1. For producer use only. Not for distribution to the public. W ALLS A ROUND W EALTH OLA 1865 0114 Comprehensive Planning, Inc Derek Archey, CFP, ALMI 248-457-2312 x 313 archeyd@compreplan.com

2. For producer use only. Not for distribution to the public. A legacy plan should reflect a client’s unique goals and needs Life insurance producer plays an important role: A bridge between client goals and desired results Must ask questions to help clients identify and articulate goals in order to be able to recommend the appropriate strategies Legacy Planning

3. For producer use only. Not for distribution to the public. The American Taxpayer Relief Act 2014 Estate, Gift and Generation Skipping Transfer Tax $5.34 million exemption 40% top tax bracket

4. For producer use only. Not for distribution to the public. Reframing the Legacy Planning Conversation Shift Emphasis TaxesGoals / Values

5. For producer use only. Not for distribution to the public. Transfer taxes Divorce Creditors Beneficiaries’ lack of asset management skills Overspending Substance abuse How Is Wealth Lost from Generation to Generation?

6. For producer use only. Not for distribution to the public. Influencing the Behavior of Beneficiaries Wealthy parents have two major concerns: Children are not going to live as well as they do Wealth that parents leave their children is going to spoil them How do you bridge the gap between these two competing concerns? Answer: Dynasty Trust

7. For producer use only. Not for distribution to the public. “Family Bank” trust Legacy trust Incentive trust Generation-skipping trust Dynasty Trust

8. For producer use only. Not for distribution to the public. What Is a Dynasty Trust? A trust with a long term Not just for the “ultra-wealthy” Offers tax and non-tax advantages Tax advantages are maximized when trust is funded with life insurance Leverage GSTT exemption which is based on premiums, not death benefit Death benefit received federal income tax-free

9. For producer use only. Not for distribution to the public. Gifting to the Trust Grantors (Grandparents) Dynasty Trust for Children & Grandchildren Created using $10.68 million lifetime gift tax exemptions and allocating GSTT exemption (1)

10. For producer use only. Not for distribution to the public. (1) Gifting to the Trust Grantors (Grandparents) Dynasty Trust for Children & Grandchildren Created using $10.68 million lifetime gift tax exemptions and allocating GSTT exemption Gifting to the Trust (2) Grantors (Grandparents) Dynasty Trust for Children & Grandchildren Trust purchases survivorship life insurance policy on lives of grandparents

11. For producer use only. Not for distribution to the public. Gifting to the Trust Grantors (Grandparents) Dynasty Trust for Children & Grandchildren Trust purchases survivorship life insurance policy on lives of grandparents (2) Grantors (Grandparents) Dynasty Trust for Children & Grandchildren Created using $10.68 million lifetime gift tax exemptions and allocating GSTT exemption (1) Beneficiaries Children or Grandchildren Grantors (Grandparents) Death benefit magnifies trust assets through leverage of premium amounts Dynasty Trust for Children & Grandchildren

12. For producer use only. Not for distribution to the public. Gifting to the Trust Beneficiaries Children or Grandchildren Grantors (Grandparents) Death benefit magnifies trust assets through leverage of premium amounts Dynasty Trust for Children & Grandchildren (3) Grantors (Grandparents) Dynasty Trust for Children & Grandchildren Trust purchases survivorship life insurance policy on lives of grandparents (2) Grantors (Grandparents) Dynasty Trust for Children & Grandchildren Created using $10.68 million lifetime gift tax exemptions and allocating GSTT exemption (1)

13. For producer use only. Not for distribution to the public. Policy proceeds not included in insured’s taxable estate if no incidents of life insurance policy ownership exist at any time within three years prior to death To keep policy proceeds out of grantor’s estate, applicant and owner should be third party, such as Dynasty Trust Grantor then gifts premiums to third-party owner Dynasty Trust Considerations: Estate Exclusion

14. For producer use only. Not for distribution to the public. Generation-skipping transfer tax (GSTT) Dynasty Trust helps leverage GSTT exemption Proper use of GSTT exemption preserves assets for future generations Rule against perpetuities Dynasty Trust usually created in state without rule against perpetuities (RAP)* In state with RAP, Dynasty Trust term limited to life spans of named beneficiaries, plus 21 years Dynasty Trust Planning Considerations *Clients must seek advice from competent legal counsel concerning trust setup matters.

