1. A Life Insurance Strategy to Help Your Clients Complete their Legacy
Complete The Dream
A Life Insurance Strategy to Help Your Clients Complete their Legacy
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] [<ST> Insurance License Number < >]
Phone [ ] Fax [ ]
Ed. 12/2013 Exp. 04/23/2015
Not for Consumer Use.

2. Agenda Threats Strategy Execution
Today we will focus on three key topics:
Threats: A closer look at the three threats to “The Dream”
Strategy: To help you help clients “Complete The Dream” using life insurance; and
Execution: How to identify and approach prospects for this strategy as well as how to utilize the resources and support from Prudential to help them implement the strategy.
Clients should consider that life insurance policies contain fees and expenses, including cost of insurance, administrative fees, premium loads, surrender charges and other charges or fees that will impact policy values.
All guarantees and benefits of the insurance policy are backed by the claims-paying ability of the issuing insurance company.  Policy guarantees and benefits are not backed by the broker/dealer and/or insurance agency selling the policy, nor by any of their affiliates, and none of them makes any representations or guarantees regarding the claims-paying ability of the issuing insurance company.
Not for Consumer Use. 2 2

3. Clients Who May Benefit…
Age 59½ + and family oriented.
Minimum net worth of $1,000,000 and sufficient liquid assets to support this strategy.
Have assets that they do not intend to use during their lifetime and are not needed for support in retirement.
Have sufficient retirement income from other sources to meet current and future income needs and expenses. Additionally, the client should have a financial plan completed as determined in conjunction with their financial advisor.
Desire to provide for and leave more to children or grandchildren.
Want to reduce “legacy” assets exposure to market volatility.
Want to counter losses to their legacy assets.
And as we are going through this concept, I’d like you to think about clients that you may work with in your book of business who look like this:
(read slide)
“Leave on” assets are assets that the client does not need to live on and has earmarked as legacy assets to “leave on” to their heirs.
Not for Consumer Use.

4. Threats Taxes are a reality IRR at Year 30: 7.0% 5.9% 4.9%
Hypothetical growth of $100,000 (non-qualified) invested at 7% (before-tax) assuming a 30% income tax rate.
IRR at Year 30:
7.0%
5.9%
4.9%
Taxes are a reality. This graph shows how income taxes can reduce the accumulation value of invested assets. What does this also mean in terms of a rate of return? (click animation 1)
Assuming $100,000 is invested in a tax-deferred investment growing at 7% pre-tax results in an accumulated value at year 30 of $761,226 with an IRR of 7%. However, if we were to assume that tax-deferred amount were liquidated as a lump sum in year 30 and reduced to $562,858 as a result of income taxes using a 30% rate, the IRR goes from 7% down to 5.9%. Lastly, if we were to assume the growth was taxed as income each year at this same tax rate, the ending accumulation value would be only $420,015 and the IRR goes down to 4.9%!
As we just discussed, the lower the rate of return, the longer the road to counter losses in legacy assets which may be extended even further due to the impact of either income or capital gains tax erosion.
*Assumes the pre-tax accumulated tax-deferred value is liquidated as a lump sum in the respective years shown subject to a tax rate of 30% to the extent of gain.
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5. Threats Chronic illness is a reality
78 million baby boomers will retire over the next two decades.1
About 70% of Americans over age 65 will require some type of chronic illness care services during their lifetime.2
Average national costs of chronic care3 (2010) in the United States:
$205/day for a semi-private room in a nursing home ($74,825/year).
$229/day for a private room in a nursing home ($83,585/year).
$3,293/month for one bedroom unit in an Assisted Living Facility ($39,516/year).
$21/hour for a Home Health Aide ($30,660/year at 4 hours/day).
The recent economic and market volatility has left many with a feeling of uncertainty and to this point, there are other uncertainties that arise with an aging population.
Research conducted … [read stats]
Imagine what kind of damage would be done to a client’s financial portfolio if they were forced to liquidate $80,000 per year or more, in today’s dollars, to pay for uninsured costs related to chronic illness.
The financial impact of an uninsured chronic illness can further diminish the ability for clients to leave a legacy and to have enough assets for themselves during their lifetime.
However, based on these statistics, much of the chronic care that is provided is delivered in the home by family caregivers so if insurance is purchased by the clients, having a benefit that pays regardless of who provides the care could be extremely important to many people. We will come back to this point in a few minutes.
1Source: U.S. Census Bureau, Facts for Figures, 2006.
2Source: U.S. Department of Health and Human Services: National Clearinghouse for Long-Term Care Information, 2010
3Source: U.S. Department of Health and Human Services. May, 2011.
Statistics referenced on this slide are believed to be the most up to date.
