FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.1 Gifting Using Gifting to discover the power of lifetime giving 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 In most situations what is the fundamental Road Block in the Estate Planning Sale? The Problem

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.3 To Gift or Not to Gift… That is the question

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.4 Empathy Jargon

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.5 Objectives With A PlanWithout A Plan IRS Family IRS Family

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.6 Inclusive vs. Exclusive THE BASIC RULES OF THE ANNUAL GIFT TAX EXCLUSION

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.7 $11,000 Annual Exclusion removes assets and appreciation from the estate Lifetime Applicable Exclusion Amount removes up to $1,000,000 (2002 and beyond) and its future appreciation from the estate Gift Tax Principles

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.8 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.9 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.10 Applicable Credit Amount Gifts 2002 $500,000 Gift tax $250, $3,424,238 Estate tax $1,712,119 * Assumes 50% Estate Tax Bracket

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.11 The Irrevocable Life Insurance Trust Mom & Dad Mom & Dad Family ILIT Family ILIT Insurance Company Insurance Company Insurance Policy Beneficiaries Cash Gifts Premium Payments Insurance Proceeds

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.12 Gifting and The Solution

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.13 Sean age 55, Kelly age married children (and 6 grandchildren). Estate of $10,000,000 with after tax growth of 5%. Combined annual exclusions equal $176,000. They are interested in understanding the difference between: No gifting, Gifting to an irrevocable trust and investing, and Gifting to an irrevocable trust and purchasing insurance. Sean and Kelly MacCaulay

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.14 No Gifting MacCaulay Estate Value in 34 Years $51,257,198 MacCaulay Estate Value in 34 Years $51,257,198 Estate Taxes of $27,845,659* Estate Taxes of $27,845,659* Net to Heirs $24,627,045 Net to Heirs $24,627,045 Credit Shelter Trust $1,215,506 Credit Shelter Trust $1,215,506 Assumes the use of unlimited marital deduction and that each client uses any remaining applicable credit amount ($1,000,000 effective 2002)

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.15 Gifting to an Irrevocable Trust and Investing * With Gifting to IT. ** Includes after-tax return on gifts invested Irrevocable Trust $15,209,806** Irrevocable Trust $15,209,806** MacCaulay Estate Value in 34 Years $36,047,392* MacCaulay Estate Value in 34 Years $36,047,392* Estate Taxes of $19,480,260 Estate Taxes of $19,480,260 Net to Heirs $32,992,439 Net to Heirs $32,992,439 Credit Shelter Trust $1,215,506 Credit Shelter Trust $1,215,506

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.16 Gifting to an ILIT- With Life Insurance Irrevocable Trust $11,489,259 Plus +$7,349,619 Irrevocable Trust $11,489,259 Plus +$7,349,619 MacCaulay Estate Value in 34 Years $36,047,392 MacCaulay Estate Value in 34 Years $36,047,392 Estate Taxes of $19,480,266 Estate Taxes of $19,480,266 Net to Heirs $36,621,511 Net to Heirs $36,621,511 Credit Shelter Trust $1,215,506 Credit Shelter Trust $1,215,506 * If grandchildren are also heirs of the trust, the parents can either allocate part of their combined generation- skipping transfer (GST) tax exemption to the gifts to the trust, or create two separate trusts (one for the children and one for the grandchildren) so they only need to allocate their GST exemption to the grandchildren’s trust.

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.17 Results No Gifting$24,627,045 Gifting To ILIT and Investing$32,992,439 Gifting To ILIT and Life Insurance$36,621,511

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.18 Summary: Lifetime gifting can: Reduce estate taxes Maximize gifts to loved ones Safeguard family assets Safeguard family privacy

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.19 Gifting 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. The End