15. For producer use only. Not for distribution to the public. Separate Taxpayer for Estate and Gift Tax PurposesOne in the Same for Income Tax Purposes Dynasty Trust Intentionally Defective Grantor Trusts Grantor Dynasty Trust

16. For producer use only. Not for distribution to the public. Effective way to transfer significant assets to successive generations of beneficiaries Provides creditor protection Divorce consequences Irresponsible spending Continuity of asset management May contain incentives for beneficiaries Benefits of a Dynasty Trust

17. For producer use only. Not for distribution to the public. Generations of a family can manage charitable bequests Heirs can serve on foundation board Reasonable expenses may be paid to board and travel for foundation business may be reimbursed Removes assets from taxable estate Private Foundation

18. For producer use only. Not for distribution to the public. Reduced federal income tax deduction 30% of AGI Deduction for property based on cost basis rather than fair market value Self-dealing rules Minimum distribution requirements Private Foundation (cont.)

19. For producer use only. Not for distribution to the public. The Hilton Family Foundation 97% Barron Hilton (Age 80) Family Foundation $2.3 Billion Children & Grandchildren $71 Million 3% Source: USA Today, December 27, 2007

20. For producer use only. Not for distribution to the public. Private Foundation with a Legacy Trust Legacy Trust for Children & Grandchildren Grandparents (Grantors) Trust created using $5.34 Million lifetime gift tax exemption and allocating portion of GSTT exemption

21. For producer use only. Not for distribution to the public. Private Foundation with a Legacy Trust (cont.) Family Foundation Trust Owns Survivorship Life for Children or Grandchildren Legacy Trust Grandparents (Grantors) Initial Contribution

22. For producer use only. Not for distribution to the public. Private Foundation with a Legacy Trust (cont.) Family Foundation At Death: Beneficiaries Children or Grandchildren Can serve on board & direct bequests Trust Owns Survivorship Life for Children or Grandchildren Legacy Trust Results: Reduced estate taxes Protected wealth for generations Community influence for heirs 100% of Estate

23. For producer use only. Not for distribution to the public. A blended family is one to which the husband and/or wife bring together children and assets from a previous relationship. What Is a Blended Family?

24. For producer use only. Not for distribution to the public. No Plan + Family Fallout Traditional Plan Fosters Family Discord Blended Family Estate Planning Issues

25. For producer use only. Not for distribution to the public. What Is a Blended Family? Carol (Age 65) Mike (Age 65) JanMarsha Cindy Greg Previous Marriage Current net worth: $15 Million

26. For producer use only. Not for distribution to the public. Carol & Mike’s Living Trust Carol (Age 65) Mike (Age 65) Living Trust $15 Million

27. For producer use only. Not for distribution to the public. Carol & Mike’s Living Trust (cont.) Carol (Age 65) Survivor’s Trust $7.5 Million Exemption Trust $5.34 Million QTIP Trust $2.16 Million Available to Carol during her lifetime At Mike’s Death:

28. For producer use only. Not for distribution to the public. Carol & Mike’s Living Trust (cont.) Survivor’s Trust $7.5 Million Exemption Trust $5.34 Million QTIP Trust $2.16 Million At Carol’s Death: Marsha Jan Cindy Greg

29. For producer use only. Not for distribution to the public. Carol is 32 and Mike is 71 Mike has three children from a previous marriage Mike is currently worth $10 Million Blended Family– Younger Second Spouse

30. For producer use only. Not for distribution to the public. Blended Family– Younger Second Spouse (cont.) Carol (Age 32) Mike (Age 71) PeterGreg Bobby Current net worth: $10 Million Previous Marriage

31. For producer use only. Not for distribution to the public. At Carol’s Death in 40–50 years: Carol & Mike’s Living Trust– Younger Second Spouse At Mike’s Death: Carol (Age 32) Mike (Age 71) Exemption Trust $5.34 Million QTIP Trust $4.66 Million Living Trust $10 Million Available to Carol during her lifetime Greg Peter Bobby Carol (Age 65)

32. For producer use only. Not for distribution to the public. Mike’s Living Trust & Dynasty Trust Bobby At Mike’s Death... Dynasty Trust (with Life Insurance) Greg Carol Exemption Trust $5.34 Million Peter Mike Living Trust $10 Million QTIP Trust $4.66 Million Greg Jr.Peter Jr.Bobby Jr. Greg IIIPeter IIIBobby III Next Generation... At Carol’s Death...

33. For producer use only. Not for distribution to the public. Establish a Revocable Living Trust Including marital and bypass trusts Purchase a separate life insurance policy to specifically benefit only those children born of a previous marriage Consider establishing a Legacy Trust if facing potential estate tax liability or desire third-party trustee control of trust funds Planning for Blended Families

34. For producer use only. Not for distribution to the public. At death, trust receives death benefit Children from insured’s prior relationship will receive these proceeds free of federal estate and income tax Clients can make sure bulk of their assets is available for current spouse and children of second relationship or marriage Planning for Blended Families (cont.)

