closing

We trust that this letter provides a clear and comprehensive guide to the annual premium funding procedures for the Caldwell Family Insurance Trust. Please do not hesitate to contact us at any time if you have questions or if any aspect of the process requires clarification. We are committed to ensuring that the ILIT continues to function as intended and that the substantial estate tax benefits of this structure are preserved for the benefit of your family.

Please note that this letter is provided for informational and procedural guidance purposes and does not constitute tax advice. For all matters relating to the preparation and filing of your federal gift tax return (Form 709) and for specific tax advice regarding your ILIT contributions, you should consult directly with Strathmore Corporation & Greaves LLP (Martin J. Prescott, CPA).

For a complete summary of all ongoing obligations under your comprehensive estate plan, including the ILIT and other planning vehicles, please refer to our comprehensive closing letter dated September 29, 2023, a copy of which is maintained in your estate planning file at this firm and was provided to each of your advisors at the conclusion of our engagement.

We look forward to continuing to assist you with the administration of your estate plan.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Victoria Chambers Partner

cc: Sylvia Hartwell, Partner, Calderwood & Harkness LLP Monica Reyes, Associate, Calderwood & Harkness LLP Martin J. Prescott, CPA, Senior Partner, Strathmore Corporation & Greaves LLP Philip A. Rossiter, Senior Vice President, Northgate Trust Company of Delaware Diana R. Linden, CFP®, Managing Director, Havensbrook Wealth Advisors LLC Nathan C. Freed, Senior Vice President, Glenmore Insurance Brokerage LLC

Enclosures:

1. ILIT — Form Crummey Withdrawal Notice (template)

2. Wire transfer instructions for Northgate Trust Company of Delaware (Caldwell Family Insurance Trust account)

3. Beacon Life Assurance Company premium billing schedule (Policy No. BLA-2023-77419)

Field	Detail
Bank	[To be provided by Northgate Trust Company of Delaware]
Account Name	Caldwell Family Insurance Trust
Trustee Contact	Philip A. Rossiter, Senior Vice President, Trust Administration
Trustee Address	1201 North Market Street, Suite 1600, Wilmington, DE 19801
Reference/Memo	Policy No. BLA-2023-77419 — Annual Premium
Item	Amount
2023 basic exclusion amount (IRC § 2010(c)(3))	$12,920,000
Less: Prior taxable gifts (cumulative, pre-2023)	($6,750,000)
Less: 2023 gift to Caldwell Family Dynasty Trust	($5,000,000)
Remaining lifetime gift tax exemption	$1,170,000

CALDERWOOD & HARKNESS LLP 375 Park Avenue, 42nd Floor New York, NY 10152 Telephone: (212) 554-8000 Facsimile: (212) 554-8001 www.calderwoodharkness.com
Matter No.: 1034-00004 Billing Code: 78412-JRC
[Date]
Mr. Jonathan R. Caldwell 418 East 72nd Street, Apt. 14A New York, NY 10021
Re: Caldwell Family Insurance Trust — Annual Premium Funding Procedures Beacon Life Assurance Company Policy No. BLA-2023-77419 ILIT Trust Agreement dated March 15, 2023
Dear Mr. Caldwell:
We are writing to provide you with this annual advisory letter regarding the procedures for funding the annual premium payment on the second-to-die universal life insurance policy held by the Caldwell Family Insurance Trust (the "ILIT"). This letter is intended to serve as a comprehensive guide for each year's premium funding cycle and should be reviewed carefully in advance of each premium due date. We have designed this letter as a template for annual use, to be updated and reissued each year as necessary to reflect any changes in applicable law, exemption amounts, premium amounts, or family circumstances.
