FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.1 Basic Estate Planning Strategies Manulife Financial and the block design are registered service marks and trademarks of The Manufacturers Life Insurance Company and are used by it and its affiliates including Manulife Financial Corporation. Copyright The Manufacturers Life Insurance Company (U.S.A.). All rights reserved. MLI Expires 12/31/2002. THIS MATERIAL MAY NOT BE COPIED OR USED WITH THE PUBLIC.

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.2 Three Financial Stages of Life Creation Conservation Distribution

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.3 Everything that you do that involves sound decisions about taxation, cash flow savings, investments, and protection. Creation

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.4 Everything you do to make sure that you keep together what you put together and conserve value. Conservation

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.5 Everything you do to legally pass on your estate to someone other than the government as smoothly and efficiently as possible. Distribution

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.6 What is Estate Planning? Estate planning is a process. It is a lifetime process. The estate planning process has financial dimensions. The estate planning process has equally important non-financial dimensions.

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.7 Attorney Accountant Life Insurance Advisor Financial Consultant Trust Officer Estate Planning Team

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.8 To arrange for the orderly disposition of assets in accordance with the intentions of the estate owner. The Objective of Estate Planning:

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.9 Non-Financial Considerations Disability protection. Peace of mind by providing for a spouse. Peace of mind by providing for children, grandchildren, and parents. Family business succession. Selecting a trustee, guardian, conservator and personal representative. Avoiding family conflicts. Basic funeral arrangements. Organ donation decisions.

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.10 Financial records. Liquidity in the event of disability or death. Liquidity to pass a family business Deciding who takes what, when, and how much. Minimizing transfer costs (taxes, court fees, advisor fees, etc.). Minimizing liability. Financial Considerations

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.11 Common Arrangements in the Estate Plan No legal, tax or accounting advice can be given by Manulife Financial, its agents, employees or registered representatives. Prospective clients should consult their professional tax/legal advisor for details. The Legal Aspects

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.12 Separate Property Community Property Tenancy By The Entirety (Husband & Wife) Joint Tenancy With Survivorship Rights Tenancy in Common Holding Title

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.13 How Assets Are Transferred at Death Intestate Succession. Probate & Wills. Joint Tenancy (w/survivorship rights). Beneficiary Designation. Revocable Trust. Irrevocable Trust.

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.14 Intestate Succession When individuals fail to plan, the estate disposition is left to state intestate succession statute. Varies from state to state. Very often results in unintended dispositions and tax consequences. State-DeterminedBeneficiariesState-DeterminedBeneficiaries ProbateCourtProbateCourt Net Estate

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.15 Probate Settling An Estate With Court Supervision

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.16 Joint Tenancy With Right of Survivorship Property owned jointly passes automatically to survivor at death. Simple. Unaffected by provisions made in wills and/or trusts. Can result in unintended dispositions and tax consequences. Should be coordinated with overall estate plan. Mom Dad Asset

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.17 Beneficiary Designation Designating beneficiaries under life insurance contracts or IRAs. Unaffected by provisions in will and trusts. Unplanned designations can result in unintended dispositions and tax consequences. Should be coordinated with overall estate plan. Asset Mom Dad Owner Designated Beneficiary

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.18 Will Set of instructions. Who takes what, how much, when, and under what circumstances. No effect until death. Trusts can be established in wills. Can designate guardians & conservators for minors in wills. Wills require probate. Deceased’s Estate Deceased’s Estate Beneficiaries Net Estate

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.19 SIMPLE ESTATE PLAN Everything passes to Wife at Husband’s Death Assumes Wife Owns $1,000,000 Outright. Calculations assume (1) the state death tax equals the maximum state death tax credit allowable for federal estate tax purposes and (2) probate and other administration expenses are zero. Assumes both spouses die in 2011 without use of Applicable Credit at first death Ultimate Benefit to Children $ 2,055,000 Current Estate of Decedent $2,000,000 Marital Share (Surviving Spouse) $2,000,000 Marital Share $1,000,000 Already Owned $3,000,000 Surv Sp Estate Approximate Taxes on $3,000,000 upon Surviving Spouse’s Death $ 945,000 Maximum Marital Deduction Formula

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.20 Durable Powers of Attorney

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.21 Durable Power of Attorney Aim is to protect your assets during disability. Trusted individual is given power to transfer assets to living trust. Trustee manages living trust assets for your benefit until you recover or die.

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.22 Durable Power of Attorney for Health Care Health Care Declaration or Health Care Proxy OR

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.23 Trusts Testamentary (At Death) Inter Vivos (During Life) Trusts should be drafted by an attorney familiar with such matters in order to take into account income and estate tax laws (including the generation-skipping tax). Failure to do so could result in adverse tax treatment of trust proceeds.

