Brought to you by the Advanced Consulting Group of Nationwide ® Charitable Giving Review with a Focus on Life Insurance Nationwide, the Nationwide N and Eagle and Nationwide is on your side are service marks of Nationwide Mutual Insurance Company. © 2015 Nationwide.

2NFM-6870AO.6 FOR CLIENT USE. 2 Some things you need to know This presentation was not intended by the author to be used, and cannot be used, by anybody for the purpose of avoiding any penalties that may be imposed on your pursuant to the Internal Revenue Code. The information contained herein was prepared to support the promotion, marketing and/or sale of life insurance contracts, annuity contracts and/or other products and services provided by Nationwide Life Insurance Company. Federal tax laws are complex and subject to change. Neither the company nor its representatives give legal or tax advice. Please talk with your attorney or tax advisor for answers to your specific questions. Annuities and life insurance products are underwritten by Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance Company, Columbus, Ohio.

3NFM-6870AO.6 FOR CLIENT USE. 3 Some things you need to know As personal situations change (i.e., marriage, birth of a child or job promotion), so will life insurance needs. Care should be taken to ensure these strategies and products are suitable for long-term insurance needs. Life insurance has fees and charges associated with it that include costs of insurance that vary with such characteristics of the insured as gender, health and age, and additional charges for riders that customize a policy to fit your individual needs Assumes contract qualifies as life insurance under Internal Revenue Code (IRC) Section Most distributions are taxed on a first in/first out basis as long as the contract remains in force and meets the non-MEC (Modified Endowment Contract) definitions of IRC Section 7702A. Loans and partial surrenders will reduce any death benefits payable.

4NFM-6870AO.6 FOR CLIENT USE. 4 Some things you need to know All guarantees and protections are subject to the claims- paying ability of Nationwide Life Insurance Company. Every strategy involves some level of risk and is subject to limitations. Advanced estate planning strategies should be addressed by a qualified estate planning attorney. The strategies that follow are only intended to represent potential advanced uses of life insurance. This is not an endorsement of any specific estate planning strategy. Other strategies that either involve or do not involve the use of life insurance may provide equal or greater benefit to the client depending on personal circumstances. © 2010, Nationwide Financial Services, Inc. All rights reserved. Not a deposit Not FDIC or NCUSIF insured Not guaranteed by the institution Not insured by any federal government agency May lose value

5NFM-6870AO.6 FOR CLIENT USE. 5 Agenda Types of gifts Charitable giving techniques and strategies Charitable giving with life insurance

6NFM-6870AO.6 FOR CLIENT USE. 6 Charitable Giving Techniques and Strategies Outright gifts Charitable remainder trusts Charitable lead trusts Charitable gift annuities Pooled income funds Split interest giftsPrivate foundationsLife insurance program

7NFM-6870AO.6 FOR CLIENT USE. 7 Income Taxation of Outright Gifts of Different Property Cash gifts Property  Long-term capital gains

8NFM-6870AO.6 FOR CLIENT USE. 8 Split interest gifts Charitable gift annuitiesCharitable remainder trustsCharitable lead trustsPooled income funds

9NFM-6870AO.6 FOR CLIENT USE. 9 Charitable gift annuities Charity systematically pays income to the donor (annuitization) in exchange for the donor’s gift Donation for charity, lifetime income for donor Tax deduction for donor

10NFM-6870AO.6 FOR CLIENT USE. 10 Charitable gift annuities $ Tax Deduction* Irrevocable transfer of property or money Lifetime Payout * If donor qualifies for itemized deduction under current tax law. Donor/ Annuitant Donor/ Annuitant Charity

11NFM-6870AO.6 FOR CLIENT USE. 11 Charitable remainder trusts (CRTs) Tax-exempt trusts Pay income to donors At death, remaining assets go to charity

12NFM-6870AO.6 FOR CLIENT USE. 12 Overview of CRTs CRT’s Increase income Reduce taxes Diversify assets Build wealth Create charitable gifts Assets in CRTs do not go to heirs Strict provisions for distributions

13NFM-6870AO.6 FOR CLIENT USE. 13 * If donor qualifies for itemized deduction under current tax law. Irrevocable transfer of property Remainder at donor/beneficiary’s death Lifetime income Charity Donor Charitable Remainder Trust How does a CRT work? $Tax Deduction*

14NFM-6870AO.6 FOR CLIENT USE. 14 Types of CRTs Annuity trusts: fixed income Unitrust: variable income  NIMCRUT

15NFM-6870AO.6 FOR CLIENT USE. 15 Overview of annuity trusts Income is a fixed dollar amount Income is based on percentage of initial contribution No additional contributions are permitted Must pass 5% probability test to qualify for deductions