1. Purpose of This Letter
This letter is provided annually to guide you through the procedures for funding the annual premium payment on the second-to-die universal life insurance policy held by the ILIT. As you will recall, the ILIT was established on March 15, 2023, pursuant to the Caldwell Family Insurance Trust Agreement of even date (the "Trust Agreement"), with Northgate Trust Company of Delaware serving as the institutional trustee. The ILIT was created as a central component of the comprehensive estate plan developed for you and Mrs. Eleanor V. Caldwell during our engagement concluded on September 29, 2023.
The life insurance policy held by the ILIT is issued by Beacon Life Assurance Company, Policy No. BLA-2023-77419 (the "Policy"). The Policy is a second-to-die universal life insurance policy insuring the joint lives of you, Jonathan R. Caldwell (date of birth: March 14, 1956), and your wife, Eleanor V. Caldwell (date of birth: September 22, 1958). The Policy provides a death benefit of $15,000,000, payable upon the death of the survivor of you and Mrs. Caldwell.
Proper adherence to the procedures set forth in this letter each year is critical to ensuring that:
(a) the Policy remains in force and the premium is paid in full and on time;
(b) the $15,000,000 death benefit remains excluded from both your taxable estate and Mrs. Caldwell's taxable estate for federal estate tax purposes; and
(c) the gift tax consequences of your annual premium contributions are minimized through proper use of annual exclusion gifts and the Crummey withdrawal rights available under the Trust Agreement.
The importance of following these procedures consistently and precisely each year cannot be overstated. Even a seemingly minor procedural misstep — such as a late Crummey notice or a premium payment made directly to the insurance carrier rather than through the trustee — could jeopardize the estate tax benefits of the ILIT structure or create unnecessary gift tax exposure. We therefore ask that you review this letter carefully each year and contact us with any questions before initiating the annual premium funding process.
2. Annual Premium Amount and Payment Timing
The annual premium due on the Policy is $187,500. The premium due date for each policy year should be confirmed with Beacon Life Assurance Company through your insurance broker, Glenmore Insurance Brokerage LLC (Nathan C. Freed, Senior Vice President, Private Client Division), or through Northgate Trust Company of Delaware (Philip A. Rossiter, Senior Vice President, Trust Administration). The exact due date may vary slightly from year to year depending on the carrier's billing cycle, and it is important to verify this date well in advance of each year's payment.
Timing of Transfer. You should plan to transfer the full premium amount of $187,500 to Northgate Trust Company of Delaware, as trustee of the ILIT, at least 45 days before the premium due date. This lead time is essential to allow sufficient time for the following sequential steps to occur before the premium must be remitted to the carrier:
(i) receipt and clearance of your wire transfer by Northgate;
(ii) issuance by Northgate of the required Crummey withdrawal notices to each of the three Crummey beneficiaries (discussed in detail in Section 4 below);
(iii) the running of the 30-day withdrawal period during which each beneficiary may exercise his or her Crummey withdrawal right; and
(iv) remittance of the premium payment by Northgate to Beacon Life Assurance Company.
If the premium contribution is not received by Northgate with sufficient lead time, there is a risk that the Crummey notice procedures cannot be completed before the premium must be paid, which could compromise the availability of the annual gift tax exclusion for that year's contribution.
Wire Transfer Instructions. All premium contributions should be made by wire transfer to Northgate Trust Company of Delaware using the following instructions:
Current wire transfer instructions for the Caldwell Family Insurance Trust account at Northgate are enclosed with this letter. Please verify the wire instructions with Mr. Rossiter prior to initiating each year's transfer, as banking details may change from time to time.
Notification. Upon making the wire transfer, you should promptly notify both of the following:
(a) Northgate Trust Company of Delaware — Philip A. Rossiter, at the address noted above or by telephone or email as provided to you separately; and
(b) Calderwood & Harkness LLP — Victoria Chambers, Partner, or Monica Reyes, Associate, at this firm.
This notification allows Northgate to begin the Crummey notice procedures immediately upon receipt of the funds and enables our firm to track the annual funding cycle and coordinate with your other advisors as needed.