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.24 Created by will Included in probate estate Comes into existence upon death and is irrevocable Testamentary Trusts

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.25 Credit Shelter Trusts

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.26 Children receive approximately $510,000 additional assets over the Simple Estate Plan by utilizing the Marital Deduction Formula Plan. Calculations assume (1) the state death tax equals the maximum state death tax credit allowable for federal estate tax purposes and (2) probate and other administration expenses are zero. CREDIT SHELTER TRUST PLANNING (Splitting of Estate into Credit Shelter Trust and Marital Share on Decedent’s Death). Assume Surviving Spouse Owns $1,000,000 on Decedent’s Death Assumes both spouses die in 2011 Ultimate Benefit to Children $2,000,000 Surv Spouse’s Estate $1,000,000 Credit Shelter Trust ($ 435,000) Approximate Taxes $2,565,000 Total to Children Family Share (“B”) $1,000,000 Marital Share (“A”) (Surviving Spouse) $1,000,000 Marital Share $1,000,000 Already Owned $2,000,000 Surv Sp Estate Approximate Taxes on $2,000,000 upon Surviving Spouse’s Death $435,000 Current Estate of Decedent $2,000,000 Applicable Exclusion Amount Optimal Marital Deduction Formula

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.27 Revocable Living Trust

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.28 Avoids probate. Places assets in trust while living. Appoints you as your own trustee. Lets you move assets in and out of trust with no penalties or restrictions. Is revocable during your lifetime. Living Trust

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.29 QTIP Trust

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.30 Qualified Terminable Interest Property (QTIP). Allows first spouse to die to give lifetime benefits (income) to surviving spouse. Retains right to name ultimate beneficiaries to protect assets for children in case of remarriage of surviving spouse. Qualifies for marital deduction. QTIP Trust

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.31 Irrevocable Life Insurance Trusts

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.32 Once established, cannot be changed. Often used to escape estate taxes, (because trust assets not in your estate). Several types: –Irrevocable Life insurance Trust (ILIT) –Spousal Support ILIT –Survivorship Trust –Dynasty Trust Irrevocable Trusts

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.33 CREDIT SHELTER TRUST PLANNING WITH A SEPARATE IRREVOCABLE LIFE INSURANCE TRUST (Splitting of Estate into Family Share and Marital Share on Decedent’s Death.) Assume Surviving Spouse Owns $1,000,000 on Decedent’s Death Assumes both spouses die in 2011 Ultimate Benefit to Children $2,000,000 Surv. Spouse’s Estate $1,000,000 Credit Shelter Trust $ 435,000 Life Ins Trust ( 435,000) Approximate Taxes $3,000,000 Total to Children Irrevocable Life Insurance Trust $435,000 Current Estate of Decedent $2,000,000 Approximate Taxes on $2,000,000 upon Surviving Spouse’s Death $435,000 Optimal Marital Deduction Formula Children receive approximately $945,000 additional assets over the Simple Estate Plan by utilizing the Marital Deduction Formula Plan and life insurance in an ILIT. Calculations assume (1) the state death tax equals the maximum state death tax credit allowable for federal estate tax purposes and (2) probate and other administration expenses are zero. Also assumes that premium for life insurance is paid from other sources. Applicable Exclusion Amount Family Share (“B”) $1,000,000 Marital Share (“A”) (Surviving Spouse) $1,000,000 Marital Share $1,000,000 Already Owned $2,000,000 Surv Sp Estate FOR BROKER/DEALER AND GENERAL AGENT ONLY.

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.34 Donor Donor & Spouse $11,000 $22,000 Annual Gifts do not affect The Applicable Exclusion Amount Annual Gifts Individual GiftsSplit Gifts Donee

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.35 Annual Crummey gifts used to finance premiums. Crummey Provisions

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.36 Reducing Exposure to Federal Estate Taxes Trusts With “Crummey” Powers Crummey Trust Crummey Trust Beneficiaries John & Mary Doe John & Mary Doe Trust Beneficiaries With Lifetime Crummey Demand Rights

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.37 Dynasty Trusts

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.38 Transferring Assets Titling Assets Estate Equalization Other Techniques

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.39 Gift during life (assume 50% tax bracket) : $11,000 Gift + $5,500 Gift Tax = $16,500 Gift at Death (assume 50% tax bracket) : $11,000 Gift + $11,000 Estate Tax = $22,000 Savings$ 5,500 Estate & Gift Tax Principles

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.40 Other Advantages of Gifting Current enjoyment. Creditor protection. Probate avoidance. Appreciation shifting. Income shifting. Taxable gifts. Discounted gifts.

