SWITCH-DOLLAR © Copyright 2003All Rights Reserved.by The Weinberg Group, Inc. The Weinberg Group

Q. Why Switch-Dollar Life Insurance? A. Tax Efficient Funding of: Estate Taxes Other Liquidity Needs Business Continuity Plans Buy-Sell Agreements Charitable Bequests Defective Grantor Trust Installment Notes

IRS NOTICE PROP. REGS. GUIDANCE ON THE TAX TREATMENT OF SPLIT- DOLLAR LIFE INSURANCE Taxation as Economic Benefit (Endorsement) Split-Dollar Limited Grandfather Protections for: Or Taxation as Split-Dollar Loan Existing Plans (entered into before Jan. 28, 2002) New Plans (entered into before Final Regs.)

IRS NOTICE PROP. REGS. GUIDANCE ON THE TAX TREATMENT OF SPLIT- DOLLAR LIFE INSURANCE Changes in Term Rates Used to Measure Annual Economic Benefit (“AEB”) Planning Opportunities & Risks Window of Opportunity for New Plans

Trust f/b/o Children and Descendants Jones Corp. Mary Jones Premium ReloanPremium Loan Imputed Interest Imputed Compensation Imputed Interest Imputed Gift SIDEBAR: The (Interest-Free) Loan Transaction

AEB Contributions Trust f/b/o Children and Descendants Insurance Company Jones Corp. Mary Jones Premiums Cash Value or Death Benefit = Cum. Corp. Outlay Remaining Cash Value and Death Benefit AEB Gifts Compensation Deduct./Inc. Interest Income Interest Deduction (“Personal Interest”) Interest Income (“Grantor Trust”) Interest Gifts

Mary Jones Income Tax Gift Tax I.R.S. Trust f/b/o Children and Descendants GST Tax Ins. Death Benefit Estate Tax Mary’s Estate Estate Assets Other Liquidity Needs

INSURANCE Whole Life (Current DB $8.4M) Corporate Switch-Dollar Plan (Collateral Assignment) Insurance Trust Is Owner & Beneficiary Insured: Mary Jones (Current Age 70)

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY -

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY -

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY -

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY -

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY -

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY - YEAR OF SWITCH

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY -

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY -

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY -

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY -

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY -

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY -

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY -

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY -

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY -

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY -

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY -

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY -

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY -

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY -

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY -

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY -

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY -

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY -

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY -

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY - TAX-FREE EQUITY

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY - TAXABLE EQUITY

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY - Projected L.E.

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY - Projected L.E. TOTAL ROR

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY - Projected L.E.

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY - Projected L.E.

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY - Projected L.E.

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY - Projected L.E.

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY - Projected L.E.

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY - Projected L.E.

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY - Projected L.E.

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY - Projected L.E. TRUST A/T ROR

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY - Projected L.E.

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY - Projected L.E. TRUST B/T ROR

CORPORATE SWITCH-DOLLAR/INTEREST-FREE LOAN MODEL USING INDIVIDUAL LIFE INSURANCE Insured: Mary Jones - THIS IS A SAMPLE CASE TO BE USED FOR EDUCATIONAL PURPOSES ONLY % % 16.51% 50.02% 8.48% 25.70%

SIX QUESTIONS TO ASK YOUR INSURANCE AGENT 1. How will you quantify the multiple tax impacts of the Notice on both existing and new split-dollar plans? 2. For existing plans (pre-Jan. 28, 2002 plans), what action do you intend to take, especially to take maximum advantage of the limited grandfather protection provided? 3. For new plans (plans adopted after Jan. 28 th but before the date of final regs.), what action do you intend to take, especially to take maximum advantage of the window of opportunity that is now open?

SIX QUESTIONS TO ASK YOUR INSURANCE AGENT 4. If you advise switching to a loan from a split-dollar plan (existing or new), how will you account for loan interest for income, gift, and generation-skipping tax purposes? 5. If you advise against switching to a loan, how will you account for policy equity at rollout for income, gift, and generation-skipping tax purposes? 6. What is your exit strategy for the plan design you recommend?

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