3. Gift Tax Treatment of Premium Contributions
3.1 Overview. Each annual premium payment that you make to the ILIT constitutes a gift for federal gift tax purposes. Because the ILIT is an irrevocable trust of which you are neither a trustee nor a beneficiary, and because you retain no incidents of ownership in the Policy, your contribution of funds to the ILIT for the purpose of paying the premium is treated as a completed gift to the trust beneficiaries.
The total annual contribution of $187,500 is treated in two components for gift tax purposes:
(a) the portion sheltered by the annual gift tax exclusion under IRC § 2503(b), by virtue of the Crummey withdrawal rights held by the trust beneficiaries; and
(b) the portion that exceeds the available annual exclusion coverage and therefore reduces your remaining lifetime gift tax exemption under IRC § 2505.
Each of these components is discussed in detail below.
3.2 Annual Exclusion Gifts — Crummey Withdrawal Rights
The Trust Agreement names three Crummey beneficiaries who hold withdrawal rights with respect to contributions made to the ILIT:
• Thomas R. Caldwell (your son);
• Katherine C. Hartfield (your daughter); and
• Olivia G. Caldwell (your daughter).
Pursuant to the terms of the Trust Agreement, each Crummey beneficiary holds the right to withdraw up to $5,000 per beneficiary per year from the ILIT following each contribution. These withdrawal rights were structured in accordance with the principles set forth in Crummey v. Commissioner, 397 F.2d 82 (9th Cir. 1968), and subsequent IRS guidance, to convert what would otherwise be a future interest gift (ineligible for the annual exclusion) into a present interest gift eligible for the annual exclusion under IRC § 2503(b).
The federal annual gift tax exclusion amount for 2023 is $17,000 per donee. This amount is indexed for inflation under IRC § 2503(b)(2) and should be confirmed each year with Strathmore Corporation & Greaves LLP or with our firm. Because each Crummey beneficiary's withdrawal right ($5,000) is less than the applicable annual exclusion amount ($17,000), each beneficiary's withdrawal right qualifies in full as a present interest gift eligible for the annual exclusion. There is no risk that the withdrawal right will exceed the annual exclusion amount for any given year under current law.
The total annual exclusion coverage available with respect to your ILIT contributions is calculated as follows:
3 beneficiaries × $17,000 annual exclusion per donee = $51,000 total annual exclusion coverage
The portion of each beneficiary's contribution attributable to the Crummey withdrawal right is $5,000 per beneficiary, for a total of $15,000. This total Crummey amount is well within the aggregate annual exclusion available ($51,000), and therefore the full $51,000 of annual exclusion coverage may be applied against the $187,500 contribution. As a result:
$51,000 of the $187,500 annual premium contribution is covered by annual exclusion gifts and does not reduce your lifetime gift tax exemption.
We note that the annual exclusion coverage is maximized at $51,000 because, although each beneficiary's Crummey withdrawal right is limited to $5,000, the annual exclusion amount applicable to each beneficiary ($17,000) exceeds the withdrawal right, and the IRS and case law permit the annual exclusion to apply up to the lesser of the withdrawal right and the annual exclusion amount per beneficiary. In this case, because the total contribution allocated to each beneficiary exceeds $17,000 (i.e., $187,500 ÷ 3 = $62,500 per beneficiary), and each beneficiary has a Crummey right of at least $5,000, the full annual exclusion of $17,000 per beneficiary is available. Accordingly, the total annual exclusion sheltering your contribution is $51,000.
3.3 Lifetime Exemption Usage
The remaining portion of the annual premium contribution not covered by the annual exclusion is calculated as follows:
$187,500 − $51,000 = $136,500
This $136,500 constitutes a taxable gift and must be reported on your federal gift tax return (IRS Form 709) for the applicable tax year. This amount will reduce your remaining lifetime gift and estate tax exemption (the "applicable exclusion amount" under IRC § 2010(c) and § 2505(a)).