Not for Consumer Use. 5

6. Threats Chronic illness is a reality
15 million Americans currently provide UNPAID care to adults with Alzheimer’s or another dementia (22 hours per week on average).4
80% of care provided at home is delivered by FAMILY caregivers.4
Less than 10% of older adults receive all their care from PAID workers.4
[read stats]
4Source: Alzheimer’s Association, 2011 Alzheimer’s Disease Facts and Figures, Alzheimer’s & Dementia, Volume 7, Issue 2
Statistics referenced on this slide are believed to be the most up to date.
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7. Threats Market volatility is a reality
While the long-term historical performance of the market has been positive, downturns are a normal part of the market cycle.
Bear markets are an ongoing reality:
16 bear markets since 1929.*
15-month average duration.*
Average decline of 33.5% in the S&P 500.*
* Source: “A Bear Market History Lesson” By Gerri Willis – October 8, 2008).
While the long term historical performance of the market has been positive, downturns are a normal part of the market cycle.
People have traditionally feared bear markets especially when the statistics point to the following:
-Bear markets are an ongoing reality. In fact, there have been 16 bear markets since 1929, which is an average of almost one every five years. (For our purposes, a bear market is defined as a decline of 20% or more in the Dow Jones Industrials.)
-The average length of a bear market is 15 months.
-The average bear market results in a decline of 33.5%. 
Death during or following a downturn could have a substantial negative impact on one’s legacy. For example, assets may have to be liquidated at depressed prices to cover estate settlement costs or other post-death cash needs of the family.
(click animation 1)
Additionally, how many times do you think your clients can afford a 33.5% decline in the value of their legacy assets? It could take a considerable amount of time for asset values to fully recover from depressed prices.
How many times can your clients’ legacy afford a 33.5% reduction in value?
Statistics referenced on this slide are believed to be the most up to date available as of May, 2013.
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8. # of years needed to reach prior value
Threats
The uphill climb
A hypothetical portfolio that was worth $1 million of legacy assets on January 1st, is worth about $750,000 at year end. How long will it take to recoup the $250,000 of losses if $750,000 were reinvested at age 72?
Net rate of return
# of years needed to reach prior value
Age
2.0%
3.0%
4.0%
5.0%
14.5
9.7
7.3
5.9
86.5
81.7
79.3
77.9
This hypothetical example reinforces many clients’ uncertainty and concern for the future. Some may be concerned about having enough for themselves … Goal One, and others may be concerned about their Legacy…Goal Two.
As a result of recent economic and market volatility that may have caused many to experience a substantial decline in portfolio values, clients’ perspectives regarding financial strategies and risk tolerance may have changed. People who were not averse to risk when the market was booming may seek to reduce risk to help financially protect their families and future when the market is down.
Many pull back and repositioned to fixed investments during such times. But what is the interest rate environment like currently for fixed investments? Not too attractive.
To illustrate the “uphill climb,” let’s assume you have a 72 year old client with a portfolio that was worth $1 million as of January 1st, and is now—as of December 31st—worth about $750,000. How and when can this portfolio again reach its former value?
(click animation 1)
Using a simple compound interest calculation without taking taxes into account, the amount of time required for the portfolio just to regain its prior value could be significant. Depending on the rate of return, it could take as long as age 89 or more!
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9. Would you be interested? Life insurance may offer all of the above!
How Do You Help Clients Hedge Against These Threats To Ensure Their Legacy?
If you could offer clients a strategy for their legacy assets that may:
Help remove the impact of market volatility.
Help counter losses or volatility experienced following a downturn.
Preserve and potentially increase the ultimate value received by heirs.
Grow tax-deferred and be received by heirs income tax-free.
Accelerate payments in the event of chronic or terminal illness.
Do all of the above on a predictable, guaranteed basis?
Would you be interested? Life insurance may offer all of the above!
So what if you could offer clients a strategy for their legacy assets that may:
Help remove the impact of market volatility.
Help counter losses or volatility experienced following a downturn.
Preserve and potentially increase the ultimate value received by heirs.
Grow tax-deferred and be received by heirs income tax-free.
Accelerate payments in the event of chronic or terminal illness
Do all of the above on a predictable, guaranteed basis?
(click animation for each of the above bullet points)
Would you be interested? More importantly, would your clients be interested in such a strategy?
The bottom line is this ... clients who experience substantial losses during a market downturn may not be participating in "market recovery" because they may not be in the market as a result of pulling back and repositioning to fixed investments offering very low interest rates. With life insurance, we do not have to wait on the market or on fixed returns. Life insurance may deliver all of the these benefits, as we will discuss on the following slides, generally income tax-free.
Guarantees and benefits of the insurance policy are based on the claims-paying ability of the issuing insurance company.
Not for Consumer Use. 9 9

10. Strategy THE STRATEGY: Reposition Legacy Assets Client Heirs
If appropriate, your clients may want to consider using all or part of their assets intended for their heirs to purchase a PruLife® Universal Protector life insurance policy, with a guaranteed death benefit, equal to or greater than the amount that was to be their financial legacy.