35. For producer use only. Not for distribution to the public. Less than half of all households (48%) are husband and wife households. Between 2000 – 2010: 40% increase in opposite-gender partner households 80% increase in same-gender partner households. Unmarried households are most common in New England, Washington DC, and the Pacific coastal states. Planning for Non-Married Couples

36. For producer use only. Not for distribution to the public. Differing state common-law/domestic partner laws Loss of survivor retirement benefits Asset titling Real estate planning Equalizing estates Loss of unlimited marital deduction Limitations in gifting Planning for Non-Married Couples (cont.)

37. For producer use only. Not for distribution to the public. Agreements Cohabitation Partnership Dissolution Grantor Retained Interest Trust Legal Adoption of Partner Planning Tools

38. For producer use only. Not for distribution to the public. “Naming one another as life insurance beneficiaries—an all-around simple way of transferring assets—is the great equalizer.” — Russell P. Love, McKenna Long & Aldrich Planning for Nonmarried Couples

39. For producer use only. Not for distribution to the public. Tom and Pat, both 62 $10 Million No children Tom has an estate of $8.5 Million while Pat has an estate of $1.5 Million Planning for Nonmarried Couples (cont.)

40. For producer use only. Not for distribution to the public. Planning for Nonmarried Couples (cont.) Tom (Age 62) Annual gifts of $14,000 per beneficiary $5.34 million lifetime gift tax exemption Legacy Trust with Life Insurance Pat (Age 62) Living Trust $1.5 M Living Trust $8.5 M Living Trust $8.5 M Net worth: $1.5 M Net worth: $8.5 M

41. For producer use only. Not for distribution to the public. Planning for Nonmarried Couples (cont.) Available to pay estate taxes or make distributions Pat (Age 62) Tom’s Family At Tom’s Death... Living Trust $1.5 M Living Trust $8.5 M Living Trust $8.5 M Legacy Trust with Life Insurance

42. For producer use only. Not for distribution to the public. Preserves disabled person’s quality of life without endangering eligibility for government programs. Trust funds supplement—do not replace—government assistance Two Types: Self-settled Third party What Is a Special Needs Trust?

43. For producer use only. Not for distribution to the public. Funded with the disabled person’s “own” assets At disabled beneficiary’s death, remaining trust assets are used to pay back the government for benefits received during lifetime Laws and services vary from state to state Self-Settled Special Needs Trust

44. For producer use only. Not for distribution to the public. Created and funded by third parties such as parent, grandparent or sibling through will, gift or other transfer of assets When disabled beneficiary dies, remaining monies can be left directly to a designated contingent beneficiary Third-Party Special Needs Trust

45. For producer use only. Not for distribution to the public. Special Needs Trusts How Do They Work? Disabled Loved Ones SSI & Medicaid Premiums paid for policy on life of grantor At death, proceeds paid to the trust Eligibility for government benefits maintained Grantors

46. For producer use only. Not for distribution to the public. Coordinate planning efforts with all family members so as to not frustrate the benefits of Special Needs Trust Uniform Transfer/Gift to Minors Account Direct inheritance Avoiding Common Mistakes

47. For producer use only. Not for distribution to the public. Ask fact-finding questions Determine client’s goals and circumstances Propose strategies that are tailored to accomplish goals and address circumstances Planning a Legacy

48. For producer use only. Not for distribution to the public. This material was not intended or written to be used, and cannot be used, to avoid penalties imposed under the Internal Revenue Code. This material was written to support the promotion or marketing of the products, services, and/or concepts addressed in this material. Anyone to whom this material is promoted, marketed, or recommended should be urged to consult with and rely solely on their own independent advisors regarding their particular situation and the concepts presented here. Transamerica Life Insurance Company (“Transamerica”) and its representatives do not give tax or legal advice. This presentation is provided for informational purposes only and should not be construed as tax or legal advice. Clients and other interested parties must be urged to rely solely upon their own independent advisors regarding their particular situation and the concepts presented here. Discussions of the various planning strategies and issues are based on our understanding of the applicable federal income, gift, and estate tax laws in effect at the time of this presentation. However, tax laws are subject to interpretation and change, and there is no guarantee that the relevant tax authorities will accept Transamerica’s interpretations. Additionally, this material does not consider the impact of applicable state laws upon clients and prospects. Although care is taken in preparing this material and presenting it accurately, Transamerica disclaims any express or implied warranty as to the accuracy of any material contained herein and any liability with respect to it. This information is current as of January 2014. OLA 1865 0114

49. For producer use only. Not for distribution to the public. W ALLS A ROUND W EALTH OLA 1865 0613