16NFM-6870AO.6 FOR CLIENT USE. 16 Who are good candidates for an annuity trust? Clients who have a charitable intent Clients who are not concerned about inflation Clients who want a fixed income

17NFM-6870AO.6 FOR CLIENT USE. 17 Who are potential candidates for an charitable remainder unitrust? Clients who have a charitable intent Those who are concerned about inflation Those that don’t need a fixed income

18NFM-6870AO.6 FOR CLIENT USE. 18 A popular type of CRT: NIMCRUT NIMCRUT stands for “net income make-up charitable remainder unitrust” Cash flow can be controlled through portfolio management Income paid is lesser of payout rate or trust income Income can exceed the payout rate if:  The actual income earned exceeds the payout rate and  There is a cumulative distribution deficit from prior years

19NFM-6870AO.6 FOR CLIENT USE. 19 When is a NIMCRUT a good choice? The client wants to defer cash flow Contributions may not generate immediate income The asset is not readily salable

20NFM-6870AO.6 FOR CLIENT USE. 20 General provisions for CRTs Must pay distributions to at least one taxable income beneficiary Payments made during specific lifetimes or for a fixed term not to exceed 20 years At termination, the remaining assets transferred to charity Trust administered on a four-tier tax system The income tax deduction must be at least 10% of the fair market value of the donated property

21NFM-6870AO.6 FOR CLIENT USE. 21 Overview of charitable lead trusts (CLTs) The opposite of a CRT: the charity receives annuity stream of income, the heirs the remaining value Provide funding to a charity without permanently giving away the asset Not tax-exempt and contributions aren’t always tax deductible

22NFM-6870AO.6 FOR CLIENT USE. 22 Types of charitable lead trusts Charitable lead annuity trust (CLAT): fixed interest rate for the term of the trust Charitable lead unitrust (CLUT): percentage of the assets provided annually

23NFM-6870AO.6 FOR CLIENT USE. 23 Charitable lead trusts (CLTs) illustrated $IRS* Gift or EstateTax Charitable Deduction Income for Fixed Period At End of Trust Term Remaining Trust Assets *If donor qualifies for itemized deduction under current tax law. Charity Remainder Beneficiaries Charitable Lead Trust Donor/ Annuitant Donor/ Annuitant Property Transferred

24NFM-6870AO.6 FOR CLIENT USE. 24 Pooled income funds Created by public charities Donor transfers money into a pooled income fund in exchange for lifetime income Tax benefits

25NFM-6870AO.6 FOR CLIENT USE. 25 Private foundations Charitable organizations created and funded by a single donor or family Highly regulated and restricted High degree of control for donors Tax benefits may not be as great for donations to private foundations as for public charities

26NFM-6870AO.6 FOR CLIENT USE. 26 Life Insurance & Charity The advantages of life insurance

27NFM-6870AO.6 FOR CLIENT USE. 27 Why a Gift of Life Insurance? Create a potentially larger gift in the future Doesn’t deplete current assets if paid from current income Beneficiary election Avoids probate when properly arranged A set benefit amount Premiums may qualify as itemized deductions if policy is owned by the charity

28NFM-6870AO.6 FOR CLIENT USE. 28 Considerations for the use of Life Insurance? Insuaurable interest Underwriting –Medical underwriting –Financial underwriting Impact on future insurance purchases Costs of insurance Premium requirements Death benefit is only paid at insured’s death

29NFM-6870AO.6 FOR CLIENT USE. 29 Charity owns $100,000 policy on 43 year old man Annual premium cost $950 Itemized Deduction(25% tax bracket)-$ Net cost (Premium – tax deduction)$ Charity is beneficiary of $100,000 death benefit

30NFM-6870AO.6 FOR CLIENT USE. 30 Gifts of Life Insurance $100,000 Death Benefit *If donor qualifies for itemized deduction under current tax law. Annual Premiums of $950 Gift of $100,000 Life Insurance Policy & Annual Gifts of $2,000 $2,000 Tax Deduction* 43 yr. old male Donor/insured 43 yr. old male Donor/insured Charity Life Insurance Company Life Insurance Company

31NFM-6870AO.6 FOR CLIENT USE. 31 Gift of Life Insurance- Does it make sense? What’s the average life expectancy for a 43 year old male? How long would it take the annual donations of $950 invested at a constant 5.20% rate of return to grow to $100,000?

32NFM-6870AO.6 FOR CLIENT USE. 32 Consider the impact! Gifts of Life Insurance

33NFM-6870AO.6 FOR CLIENT USE. 33 Gifts of Life Insurance That is how a little can create much to benefit many

34NFM-6870AO.6 FOR CLIENT USE. 34 Questions?