CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS Life Insurance and Divorce Unique Situations PRESENTED BY: [Joe Sample,] [Designations per field stationery guidelines] [Company Approved Title] [Agency Name] [The Prudential Insurance Company of America][if Agency Distribution] [1234 Main Street, Suite 1, Floor 10] [Anywhere], [ST] [12345] [in required states] [ Insurance License Number ] [Phone] [ ] Fax [ ] NOT FOR CONSUMER USE. © 2012 Prudential Financial, Inc. and its related entities Ed. 11/2012 Ed. 05/08/2014 PERSONAL STRATEGIES

CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS This material has been prepared by The Prudential Insurance Company of America to assist financial professionals. It is designed to provide general information in regard to the subject matter covered. It should be used with the understanding that it does not constitute legal, accounting or tax advice. Such services should be provided by the client’s own legal, accounting or tax advisors. Accordingly, information in this document cannot be used for purposes of avoiding penalties under the Internal Revenue Code. Return of Premium Term is issued by Pruco Life Insurance Company, except in NY and NJ where it is issued by Pruco Life Insurance Company of New Jersey. All are Prudential financial companies located in Newark, NJ, and each is solely responsible for its own financial condition and contractual obligations. Life insurance policies contain exclusions, limitations, reductions of benefits and terms for keeping them in force. A financial professional can provide your clients with costs and complete details. The availability of other products and services varies by carrier and state. Securities and Insurance Products: Not Insured by FDIC or Any Federal Government Agency. May Lose Value. Not a Deposit of or Guaranteed by Any Bank or Bank Affiliate. Prudential, the Prudential logo, and the Rock symbol are service marks of Prudential Financial, Inc. and its related entities. © 2012 Prudential Financial, Inc. and its related entities. NOT FOR CONSUMER USE. 2

CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS Divorce Happens … In 2009, 2.3 million people divorced* *Source: Table 133. Marriages and Divorces, U.S. Census Bureau, As Life Changes, Life Insurance Needs Change NOT FOR CONSUMER USE. 3

CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS Issues and opportunities The importance properly structuring policy Ensures that your intended heirs will be taken care of Unintended tax consequences if not structured properly Using Return of Premium Term in Divorce Scenarios A solution for court-ordered life insurance The benefits of Return of Premium Term NOT FOR CONSUMER USE. 4

CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS Review Beneficiary Designations The Issues Married couples tend to name each other as beneficiaries on their life insurance policies They often fail to timely adjust beneficiary designations Result is that the ex-spouse receives life insurance proceeds often to the detriment of the 2 nd spouse or other family members. In the majority of states, if an ex-spouse is named beneficiary, the ex-spouse is still entitled to the proceeds NOT FOR CONSUMER USE. 5

CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS Review Beneficiary Designations The issues Some states provide for automatic revocation of spousal beneficiary designation upon divorce Action may still be needed … Employer provided insurance governed by ERISA: Supreme Court ruled that ERISA “trumped” state law (Egelhoff v Egelhoff, 121 S. Ct (2001)) NOT FOR CONSUMER USE. 6

CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS Choosing a New Beneficiary Options and implications Should it be the insured’s estate? Estate tax exposure Subject to probate process Should it be the insured’s children? Estate tax exposure Minor children Should an ILIT be owner and beneficiary? Removes insurance from estate NOT FOR CONSUMER USE. 7

CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS Barriers to Changing the Beneficiary Existing ILITs ILITs are irrevocable Does the ILIT provide a “divorce escape clause”? Other solutions: Negotiations Court reformation Create a new ILIT NOT FOR CONSUMER USE. 8

CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS Tax Issues for Agreements after July 18, 1984 Transferring a Policy Between Spouses No gain is recognized by transferor spouse Carryover basis –No transfer-for-value issues Non-recognition of gain is not available for transfers to nonresident alien spouses Gain may be recognized where a policy with a loan is transferred to a trust NOT FOR CONSUMER USE. 9

CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS Tax Issues for Agreements after 1984 Premiums Paid after Divorce Policy required by settlement agreement If the recipient spouse is the owner of the policy and premiums paid by the payor spouse qualify for alimony treatment, the premiums paid are: Deductible by the payor spouse Taxed as ordinary income to the recipient spouse Death benefits: income tax-free to the recipient spouse NOT FOR CONSUMER USE. 10

CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS Tax Issues for Agreements after 1984 Premiums Paid after Divorce If the providing spouse is the owner of the policy, premium payments are: Not deductible by the payor spouse Not taxable to the recipient spouse Death benefits are taxable to the recipient spouse when received as periodic payments When policy proceeds are included in a payor spouse’s estate, there is an offsetting deduction if the terms of the settlement require insurance to be maintained NOT FOR CONSUMER USE. 11

CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS Return of Premium Term and Divorce Why Use Return of Premium (ROP) Term? Required Insurance Some divorce settlements require that one spouse maintain insurance on his or her life for the benefit of the ex-spouse and children. The Solution ROP Term may be able to be used to meet court-ordered support obligations—with the potential for the return of premium! Considerations Return of Premium returns all premiums paid during the level premium period selected if the insured lives to the end of the selected period. Returned premiums do not include any outstanding loans and interest. All premiums may not be returned if the policy was surrendered before the end of the level premium period. Prior to purchase, the client should confirm with his/her attorney that ROP Term satisfies the provisions of an order or divorce agreement. NOT FOR CONSUMER USE. 12

CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS NOT FOR CONSUMER USE. 13 Need more information? Click on the ATTACHMENTS tab for more material Click the Tools & Help icon Contact the Life Sales Desk: - or – Visit our website: THANK YOU FOR JOINING US! ] [ Thank You!

CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS [ Questions NOT FOR CONSUMER USE. 14 Contact the Life Sales Desk: - or – Visit our website: