FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.1 Dynasty Trust Analysis (GSTT Planning Strategies) Maximizing Family Wealth and Avoiding Transfer Tax for Generations 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 Client Profile 60s or older Wealthy individuals with children who will have estate tax exposure Individuals who want to pass substantial wealth to future generations

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.3 The Problem Each generation needs liquidity to pay for estate taxes and other administrative costs at death. What impact will divorces or lawsuits have on the growth of assets for future generations?

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.4 Background Issues Generation-Skipping Transfer Taxes (GSTT) Rule Against Perpetuities

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.5 The Dynasty Trust Solution Pay the estate tax once, and for all.

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.6 The Dynasty Trust Savings Availability Leverage

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.7 Purpose. Flat Tax at a 50% Rate (2002). Additional Tax. Applied to “Skip” Gifts. The GSTT

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.8 Direct skips. Outright gift. Gifts in trust. Taxable distributions. Taxable terminations. GSTT Events

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.9 $1,100,000* Per Estate Owner $2,200,000* Husband and Wife The GSTT Exemption *Effective 2002

$1,100,000* $1,500, $2,000, $3,500, No estate or GST tax $1,000,000* Increase in GST and Estate Tax Exemptions (return to current law) FOR BROKER/DEALER AND GENERAL AGENT USE ONLY * The GST exemption will be inflation adjusted in

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.11 Increase in the Gift Tax Exemption Gift tax exemption will stay at $1,000,000 in 2002 and after Gift tax has not been repealed After 2010, the highest gift tax rate will be the top individual income tax rate

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.12 A Dynasty Trust An Irrevocable Life Insurance Trust (ILIT) Multi-Generational Benefits

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.13 GSTT Allocation and Life Insurance No Transfer Taxes to Trust Avoiding Transfer Taxes in Future Generations

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.14 The Stroms Client Jeremy and Amanda Strom Ages67 & 62 Two ChildrenAges 36 and 33 Two GrandchildrenAges 4 and 1 Estate Value$5,000,000 After-tax Growth Rate5%

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.15 Establish a Dynasty Trust. Gift $220,000 for 10 years to the Trust. Trustee purchases life insurance policy. Strategy 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.16  Strom children and grandchildren are named beneficiaries.  Purchase Survivorship Universal Life Policy #1: Establish The Trust Jeremy&AmandaJeremy&AmandaDynastyTrustDynastyTrustStromFamilyStromFamily

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.17 #2: Funding the Trust Annual gifts Trustee pays annual premiums Jeremy&AmandaJeremy&Amanda DynastyTrustDynastyTrust SurvivorshipULSurvivorshipUL $220,000 per year for 10 years

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.18 #3: In The End… SurvivorshipULSurvivorshipUL Income tax free death benefit Distributions DynastyTrustDynastyTrustStromFamilyStromFamily 18

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

In 26 years the Strom Estate will be worth $16,300,908 Ultimately, the Great Grandchildren will end up with $28,419,323 FOR BROKER/DEALER AND GENERAL AGENT ONLY.20 Current Situation

In 26 years the Strom Estate will be worth $11,259,551 Ultimately, the Great Grandchildren will end up with $144,149,849 FOR BROKER/DEALER AND GENERAL AGENT ONLY. 21 Proposed Dynasty Trust

FOR BROKER/DEALER AND GENERAL AGENT ONLY. 22

FOR BROKER/DEALER AND GENERAL AGENT USE ONLY.23 Dynasty Trust Analysis Manulife Financial and the block design are registered service marks 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