As of the completion of the 2023 estate plan, your remaining lifetime gift tax exemption was calculated as follows:
At the current annual usage rate of $136,500 per year, the remaining exemption of $1,170,000 would be consumed over approximately 8 to 9 years, assuming no changes in the exemption amount due to inflation adjustments or legislative changes. This projection is approximate and should be updated each year by Strathmore Corporation & Greaves LLP in connection with the preparation of your Form 709.
Sunset of the Lifetime Exemption. We wish to draw your particular attention to the following important legislative development: Under current law, the increased lifetime gift and estate tax exemption amount (currently $12,920,000 for 2023) is scheduled to sunset after December 31, 2025. If no legislation is enacted to extend the increased exemption, the basic exclusion amount would revert to approximately $5,000,000, as adjusted for inflation since 2011. This potential reduction in the exemption amount could significantly affect the overall estate and gift tax landscape for you and Mrs. Caldwell. We strongly recommend that you consult with Calderwood & Harkness LLP and Strathmore Corporation & Greaves LLP well in advance of the sunset date to assess the impact on your estate plan and to consider whether accelerated gifting strategies or other plan adjustments are advisable.
Form 709 Coordination. The annual Form 709 reporting your ILIT premium gifts should be prepared and filed by Strathmore Corporation & Greaves LLP. The responsible partner for your account is:
Martin J. Prescott, CPA Senior Partner, Private Client Group Strathmore Corporation & Greaves LLP 600 Third Avenue, 28th Floor New York, NY 10016
Each year, you (or Havensbrook Wealth Advisors LLC on your behalf) should provide Mr. Prescott with the following documentation in connection with the Form 709 filing: the amount contributed to the ILIT, copies of all Crummey withdrawal notices issued by Northgate, and the annual exclusion and lifetime exemption calculations set forth in this letter (as updated for the applicable year).
4. Crummey Withdrawal Notice Procedures
4.1 Requirement. Under established IRS guidance and the seminal decision in Crummey v. Commissioner, 397 F.2d 82 (9th Cir. 1968), in order for contributions to the ILIT to qualify for the annual gift tax exclusion under IRC § 2503(b), each Crummey beneficiary must receive timely written notice of his or her right to withdraw a portion of the contribution. The notice requirement is a critical procedural safeguard: it ensures that each beneficiary has a genuine, present opportunity to withdraw funds from the trust, thereby converting the gift from a future interest (which does not qualify for the annual exclusion) to a present interest (which does qualify).
The consequences of failing to provide proper Crummey notices are severe. If the IRS were to determine that the Crummey notices were not timely issued, were not sent to the correct beneficiary addresses, or were otherwise defective, the IRS could disallow the annual exclusion for the entire $187,500 contribution. In such event, the full contribution — rather than only $136,500 — would be treated as a taxable gift, accelerating the consumption of your remaining lifetime exemption and potentially triggering gift tax liability if your exemption has been fully utilized.
4.2 Notice Timing and Mechanics
Upon receipt of your annual premium contribution, Northgate Trust Company of Delaware, as trustee of the ILIT, is responsible for sending a Crummey withdrawal notice to each of the three Crummey beneficiaries at their respective addresses of record. The current addresses for the Crummey beneficiaries are as follows:
Thomas R. Caldwell 55 Perry Street, Unit 3 New York, NY 10014
Katherine C. Hartfield 210 Briarcliff Lane Greenwich, CT 06830
Olivia G. Caldwell 1240 North Dearborn Street, Apt. 807 Chicago, IL 60610
If any beneficiary's address has changed since the prior year, you should promptly notify Northgate and Calderwood & Harkness LLP so that the records may be updated before the next Crummey notice cycle.
The Crummey withdrawal notice must be sent promptly after the contribution is received by the trustee — ideally within 3 to 5 business days of receipt. Each notice must contain the following information:
(a) a statement that a contribution of $[amount] has been made to the Caldwell Family Insurance Trust;
(b) a statement that the beneficiary has the right to withdraw up to $5,000 from the trust;
(c) a statement that the withdrawal right must be exercised within 30 days of the date of the notice; and
(d) a description of the procedure for exercising the withdrawal right (i.e., by written notice to Northgate Trust Company of Delaware).