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY $500,000 Gift tax $250,000 Applicable Credit Amount Gifts 2026 $3,424,238 Estate tax $1,712,119 *Assumes 50% Estate Tax Bracket

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.42 Common Arrangements in the Estate Plan Summary Manulife Financial and its representatives do not give legal or tax advice. We recommend you seek competent tax or legal counsel. The Legal Aspects

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.43 Husband dies first Simple Will - All to Wife Issues: Estate taxesEstate taxes Funding living trusts during lifetimeFunding living trusts during lifetime Probate costsProbate costs Asset management for minor childrenAsset management for minor children IncompetenceIncompetence Wife remarriesWife remarries Husband’s lost exemption equivalentHusband’s lost exemption equivalent For simplicity we are using the terms ‘husband” and “wife” rather than “first spouse” “ second spouse” or “surviving spouse.” Assumes both spouses die in 2011 Wife’sProperty Taxable Estate Husband’s Property Probate Costs Wife’s Marital Deduction Wife’s Property Distributed By Will IRS Taxes Gross Estates Probate Costs Wife’s $1,000,000 Applicable Exclusion Amount Wife dies second Probate Costs Wife’s Estate Heirs

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.44 Gross Estates Wife’s Property Husband dies first Wife’s $1,000,000 Applicable Exclusion Amount Wife may be a beneficiary of Credit Shelter Trust Credit Shelter Trust established in Will Planner must review ownership of assets and beneficiary designations to make sure Credit Shelter Trust will be funded. Taxable Estate Credit Shelter Trust $1,000,000 Husband’s Property Wife’s Marital Deduction Wife’s Property Distributed By Will Probate Costs Wife dies second Probate Costs Wife’s Estate Taxes Issues: Estate taxes Funding living trusts during lifetime Probate costs Asset management for minor children Incompetence Wife remarries Assumes both spouses die in 2011 HEIRS

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.45 Husband dies first Credit Shelter Trust & QTIP Trust established in Will Wife dies second Planner must review ownership of assets and beneficiary designations to make sure Credit Shelter Trust can be funded. Issues: Estate taxes Funding living trusts during lifetime Probate costs Asset management for minor children Incompetence Assumes both spouses die in 2011 Wife’s Property Wife may be a beneficiary of Credit Shelter Trust Income to Wife Taxable Estate Taxes QTIP Trust Credit Shelter Trust $1,000,000 Husband’s Property Wife’s Marital Deduction Gross Estates Wife’s Property Distributed By Will Wife’s $1,000,000 Applicable Exclusion Amount Probate Costs Wife’s Estate TaxesHeirs

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.46 Revocable Living Trust Credit Shelter & QTIP Trusts Husband dies first Gross Estates Wife dies second Planner must review ownership of assets and beneficiary designations to make sure Credit Shelter Trust can be funded. Issues: Estate taxes Funding living trusts during lifetime Assumes both spouses die in 2011 Taxes Husband’s Property Not In Trust No Probate Wife may be a beneficiary of Credit Shelter Trust Wife’s Living Trust Taxable Estate Credit Shelter Trust $1,000,000 Husbands Living Trust Probate Costs To Wife or her Living Trust (No Probate) Wife’s Property Distributed By Will Wife’s $1,000,000 Applicable Exclusion Amount Income to Wife Probate Costs Wife’s Estate Taxes QTIP Trust Heirs

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.47 Irrevocable Trust Revocable Living Trust Credit Shelter & QTIP Trusts Husband’s Property Not In Trust Husband dies first No Probate Wife dies second Annual Exclusion and/or Taxable gifts ILIT Pays Premiums Collects Death Benefits May be a spousal or Survivorship ILIT Wife’s Living Trust Planner must review ownership of assets and beneficiary designations to make sure Credit Shelter Trust can be funded.Taxable Gifts use the Applicable Credit Amount. Taxable gifts exceeding the exemption equivalent result in gift tax. Credit Shelter Trust $1,000,000 Husbands Living Trust Taxable Estate Wife may be a beneficiary of Credit Shelter Trust Wife’s Property Distributed By Will Wife’s $1,000,000 Applicable Exclusion Amount Gross Estates Probate Costs Income to Wife Wife’s Estate Taxes To Wife or her Living Trust (No Probate) Taxes QTIP Trust Assumes both spouses die in 2011 HEIRS

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.48 Conclusion The most carefully crafted estate plan which is not implemented is the same as having no plan. Please contact a qualified adviser for help and assistance.

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.49 Basic Estate Planning Strategies Manulife Financial and the block design are registered service marks and trademarks of The Manufacturers Life Insurance Company and are used by it and its affiliates including Manulife Financial Corporation. This material is for informational purposes only. For more detailed information please contact your advisor. Manulife Financial or any of its agents, employees, or registered representatives do not give legal, tax, investment, or accounting advice. The information given here is merely a summary of our understanding of the current laws and regulations. Prospective purchasers should consult their tax advisor.