Income or Withdrawal
Net Death Benefit
Legacy Assets
Life Insurance
Premium
Now that we’ve talked about the threats to “The Dream,” let’s discuss a strategy that could help clients complete their legacy using life insurance. Keep in mind that with regard to this strategy and the purchase of life insurance for these purposes, that all current life insurance coverage is taken into account to be sure your client does not have too much coverage from a financial underwriting standpoint.
Here is a schematic for how the strategy works. It simply involves repositioning a “legacy asset” as we’ve been discussing today to pay premiums for a PruLife® Universal Protector life insurance policy. A UL Protector life insurance policy can help your clients address their financial goals by potentially countering the losses experienced during or following a downturn with a death benefit of equal or greater value. Life insurance death benefits, which are in place immediately after the policy has been issued, and the first premium has been paid, are generally received federal income tax-free, making it an attractive option for repositioning legacy assets that may otherwise be subject to income or estate taxes.
It’s important to note that the client must not need the income or principal from the asset to live on and they must have a strong desire to leave more to his or her heirs to be a candidate for this strategy. Additionally, the income taxation of the growth, withdrawal to the client, and the ultimate distributions to the heirs will be dependent on the type of assets in the bucket. For tax deferred assets, taxable distributions (and certain deemed distributions) are subject to ordinary income tax, and if made prior to age 59 1/2, may also be subject to a 10% federal income tax penalty. Additionally, we are only talking about federal income taxes. If the owner’s estate is large enough, the legacy asset could be included in the estate, and may be subject to estate taxes when it is transferred to the next generation.
UL Protector offers an optional BenefitAccess Rider, a rider for chronic and terminal illness for an extra cost that may pay the policy owner accelerated death benefit payments. The chronic illness option offers up to the maximum monthly benefit should the insured become chronically ill and qualify under the terms of the rider. The terminal illness option offers a partial or full acceleration of the policy’s death benefit.
We will talk more about the details of this optional rider in a few slides but, first, let’s go back to the example of our 72-year-old from earlier whose legacy portfolio had diminished from $1 million to $750,000 and illustrate how life insurance can be an attractive option to help rebuild the legacy.
BenefitAccess Rider
Client
Heirs
Income tax on income or withdrawal?
Balance of Legacy Assets at Death
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11. Repositioning Legacy Assets
Strategy
Repositioning Legacy Assets
Annual Premium1: $250,000 for
3 years
Total
Death Benefit:
$1,335,360
Annual Premium1: $125,000 for
3 years
Total
Death Benefit:
$645,647
Legacy Assets Value: $1,000,000
Annual Premium: $37,500 for
10 years
Total
Death Benefit:
$652,242
Legacy Assets Value: $750,000
Assumes a female, age 72, Non-Smoker Plus,
PruLife® Universal Protector, guaranteed to age 105.
Market Downturn
This client, like many, has many options for utilizing the net after-tax amount of the withdrawal from her legacy asset including spending the money, giving it away to family, friends, or charity, or re-investing in another account.
Let’s assumed prior to the collapse of the financial markets the assets your clients intended to leave to your heirs were valued at $1 million. As a result of a market downturn those same assets are now valued at $750,000; a 25% decline. With the “Complete the Dream” strategy your clients can use all or a portion of the remaining assets to purchase a UL Protector life insurance policy to help counter those losses and remove the impact of market volatility from the values of assets they intend to pass on to their loved ones.
Here are three possible options to consider using UL Protector (based on rates for a 72-year-old female client who can qualify for Non-Smoker Plus underwriting):
$250,000 to be paid as a annual premium per year for 3 years which buys a death benefit of $1,335,360 guaranteed to age 105; or
$125,000 per year for 3 years, or roughly half of the current assets’ value, which buys a death benefit of $645,647 guaranteed to age 105; or
$37,500, roughly 5% of the current assets’ value, per year for 10 years as annual premiums which buys a death benefit of $652,242 guaranteed to age 105.
Which of these sounds most appealing?
This second or third option may be attractive for many clients because it may allow them to obtain attractive death benefit protection and leverage, but only uses a portion of the portfolio allowing them to spend or invest the remaining portion as they desire. In other words, knowing that there is a minimum legacy established by way of the death benefit, the clients may feel more comfortable repositioning the remaining assets to cover lifetime cash needs or possibly investing more aggressively to potentially improve the long-term results.
It is possible to equate the third option with simply redirecting income/growth from the portfolio for the next 10 years assuming the portfolio could return 5% net per year over that timeframe. Either way, these examples demonstrate that this client could dramatically enhance the current value of this portion of the portfolio for the benefit of her heirs by repositioning assets to buy life insurance. The important thing to remember is that this is not an all-or-nothing strategy.
Note that for purposes of this discussion, we are assuming that the clients’ assets are not subject to estate taxes.
1. These policies will become MECs in year 1 and will remain a MEC for the life of the policy. Distributions (including loans) are taxable to the extent of gain in the contract, and an additional 10% federal income tax penalty may apply if taken prior to age 59½.