A form Crummey Withdrawal Notice has been prepared by Calderwood & Harkness LLP and provided to Northgate for annual use. A copy of this form notice is enclosed with this letter for your reference (see separate document: ILIT — Form Crummey Withdrawal Notice). The form notice should be used by Northgate each year without modification, except as to the date, contribution amount, and any updated beneficiary addresses.
If the 30-day withdrawal period lapses without the beneficiary exercising the withdrawal right, the withdrawal right expires automatically by its terms under the Trust Agreement, and the contribution remains in the trust to be applied toward the premium payment. It is expected in the ordinary course that none of the beneficiaries will exercise the withdrawal right, as the primary purpose of the Crummey power is to qualify the contribution for the annual gift tax exclusion rather than to provide immediate access to trust funds.
4.3 Record Retention
Proper documentation of the Crummey notice process is essential. In the event of an IRS audit or examination of your Form 709, the burden of establishing that proper Crummey notices were issued falls on you as the donor. Accordingly, the following record-keeping practices should be followed:
(a) Northgate must retain copies of all Crummey notices sent, along with proof of mailing (by certified mail, return receipt requested, or equivalent delivery method providing proof of dispatch and delivery), for each year. Northgate should maintain these records for a minimum of six years following the filing of the applicable Form 709, consistent with the general statute of limitations for gift tax returns under IRC § 6501.
(b) You should request and retain copies of all Crummey notices from Northgate for your own records and for inclusion with the annual Form 709 filing package provided to Strathmore Corporation & Greaves LLP.
(c) Calderwood & Harkness LLP recommends that you, or your financial advisor, Havensbrook Wealth Advisors LLC (Diana R. Linden, CFP®, Managing Director, 900 Third Avenue, 18th Floor, New York, NY 10022), maintain a separate file for all ILIT-related documents. This file should include, at a minimum, the following for each year:
• premium payment wire transfer confirmations;
• copies of all Crummey withdrawal notices issued by Northgate;
• proof of mailing for each Crummey notice;
• annual policy statements from Beacon Life Assurance Company;
• copies of the filed Form 709; and
• any correspondence with Northgate, Beacon Life, or Glenmore Insurance Brokerage regarding the Policy or the ILIT.
The maintenance of a comprehensive ILIT file will be invaluable in the event of any future IRS inquiry and will simplify the annual coordination among your advisors.
5. Three-Year Lookback Rule — IRC § 2035
An important consideration in the administration of the ILIT is the three-year lookback rule under IRC § 2035. Under this provision, if an insured transfers a life insurance policy — or any incidents of ownership in a life insurance policy — to an irrevocable trust within three years of the insured's death, the full death benefit of the policy may be included in the insured's gross estate for federal estate tax purposes, thereby defeating one of the primary purposes of the ILIT structure.
Because the Policy (Policy No. BLA-2023-77419) was assigned to the ILIT on March 15, 2023, the three-year lookback period with respect to the original policy transfer runs through March 15, 2026. If you were to die before March 15, 2026, there is a risk that the $15,000,000 death benefit could be pulled back into your gross estate for federal estate tax purposes under IRC § 2035(a). However, this risk is substantially mitigated by the fact that the Policy is a second-to-die policy: no death benefit is payable until both you and Mrs. Caldwell have died. Accordingly, even if you were to die before March 15, 2026, the death benefit would not become payable at that time, and the estate tax inclusion issue would arise only if Mrs. Caldwell were to die during the same three-year period or shortly thereafter such that the death benefit becomes payable while the § 2035 taint remains relevant.
After March 15, 2026, the § 2035 risk with respect to the original policy assignment will be fully extinguished, and the death benefit should be excluded from both your taxable estate and Mrs. Caldwell's taxable estate, provided that neither of you holds any incidents of ownership in the Policy at the time of death.
