Protected Equity Plan

Transcription

1 F40

2 Protected Equity Plan This concept is suitable for insureds up through age 60 who desire to accumulate wealth through a principal protected and tax advantaged vehicle for the generation of future income. The Protected Equity Plan (PEP) uses an Indexed Universal Life Insurance Policy with the following unique features: Equity returns through choice of Equity Index Accounts with guaranteed annual floor of 1% Availability of fixed interest accounts Cash value grows on a tax deferred basis Tax free distributions (via loans) as long as the policy remains in force Investment can be protected from the claims of creditors* Residual death benefit to family can be transfer tax free* The Protected Equity Plan (PEP) is a principal protected and tax advantaged income generation vehicle with significant death benefits as well. * Requires the use of an irrevocable trust such as a Spousal Lifetime Access Trust; Asset Protection Trust; or an Irrevocable Insurance Trust.

3 Susan, Female Age 41 Preferred, Non-Smoker California Resident Protected Equity Plan Values No Distributions Year Cash Surrender Values Cash Surrender Values Death Benefit (EOY) Contributions Guaranteed (6.3%) Non-Guaranteed (6.3%) No Loans/Withdrawals No Loans/Withdrawals No Loans/Withdrawals Age 0 Values With Distributions Year Lifetime Tax Free Cash Surrender Values Death Benefit (EOY) (Annual) Cumulative (6.3%) Non-Guaranteed (6.3%) Distributions Distributions Net Loans Age 0 2,6 828,982 1,,309 1,381,636 1,67,964 1,934,291 2,2,618 2,486,946 2,763,272 1,226,86 2,43,730 3,680,9 4,907,460 6,134,32 7,361,190 8,88,0 9,814,920 11,041,78 12,268,60 2,6 828,982 1,,309 1,381,636 1,67,964 1,934,291 2,2,618 2,486,946 2,93,604 3,133,48 3,963,063,301,362 7,0,162 9,37,18 12,872,864 17,49,124 23,612,37 31,737,493 40,278,377 4,796,908 2,6 828,982 1,,309 1,381,636 1,67,964 1,934,291 2,2,618 2,486,946 2,93,604 2,888,113 2,640,476 2,308,88 1,988,27 1,739,303 1,669,196 1,88,632 2,262,161 3,376,786,361,861 8,268,469 11,739,3 12,118,890 12,21,37 12,93,604 13,133,48 18,332,080 24,793,164 33,324,368 40,681,161 4,796,908 11,739,3 12,118,890 12,21,37 12,93,604 13,133,48 12,888,113,412,734 8,720,070 6,9,73 3,802,81 2,3,690 2,749, 3,608,302 4,99,9,361,861 8,268,469 *Lifetime distributions total $12,268,60 ($ year 11 through year 60), distributions are tax free (via loans against the cash value) **Death benefits are reduced to lower mortality costs in order to maximize lifetime distributions Projected tax free life time distributions total $12,268,60 ($ per year from year 11 through age 0)

4 Comparison of Indexed UL (6.3% with 1% Guaranteed Return) & Investment Account (pre-tax.0%) Assumptions: Susan, Female Age 41 Preferred, Non-Smoker Annual Deposit of $ for years Indexed Universal Life Policy with a projected return of 6.3% Investment Account (pre-tax.0%) Indexed UL 6.3% Projected Return (1% Guaranteed) Advantages Disadvantages *Guaranteed Surrender Cash value guarantee Mortality Value Year 1 years costs Guaranteed Surrender Downside Protection Upside is Value Year 1-2,763,273 capped at 12% ***Annual Tax Free Income Starting 11th Yr. Tax Deferred Growth Loan fees Cumulative Tax Free Tax free distributions Income through age 0 12,268,60 via loan Initial Death Benefit Death benefit for family Death Benefit at Life Expectancy (Age 87) 26,319,468 Death Benefit at Age 0 4,796,908 Investment Account (pre-tax.0%) Advantages Disadvantages Projected Value Year 1 293,82 No Limitation No protection on upside on downside Projected Value Year 3,93,97 Income subject to income taxation ****Annual After Tax Income Starting 11th Year Cumulative After Tax No insurance Income 12,023,277 benefit for To Age 99 family Initial Death Benefit 0 Account Value at Life 2,378,49 Expectancy (age 87) Account Value at Age 0 0 *Withdrawals and policy reductions are not allowed during the guaranteed period. Loans are permitted but are against the natural account value. The full guaranteed amount can be accessed only through cash surrender. **Current cap is 12% with 0% participation rate; the carrier can adjust caps on an annual basis. *** Loans taken against the indexed account are at a fixed rate of.3% until age 0 and then 3% thereafter. The indexed crediting rate is paid on the money even though it is borrowed. A crediting rate of 6.3% would result in a positive spread of 1.3% whereas a crediting rate of 4% would result in a negative loan spread of 1%.*** The tax rate 39.6 (federal & state) is assumed on the Investment Account.

5 Transaction Diagram Client Cumulative Contributions $/Year for Indexed Universal Life Policy on Susan, Female Age 41 Initial Benefit $ Cumulative Lifetime Distributions Client (Children can also be income beneficiaries) $12,268,60 Lifetime Distributions (tax free) ($ from 11th Year to age 0) Remainder Death Benefit for Beneficiaries Initial $ Life Expectancy (Age 87) $3,841,383 (Age 0) $8,268,469 Table of Benefits to Family (Indexed Universal 6.3% And Investment (pre-tax.0%) Year 20 2 Account Value With Distributions 1,667,819 3,93,974 3,871,73 3,784,4 3,66,641 Death Benefit PEP With Distributions 12,93,604,412,734 8,720,070 6,9,73 (Age 87 Life Expectancy) 9 0 2,378,49 1,27,00 0 3,841,383,217,42 8,268,469 *The death benefit is reduced in the 12th year to enhance tax free cash distributions; the client has control of deciding the balance between the amount of the death benefit reduction and the cash distributions.

6 Protected Equity: Down Side Protection Index UL Best Case Scenario % % % % % Average: 8.41% Index UL Worse Case Scenario 1.00% % % % % Diablo Road, Suite 0 Danville, CA 9426 Patricia Tanner (92) (92) (fax) patricia@fortune-strategies.com Phone: info@fortune-strategies.com