Life insurance policy cash values are accessed through withdrawals and policy loans. Interest is charged on loans. In general, loans are not taxable, but withdrawals are taxable to the extent they exceed basis in the policy. Loans outstanding at policy lapse or surrender before the insured’s death will cause immediate taxation to the extent of gain in the policy. Unpaid loans and withdrawals reduce cash values and policy benefits and negate any guarantee against lapse. If a policy is a Modified Endowment Contract (MEC), distributions (including loans) are taxable to the extent of income in the policy, and an additional 10 percent federal income tax penalty may apply. You may wish to consult your tax advisor for advice regarding your particular situation.
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12. Strategy: Life insurance with BenefitAccess
Expand the living benefits of life insurance with our BenefitAccess Rider
For clients who:
Need death benefit protection
Are concerned about chronic and terminal illness protection
Life insurance with our optional BenefitAccess Rider may be the protection option they are looking for since it can:
Provide a death benefit to beneficiaries
Accelerate the death benefit to the client if they become chronically or terminally ill
BenefitAccess is an optional rider that enables customers to advance the policy’s death benefit in the event the insured becomes chronically ill or terminally ill, and all terms of the rider have been met. A licensed health care practitioner must certify the chronic or terminal illness to qualify for benefits. Chronic illness claims will require annual recertification by a licensed health care practitioner. Other terms and conditions may apply.
This rider is not long-term care (LTC) insurance and it is not intended to replace LTC. The rider may not cover all of the costs associated with chronic illness. The rider is a life insurance accelerated death benefit product, is generally not subject to health insurance requirements.
The BenefitAccess Rider is available for an extra premium. Additional underwriting requirements and limits may also apply. Obtaining benefits under the terms of the rider will reduce and may eliminate the death benefit.
BenefitAccess provides the policy owner with the flexibility to manage the financial uncertainty brought on by a chronic or terminal illness. However, the accelerated death benefit for terminal or chronic illness payments will reduce the policy values and the policy’s death benefit available for policy beneficiaries.
Benefits paid under the BenefitAccess rider are intended to be treated for federal tax purposes as accelerated life insurance death benefits under IRC §101(g)(1)(b). Tax laws related to the receipt of accelerated death benefits are complex and may be taxable in certain circumstances. Receipt of benefits may affect eligibility for public assistance programs such as Medicaid. Accelerated benefits paid under the terms of the Terminal Illness portion of the rider are subject to a $150 ($100 in Florida) processing fee. The policyowner should consult his or her tax and legal advisors prior to initiating any claim.
The BenefitAccess Rider may not be added to the same policy as the Enhanced Disability Benefit or Living Needs Benefit SM Rider. If a client only has an interest in a terminal illness benefit they should consider a policy with the Living Needs Benefit Rider which is available at no additional cost.
The BenefitAccess Rider is subject to state variations and may not be available in all states.
Not for Consumer Use.

13. BenefitAccess for Chronic Illness
Accelerates up to 100% of death benefit and provides income to clients diagnosed as chronically ill, and otherwise meeting the terms of the rider.
Proceeds are typically federally income-tax-free*
Maximum monthly benefit of 2% of the death benefit or the IRS Per Diem Limit ($330/day for 2014), if less, capped at 4% annual increase
Indemnity benefit
Charges are waived while on claim. Provides lifetime lapse protection if 25 monthly benefit payments are made. Otherwise, insured will need to resume premium payment after recovery.
Benefit payments reduce death benefit dollar-for-dollar
(Read slide.) `
*Part of the monthly payment may be taxable, customer should consult with their tax advisor.
Not for Consumer Use.

14. BenefitAccess for Terminal Illness
Upon being certified as terminally ill with a life expectancy of 6 months or less:
Accelerates the death benefit in a lump sum
Or a portion in a lump sum (at least $25,000 must remain)
If a portion is accelerated the rest could later be accelerated in full
Benefits reduced by discount factor
No policy charge for this portion (a fee applies each time it is used)
There is also a terminal illness benefit associated with the rider.
(Read slide.)
Note that the fee at time of claim is $150
Benefits for chronic illness and terminal illness can not be paid simultaneously. Terminal illness benefits could be paid subsequent to chronic illness benefits but once terminal benefits are paid, chronic illness benefits are no longer available.
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15. BenefitAccess Rider No receipts (indemnity benefit) No waiting period
No exclusions for family caregivers
All charges waived once benefits begin*
Additionally, here are some features which make our BenefitAccess Rider an attractive optional benefit for your clients:
It’s an indemnity benefit and the policy owner does not have to provide receipts associated with care expenses to the company.
There is no waiting period.
Benefits can be paid even if an immediate family member is the caregiver and there are no restrictions with how the benefit dollars are used. The proceeds can be used for anything the client wants including non-medical expenses.