Annual Premium Contributions and the Three-Year Rule. It is important to understand that each annual premium contribution does not restart the three-year lookback period, so long as you hold no incidents of ownership in the Policy. Your annual premium payments are treated as gifts of cash to the ILIT — not as transfers of the Policy itself. The three-year rule applies to transfers of the policy or incidents of ownership therein, not to subsequent contributions of cash to the trust.
Avoidance of Incidents of Ownership. To preserve the estate tax exclusion of the death benefit, it is essential that you do not retain or exercise any incidents of ownership over the Policy. Incidents of ownership include, but are not limited to:
(a) the right to change the beneficiary designation of the Policy;
(b) the right to borrow against the Policy or pledge the Policy as collateral;
(c) the right to surrender or cancel the Policy;
(d) the right to assign or transfer the Policy; and
(e) the right to select settlement options under the Policy.
All such actions must be taken exclusively by Northgate Trust Company of Delaware, as trustee of the ILIT, in accordance with the terms of the Trust Agreement. You should not contact Beacon Life Assurance Company directly regarding any policy administration matters; all communications with the carrier should be directed through Northgate or through your insurance broker, Glenmore Insurance Brokerage LLC (Nathan C. Freed).
6. Annual Checklist — Summary of Steps
For your convenience, the following is a numbered checklist summarizing the steps you should take each year in connection with the annual premium funding cycle. We recommend that you (and Ms. Linden at Havensbrook Wealth Advisors) refer to this checklist approximately 60 days before the anticipated premium due date to ensure that all steps are completed in a timely manner.
1. Confirm premium amount and due date. Contact Northgate Trust Company of Delaware (Philip A. Rossiter, Senior Vice President, Trust Administration, 1201 North Market Street, Suite 1600, Wilmington, DE 19801) or Glenmore Insurance Brokerage LLC (Nathan C. Freed, Senior Vice President, Private Client Division, 44 Wall Street, Suite 1200, New York, NY 10005) to confirm the annual premium amount ($187,500, subject to any adjustments by Beacon Life Assurance Company) and the exact premium due date for the current policy year.
2. Transfer funds to Northgate. Wire $187,500 to the Caldwell Family Insurance Trust account at Northgate Trust Company of Delaware at least 45 days before the premium due date. Include the reference: "Policy No. BLA-2023-77419 — Annual Premium." Verify wire instructions with Mr. Rossiter before initiating the transfer.
3. Notify Northgate and Calderwood & Harkness LLP. Upon completing the wire transfer, confirm the transfer with Philip A. Rossiter at Northgate and with Victoria Chambers or Monica Reyes at Calderwood & Harkness LLP.
4. Crummey notices issued. Confirm with Northgate that Crummey withdrawal notices have been sent to each of the three beneficiaries — Thomas R. Caldwell, Katherine C. Hartfield, and Olivia G. Caldwell — within 3 to 5 business days of Northgate's receipt of the contribution. Request copies of the notices and proof of mailing for your records.
5. 30-day withdrawal period lapses. No action is required on your part during the 30-day withdrawal period unless a beneficiary exercises the withdrawal right. Exercise of the withdrawal right is not expected in the ordinary course. If a beneficiary does exercise the right, Northgate will notify you and Calderwood & Harkness LLP, and additional planning may be required.
6. Premium paid by Northgate. Confirm with Northgate that the premium payment has been remitted to Beacon Life Assurance Company before the premium due date. Request written confirmation from Northgate of the date and amount of the payment.
7. Policy confirmation. Request an annual policy statement from Beacon Life Assurance Company (through Glenmore Insurance Brokerage LLC, Nathan C. Freed) confirming that the Policy is in force, the current cash surrender value, and the death benefit of $15,000,000. Review the statement for any discrepancies and forward a copy to Calderwood & Harkness LLP and Havensbrook Wealth Advisors LLC.
8. Gift tax return coordination. Provide the following documentation to Strathmore Corporation & Greaves LLP (Martin J. Prescott, CPA) for inclusion on your annual Form 709:
• the amount contributed to the ILIT;
• copies of all Crummey withdrawal notices issued by Northgate;
• annual exclusion and lifetime exemption calculations (as set forth in this letter, updated for the applicable year); and
• any other documentation requested by Mr. Prescott.
9. File records. Retain all correspondence, wire transfer confirmations, Crummey withdrawal notices, proof of mailing, policy statements, and Form 709 copies in your dedicated ILIT file. Provide copies to Havensbrook Wealth Advisors LLC (Diana R. Linden) for inclusion in your comprehensive financial records.
7. Coordination with Advisors
The proper administration of the ILIT requires ongoing coordination among several professional advisors. This letter should be shared with each of the following individuals for coordination purposes:
Strathmore Corporation & Greaves LLP — Martin J. Prescott, CPA, Senior Partner, Private Client Group, 600 Third Avenue, 28th Floor, New York, NY 10016. Mr. Prescott is responsible for the preparation and filing of your annual federal gift tax return (Form 709), including the reporting of the ILIT premium gifts, annual exclusion calculations, and lifetime exemption usage.
Havensbrook Wealth Advisors LLC — Diana R. Linden, CFP®, Managing Director, 900 Third Avenue, 18th Floor, New York, NY 10022. Ms. Linden assists with liquidity planning to ensure the availability of $187,500 annually from your liquid investment portfolio. Based on the information provided during our engagement, your liquid portfolio (consisting of public equities, fixed income securities, and cash equivalents) has an approximate current value of $112,000,000, and the annual premium obligation represents a modest percentage of available liquid assets. Nevertheless, the premium payment should be incorporated into your annual cash flow and liquidity projections prepared by Havensbrook.
Glenmore Insurance Brokerage LLC — Nathan C. Freed, Senior Vice President, Private Client Division, 44 Wall Street, Suite 1200, New York, NY 10005. Mr. Freed serves as your insurance broker and is the primary point of contact for all policy administration matters, premium billing inquiries, and communications with Beacon Life Assurance Company.
Northgate Trust Company of Delaware — Philip A. Rossiter, Senior Vice President, Trust Administration, 1201 North Market Street, Suite 1600, Wilmington, DE 19801. Northgate serves as the institutional trustee of the ILIT and is responsible for receiving your premium contributions, issuing Crummey withdrawal notices, and remitting premium payments to Beacon Life Assurance Company.
Any change to the beneficiary addresses, the terms of the Policy, the premium amount, or any other material development affecting the ILIT should be communicated promptly to Calderwood & Harkness LLP so that we may assess the implications and update this letter and related procedures as necessary.
8. Important Reminders and Caveats
We wish to emphasize the following important reminders and caveats in connection with the annual premium funding process:
(a) Annual Review of This Letter. This letter is designed as a template for annual use and should be reviewed each year to reflect any changes in applicable law, exemption amounts, annual exclusion amounts, premium amounts, or family circumstances. Examples of circumstances that may necessitate an update include the birth of additional grandchildren (who may be added as Crummey beneficiaries), the marriage of Olivia G. Caldwell (which may affect her address and other planning considerations), or the death of a Crummey beneficiary.
(b) Annual Gift Tax Exclusion Amount. The annual gift tax exclusion amount ($17,000 for 2023) is indexed for inflation under IRC § 2503(b)(2) and may increase in future years. The applicable exclusion amount should be confirmed each year with Strathmore Corporation & Greaves LLP or Calderwood & Harkness LLP, and the calculations in this letter should be updated accordingly.