Once the insured begins receiving rider benefit payments for chronic illness, there’s a lapse protection feature which waives all policy charges and deductions while receiving benefits. This waiver of charges provision prevents the policy from lapsing even without any additional premium payments from the client while receiving benefits. If benefits continue for 25 months, this waiver of charges becomes permanent. If benefit payments stop prior to 25 months then additional premiums may be required to keep the policy in force.
All charges permanently waived after 25
months of benefits
*If rider benefits stop within 25 months, additional premiums may be required to keep the policy in force.
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16. Death Benefit Comparison
Strategy
Death Benefit Comparison
You may now be wondering—“This sounds like a nice benefit but how much will it cost my client?”
To answer that, let’s look at a death benefit comparison for the same scenario that we just reviewed both with and without the BenefitAccess Rider.
Here is a summary of the two examples for “Complete the Dream” using UL Protector with and without the BenefitAccess Rider. Of course, since there is a cost associated with the addition of the rider the life insurance death benefit with the BenefitAccess Rider is less, but not substantially. Therefore, your clients can still help “Complete The Dream” and leave a substantial legacy to their client, even with the addition of the Benefit Access Rider. In the event circumstances change and your client needs to accelerate the death benefit for their own chronic or terminal illness instead of leaving this asset to their heirs they have the flexibility to do so with this rider in place. Please note: accelerating the policy’s death benefit under the BenefitAccess Rider will lower and possibly eliminate the policy’s death benefit due to be paid to the named beneficiaries.
These examples reinforce the fact that the client can pass on to her heirs a multiple of the current value of this portion of the portfolio using the Complete The Dream strategy. It is important to note however, that in the event that benefits are accelerated due to a chronic or terminal illness, the net death benefit will decrease, according to the terms of the rider, leaving less to the beneficiaries.
Note: In the event the Death Benefit is accessed to help with a chronic or terminal illness, the remaining value will decrease leaving less to the beneficiaries according to the terms of the BenefitAccess Rider.
This is a hypothetical example. Financial Advisors should verify their specific firm requirements regarding a life policy with the BenefitAccess Rider.
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17. Strategy (4% Increase in IRS Per Diem Limit)
Age
Annual Premium
Max Annual BenefitAccess Available*
Max Annual BenefitAccess Amount Taken
Net Death Benefit
BenefitAccess Lifetime Benefit Amount 72
250,000
115,200
1,180,659 73
118,800 74
124,600 80 -
157,659 85
190,800
989,859 86
198,000
791,859 87
207,469
584,390 88
215,767
368,623 89
223,200
145,423
Here we have an example at how the BenefitAccess Rider could work. We see that our client acquires the policy at age 72 and pays a $250,000 premium per year for 3 years. Then, at age 85, she becomes chronically ill and eligible for benefits under the BenefitAccess Rider. First, please note that any required premiums are permanently waived once the insured qualifies for BenefitAccess payments, unless continuous qualified payments are not maintained for 25 months. Remember that clients will need to file a new claim each year in order to continue the benefits.
The client will be eligible to receive the lesser of 2% per month of the death benefit, or the maximum allowable under the per diem limits as established by the IRS, which we are assuming is increased by an increase in the IRS Per Diem Limit of 4% per year (these rates are set by the IRS and subject to change). Please note that the death benefit payable to the beneficiary is also being reduced, dollar for dollar, as the benefits are being paid to the client under the BenefitAccess rider.
Now, let’s review the sequence of events when the client has died while her life insurance is in force.
First, the life insurance bucket gets filled with the death benefit proceeds from the life insurance company.
In our example, based on the age of the client, the assumption that she qualified for Non-Smoker Plus ratings, and that the BenefitAccess benefits were not paid, the benefit would be $1,180,659
In our example, we are directing the life insurance bucket to the children.
These dollars may be paid in lump sum or in periodic payments. There are numerous ways to structure this payout through properly structured living trusts or a life insurance trust. By working with her team of professional advisors, the client had the option to establish this structure during her lifetime. The bottom line is that the heirs will receive the life insurance benefits, generally federal income tax free.
Any BenefitAccess benefit payment would have reduced the death benefit dollar-for-dollar and the policy value proportionately leaving less available for beneficiaries
So let’s assume the client died at age 89, which is one year beyond her life expectancy of 88, after becoming chronically ill at age 85 and receiving 5 years of benefits under BenefitAccess. Under these assumptions, she would have received $1,035,236 in accelerated death benefit payments due to her chronic illness and she would still be able to pass on $145,423 as a remaining net death benefit, both of which would generally have been paid and received income tax free!
This is a great example of not only the leverage that is possible with the PruLife® Universal Protector, but also the enhanced flexibility and protection provided by the BenefitAccess Rider!
Assuming a qualifying chronic illness at age 85 and death at age 89:
Total BenefitAccess distributions taken = $1,035,236
Net Death Benefit to heirs = $145,423
*The IRS per diem limitation may be adjusted for inflation by the IRS. Prudential caps the maximum annual increase at 4%. For the purposes of this example, the per diem limitation is being inflated at a hypothetical annual rate of 4%. The Maximum Monthly Benefit at any given point in time may be less than what is illustrated above depending on actual IRS adjustments to the per diem limitation. This is a supplemental illustration and only valid if preceded or accompanied by a basic illustration. Please refer to the basic illustration for guaranteed and non-guaranteed values and other important policy information.
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18. Strategy (0% Increase in IRS Per Diem Limit)
Age
Annual Premium
Max Annual BenefitAccess Available*
Max Annual BenefitAccess Amount Taken
Net Death Benefit
BenefitAccess Lifetime Benefit Amount 72
250,000
115,200
1,180,659 73 74 80 - 85
1,065,459 86
950,259 87
835,059 88
719,859 89
604,659
Here we have an example at how the BenefitAccess Rider could work. We see that our client acquires the policy at age 72 and funds it with a $250,000 of premium per year for 3 years. Then, at age 85, she becomes chronically ill and eligible for benefits under the BenefitAccess Rider. First, please note that any required premiums are permanently waived once the insured qualifies for BenefitAccess payments, unless continuous qualified payments are not maintained for 25 months. Remember that clients will need to file a new claim each year in order to continue the benefits.
The client will be eligible to receive the lesser of 2% per month of the death benefit, or the maximum allowable under the per diem limits as established by the IRS, which we are assuming is increased by an increase in the IRS Per Diem Limit of 0% per year. Please note that the death benefit payable to the beneficiary is also being reduced, dollar for dollar, as the benefits are being paid to the client under the BenefitAccess rider.
Now, let’s review the sequence of events when the client has died while her life insurance is in force.
First, the life insurance bucket gets filled with the death benefit proceeds from the life insurance company.
In our example, based on the age of the client, the assumption that she qualified for Non-Smoker Plus ratings, and that the BenefitAccess benefits were not paid, the benefit would be $1,180,659.
In our example, we are directing the life insurance bucket to the children.
These dollars may be paid in lump sum or in periodic payments. There are numerous ways to structure this payout through properly structured living trusts or a life insurance trust. By working with her team of professional advisors, the client had the option to establish this structure during her lifetime. The bottom line is that the heirs will receive the life insurance benefits, generally federal income tax free.
Any BenefitAccess benefit payment would have reduced the death benefit dollar-for-dollar and the policy value proportionately leaving less available for beneficiaries
So let’s assume the client died at age 89, which is one year beyond her life expectancy of 88, after becoming chronically ill at age 85 and receiving 5 years of benefits under BenefitAccess. Under these assumptions, she would have received $576,000 in accelerated death benefit payments due to her chronic illness and she would still be able to pass on $604,659 as a remaining net death benefit, both of which would generally have been paid and received income tax free!
This is a great example of not only the leverage that is possible with the PruLife® Universal Protector, but also the enhanced flexibility and protection provided by the BenefitAccess Rider!
Assuming a qualifying chronic illness at age 85 and death at age 89:
Total BenefitAccess distributions taken = $576,000
Net Death Benefit to heirs = $604,659
*The IRS per diem limitation may be adjusted for inflation by the IRS. Prudential caps the maximum annual increase at 4%. For the purposes of this example, the per diem limitation is being inflated at a hypothetical annual rate of 0%. The Maximum Monthly Benefit at any given point in time may be less than what is illustrated above depending on actual IRS adjustments to the per diem limitation. This is a supplemental illustration and only valid if preceded or accompanied by a basic illustration. Please refer to the basic illustration for guaranteed and non-guaranteed values and other important policy information.
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19. Strategy
Internal Rate of Return on the $1,180,659 Death Benefit Only Scenario: $250,000 three pay with BenefitAccess
(No BenefitAccess Claims Paid)
When we are comparing different types of assets, we commonly think in terms of the potential for return. So you may be wondering at this point, could she have done better by simply reinvesting in other assets? As we discussed earlier, many clients may have dramatically scaled back their risk tolerance and repositioned to fixed investments due to the uncertainty and volatility experienced in the recent recession. So what would this type of client have to earn on average each year after tax in a fixed investment to end up with the same value provided by the death benefit? The answer to this question is known as the internal rate of return by each respective year assuming death occurred in that year.
She is a female, age 72 who qualifies for a Non-Smoker Plus underwriting rating. If we are able re-position the entire $750,000 in legacy assets over 3 years as $250,000 annual premium for a UL Protector policy with the BenefitAccess Rider, the resulting death benefit and BenefitAccess lifetime benefit is $1,802,659. It is important to note that every client presentation must include a fully compliant illustration that includes detailed information pertaining to the risks and features of the policy.