(c) Gift Splitting. If Mrs. Eleanor V. Caldwell wishes to elect to split gifts with you under IRC § 2513, thereby treating one-half of the ILIT premium contribution as having been made by Mrs. Caldwell for gift tax purposes, additional Form 709 coordination with Strathmore Corporation & Greaves LLP will be required. Gift splitting, if elected, would effectively double the available annual exclusion coverage (from $51,000 to $102,000) and reduce the annual charge against your individual lifetime exemption. However, gift splitting requires that both you and Mrs. Caldwell file separate Forms 709 for the applicable year, and Mrs. Caldwell must consent to the election. Please consult with Mr. Prescott and this firm if you wish to explore this option.
(d) No Direct Payments to Beacon Life. Under no circumstances should you make premium payments directly to Beacon Life Assurance Company. All premium payments must flow through the ILIT trustee, Northgate Trust Company of Delaware, to avoid any argument that you have retained or exercised incidents of ownership over the Policy. A direct payment to the carrier could be construed as an exercise of ownership rights, potentially resulting in the inclusion of the $15,000,000 death benefit in your taxable estate.
(e) Contact Information at Calderwood & Harkness LLP. Calderwood & Harkness LLP remains available to assist you with any questions regarding the ILIT, Crummey withdrawal procedures, gift tax implications, or any other aspect of your estate plan. Your primary contacts at this firm are:
Victoria Chambers, Partner (Responsible Partner) Sylvia Hartwell, Partner (Specialist Partner, Tax) Monica Reyes, Associate
Closing
We trust that this letter provides a clear and comprehensive guide to the annual premium funding procedures for the Caldwell Family Insurance Trust. Please do not hesitate to contact us at any time if you have questions or if any aspect of the process requires clarification. We are committed to ensuring that the ILIT continues to function as intended and that the substantial estate tax benefits of this structure are preserved for the benefit of your family.
Please note that this letter is provided for informational and procedural guidance purposes and does not constitute tax advice. For all matters relating to the preparation and filing of your federal gift tax return (Form 709) and for specific tax advice regarding your ILIT contributions, you should consult directly with Strathmore Corporation & Greaves LLP (Martin J. Prescott, CPA).
For a complete summary of all ongoing obligations under your comprehensive estate plan, including the ILIT and other planning vehicles, please refer to our comprehensive closing letter dated September 29, 2023, a copy of which is maintained in your estate planning file at this firm and was provided to each of your advisors at the conclusion of our engagement.
We look forward to continuing to assist you with the administration of your estate plan.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Victoria Chambers Partner
cc: Sylvia Hartwell, Partner, Calderwood & Harkness LLP Monica Reyes, Associate, Calderwood & Harkness LLP Martin J. Prescott, CPA, Senior Partner, Strathmore Corporation & Greaves LLP Philip A. Rossiter, Senior Vice President, Northgate Trust Company of Delaware Diana R. Linden, CFP®, Managing Director, Havensbrook Wealth Advisors LLC Nathan C. Freed, Senior Vice President, Glenmore Insurance Brokerage LLC
Enclosures:
1. ILIT — Form Crummey Withdrawal Notice (template)
2. Wire transfer instructions for Northgate Trust Company of Delaware (Caldwell Family Insurance Trust account)
3. Beacon Life Assurance Company premium billing schedule (Policy No. BLA-2023-77419)
Field | Detail
Bank | [To be provided by Northgate Trust Company of Delaware]
Account Name | Caldwell Family Insurance Trust
Trustee Contact | Philip A. Rossiter, Senior Vice President, Trust Administration
Trustee Address | 1201 North Market Street, Suite 1600, Wilmington, DE 19801
Reference/Memo | Policy No. BLA-2023-77419 — Annual Premium
Item | Amount
2023 basic exclusion amount (IRC § 2010(c)(3)) | $12,920,000
Less: Prior taxable gifts (cumulative, pre-2023) | ($6,750,000)
Less: 2023 gift to Caldwell Family Dynasty Trust | ($5,000,000)
Remaining lifetime gift tax exemption | $1,170,000

CALDERWOOD & HARKNESS LLP

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