To demonstrate the power of life insurance from an IRR standpoint, notice the results assuming she died at her life expectancy where the death benefit IRR is 2.87%, guaranteed! But, because life insurance proceeds are generally paid income tax free, this is not the actual rate of return that would be necessary to achieve the same after tax result … (go to next slide immediately)
Life Expectancy
Longevity may result in a negative internal rate of return
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20. Strategy Internal Rate of Return on the Death Benefit Only
Scenario: $250,000 three pay with BenefitAccess
(No BenefitAccess Claims Paid)
If the client alternatively invested the premium amounts in fixed, taxable investment, the actual rate of return that would be required each year is in the graph assuming a conservative 25% tax rate because we would have to factor in the impact of income taxes. This is known as the tax-equivalent IRR which is the pre-tax average annual rate of return necessary to accumulate the same after-tax value provided by the death benefit assuming death occurred in the respective years shown.
It’s important to note that if the client lives beyond life expectancy the IRR gets smaller but still provides a very meaningful result and may not be that much off from today’s fixed interest rates. Additionally, notice the considerable enhancement to the IRR if the client dies prior to life expectancy. In other words, the opportunity cost of living beyond life expectancy is much less than the opportunity cost of dying prior to life expectancy AND the client could achieve these results without having to worry about volatility or losses due to market downturns and without having to deal with fluctuations and decreases in fixed interest rates.
Do you know any clients who may be interested in this type of potential?
Life Expectancy
* Tax-Equivalent IRR assumes a 25% income tax. Longevity may result in a negative internal rate of return
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21. Taking a Closer Look At Legacy Assets
Legacy Assets May Include:
Annuities*
Credit Shelter Trust
IRAs
CDs
Municipal Bond Portfolios*
Our “Complete The Dream” strategy can be applied to a variety of legacy assets. Here are some common examples of what could be legacy assets. This list is not all inclusive.
[Read slide.]
For your clients who have assets such as these that they do not need for retirement income purposes and have earmarked as wealth transfer assets, consider whether life insurance can help these clients “Complete The Dream.”
NOTE: different assets (such as those above) will have different tax characteristics and these should be discussed with the client’s tax advisor before engaging in this strategy. It is important to consider the client’s total financial portfolio when recommending estate planning strategies using life insurance.
*Note that only registered representatives with the appropriate FINRA registration may make any recommendation to replace variable annuities and municipal bonds
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22. Summary Threats Strategy Execution
Life insurance can be a great “hedging” strategy.
Strategy
Repositioning legacy assets with life insurance.
Execution
Who it’s for and how to approach them.
A properly structured life insurance strategy, when incorporated into a client’s Legacy Plan, can help counter losses in, or potentially help enhance, the value of the legacy assets. It may also substantially reduce the impact of:
Tax Erosion
Chronic Illness
Market Volatility
Let’s summarize what we discussed throughout this presentation.
First, we talked about the threats to the “Complete the Dream” strategy, as well as how life insurance can be a great “hedging” strategy to help counter losses or volatility experienced in the value of legacy assets potentially enhancing the wealth ultimately received by heirs. It may also substantially reduce the impact of market volatility, tax erosion, and chronic illness.
The second thing we discussed was “Completing the Dream” which simply involves repositioning values from a legacy asset or portfolio to purchase life insurance that could provide a guaranteed, generally income-tax free death benefit with the option of accelerating the death benefit in the event of chronic illness with the BenefitAccess Rider.
Lastly, we reviewed some simple factors on how to “Execute for Success” including the client profile and easy talking points.
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23. Next Steps Individual meeting Identify prospects
Clients Who May Benefit
Age 59 ½ + and family oriented.
Minimum net worth of $1,000,000 and sufficient liquid assets to support this strategy.
Have assets that they do not intend to use during their lifetime and are not needed for support in retirement.
Have sufficient retirement income from other sources to meet current and future income needs and expenses. Additionally, the client should have a financial plan completed as determined in conjunction with their financial advisor.
Desire to provide for and leave more to children, grandchildren or charity.
Want to reduce “legacy” assets exposure to market volatility.
Want to counter losses to their legacy assets.
Individual meeting
Identify prospects
Build and present case
The next steps are (Read slide).
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24. Execution Conversation Points
Are you ever going to spend all this money you have in your investment account?
What are you planning to do with it?
Will you be leaving it to your children and/or grandchildren?
If I could show you a way to leave them with potentially more, would you be interested?
Let me share an idea with you …
Here are some simple conversation points you can use to engage clients in a conversation to see if they are a good candidate for this concept and get them interested in hearing about it …
(Read slide.)
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25. Why “Complete The Dream”?
Meet client needs
Deepen client relationships
Grow your business
Sales support
So what’s in it for you? Why should you incorporate this strategy with the appropriate clients in your practice?
There are four simple benefits:
Meet the needs of your clients
Deepen client relationships
Grow your business
Sales support
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26. Important Considerations
The strategy is intended for fixed, universal life insurance products.
In addition to the asset or income they may be repositioning to implement the strategy, clients should have sufficient liquid assets to support their current and future income and expenses. Equity in the home should not be considered a liquid asset.
This concept is only intended to be used for assets that will not be needed for living expenses for the expected lifetime of the insured. It is the responsibility of the client to estimate these needs and expenses and it is recommended that they consider developing a comprehensive financial plan in conjunction with implementing the strategy being considered. The accuracy of determining future needs and expenses is more critical for clients at older ages who have less opportunity to replace assets used for the strategy.
If your client’s financial or legacy planning situation changes and they need to use the assets or income that are being earmarked for future life insurance premiums, they may be unable to continue to make premium payments, the life insurance policy may terminate and the results illustrated may not be achieved.
As with most financial strategies, there are a number of considerations that may require attention.
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27. Important Considerations (continued)
If the asset or income earmarked for future life insurance premiums becomes fully exhausted, premiums may have to be paid using other assets or income to keep the life insurance policy in force.
Depending on your client’s life span, it is possible that your client’s beneficiary may receive more by just inheriting the assets, rather than by receiving the death benefit of the life insurance policy that was purchased.
Clients may have to pay taxes, early withdrawal penalties, and/or other fees on assets liquidated to pay the life insurance policy premiums.
We recommend that your client consult their tax and legal advisor to discuss their specific situation before implementing the strategy discussed herein. 27 27

28. Important Information
The BenefitAccess Rider is available for an extra premium. Additional underwriting requirements and limits may also apply. Obtaining benefits under the terms of the rider will reduce and may eliminate the death benefit.
This rider is not long-term care (LTC) insurance and it is not intended to replace LTC.
Benefits paid under the BenefitAccess Rider are intended to be treated for federal tax purposes as accelerated life insurance death benefits under IRC §101(g)(1)(b). Tax laws related to the receipt of accelerated death benefits are complex and may be taxable in certain circumstances. Receipt of benefits may affect eligibility for public assistance programs such as Medicaid. Accelerated benefits paid under the terms of the Terminal Illness portion of the rider are subject to a $150 ($100 in Florida) processing fee. You should consult your tax and legal advisors prior to initiating any claim. A licensed heath care practitioner must certify the chronic or terminal illness to qualify for the benefits. Chronic illness claims will require recertification by a licensed health care practitioner. Other terms and conditions may apply.
The rider may not cover all of the costs associated with chronic illness. The rider is a life insurance accelerated death benefit product, is generally not subject to health insurance requirements, and may not be available in all states.
Life insurance policies contain fees and expenses, including cost of insurance, administrative fees, premium loads, surrender charges and other charges or fees that will impact policy values.
Please note the important information on this slide and the next.
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29. Important Information
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 we are not rendering legal, accounting or tax advice. Such services should be provided by the client’s own advisors. Accordingly, any information in this document cannot be used by any taxpayer for purposes of avoiding penalties under the Internal Revenue Code.
PruLife® Universal Protector is issued by Pruco Life Insurance Company in all states except New York, where, if available, it is issued by Pruco Life Insurance Company of New Jersey. The contract number is ULNLG Other insurance policies and annuities are issued by The Prudential Insurance Company of America and its affiliates. Securities are offered through Pruco Securities, LLC. All are Prudential Financial companies located in Newark, NJ. Each is solely responsible for its own financial condition and contractual obligations.
BenefitAccess is covered by U.S. Patent No. 7,958,035, which was issued on the insurance product management system for an accelerated benefit provided in response to a medical condition, where the benefit is paid to the policyowner without restriction on use of proceeds.
Death benefit proceeds are generally received federal income tax free as provided in Internal Revenue Code Section 101(a).
Prudential, the Prudential logo, and the Rock symbol are service marks of Prudential Financial, Inc. and its related entities.
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30. Important Information
The Living Needs Benefit℠ is an accelerated death benefit and is not a health, nursing home, or long-term care insurance benefit and is not designed to eliminate the need for insurance of these types. There is no charge for this rider but, when a claim is paid under this rider, the death benefit is reduced for early payment, and a $150 processing fee ($100 in Florida) is deducted. If more than one policy is used for the claim, each policy will have a processing fee of up to $150 deducted ($100 in Florida). Portions of the Living Needs Benefit payment may be taxable, and receiving an accelerated death benefit may affect eligibility for public assistance programs. The federal income tax treatment of payments made under this rider depends upon whether the insured is the recipient of the benefit and is considered "terminally ill" or "chronically ill." We suggest that clients seek assistance from a personal tax advisor regarding the implications of receiving Living Needs Benefit payments. This rider is not available in Minnesota to new purchasers over age 65 until the policy has been in force for one year, and the nursing home option is not available in Connecticut, Florida, Massachusetts, New York or the District of Columbia. This rider is not available in Washington state. In Oregon, term policies must include the waiver of premium benefit to be eligible for this rider.
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.
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