Minimize Taxes, Maximize Your Legacy Using Life Insurance Designed For Valued Client Presented By Premier Producer Symetra Life Insurance Company 777 108th Avenue NE, Suite 1200 Bellevue, WA 98004-5135 www.symetra.com Symetra is a registered service mark of Symetra Life Insurance Company. Not a bank or credit union deposit or obligation Not insured by any federal government agency Not FDIC or NCUA/NCUSIF insured Not guaranteed by any bank or credit union May lose value This Supplemental illustration applies to policy form ICC_LC5 available in most states and is not valid unless all pages are included. Please refer to the basic illustration for guaranteed elements and other important information. LIM-1090 1/13
Important Information About This Supplemental Illustration This analysis compares the federal income and estate tax impact on a non-qualified deferred annuity versus using all or a portion of your current non-qualified annuity's value for the purchase of life insurance. The purpose of this analysis is to offer you an alternative plan that may increase the percentage of your estate that passes to your beneficiaries. It is intended as an estate planning option for an existing deferred annuity and is not a recommendation to purchase an immediate annuity to fund the purchase of life insurance. This supplemental illustration is not intended as investment, accounting, legal or tax advice and Symetra Life Insurance Company does not give investment, accounting, legal or tax advice. This supplemental illustration does not attempt to provide more than general U.S. tax information associated with life insurance policies. This information is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code. This information is written to support the promotion or marketing of life insurance issued by Symetra Life Insurance Company. You should seek advice based on your particular circumstances from an independent tax advisor. Illustrated annuity growth rates are purely hypothetical and do not imply consistency with actual earnings rates and growth rates. The various estate planning alternatives illustrated are based on the assumptions and data provided by the client. The accuracy of this data will be enhanced by assumptions that reflect your situation. This analysis illustrates a hypothetical annuity payout to fund premiums on a life insurance policy. This is not an annuity payment based on a Symetra Life Insurance Company quote or based on a Symetra Life Insurance Company product. Your actual payment may be more or less than illustrated. Since most annuity payout choices are irrevocable, you should consult with your legal, tax, and accounting advisors before you annuitize. Withdrawals from annuity contracts are taxable events and, unless meeting an exception, withdrawals made prior to age 59½ are subject to an additional 10% penalty. This analysis does not illustrate the effect of a tax penalty. The estate tax calculations are based on the input of current net worth and the assumed estate growth rate; the calculation of the estate tax is based on federal estate tax law in effect on 1/1/2013. Annuity contract fees, including potential surrender charges, are not reflected in this illustration. Page 2 of 9
You've spent a lifetime building wealth. Not only has your hard work and well-reasoned financial decisions ensured a comfortable retirement for yourself, you now have the means to gift retirement assets you no longer expect to use to loved ones. Now that your financial goals have changed, it may be time to consider strategies that can help minimize taxes so that your legacy dollars pass to future generations. The Potential Tax Impact of Annuities Non-qualified annuities can be effective tools for saving money and generating income. Unfortunately, the same benefits that made an annuity a great choice for you - tax-deferred growth, guaranteed lifelong income and no required minimum distributions at age 70½ - can make it an inefficient tool for transferring wealth to your beneficiaries. An Example of Annuity Value Transferring to Beneficiaries in year 10 Assumptions Future Annuity Value: $740,121 Current Net Worth (Excluding Annuity): $5,000,000 Annuity Cost Basis: $200,000 Assumed Estate Growth Rate: 4.00% Assumed Annuity Growth Rate: 4.00% Assumed Income Tax Rate: 35.00% The Result Estate Tax Attributable to Annuity: 1 $105,140 Income Tax Attributable to Annuity: 2 $162,188 Total Taxes Due on Annuity: $267,327 Balance of Annuity Left to Beneficiaries: $472,794 Percent Lost to Taxes: 36% Estate Taxes 14% Income Taxes 22% Left to Beneficiaries 64% 1 This analysis assumes the full estate tax exemption is available upon death. In 2013, the estate tax exemption (indexed for inflation) is $5.25 million per person with a maximum tax rate of 40%. The estate tax is unified with federal gift tax and generation-skipping transfer such that in 2013 the lifetime gift tax exemption and generation-skipping transfer tax exemption (indexed for inflation) is $5.25 million per person and the maximum tax rate for both of these taxes will also be 40%. (Source: "Frequently Asked Questions on Gift Taxes, IRS, accessed January 2013: www.irs.gov/businesses/small/ article/0,id=108139,00.html). Forcurrent information and an assessment of your unique situation, please consult your tax professional. 2 Income taxes are reduced by Income in Respect of a Decedent (IRD) at the beneficiary's federal income tax rate and reflect the IRD deduction, IRC Sec.691(a). Page3of9
Maximizing the Value of Your Annuity Dollars After careful consideration, you ve concluded that you have sufficient retirement assets and do not anticipate relying on an annuity for future income needs. After discussing your plans to gift the annuity to your beneficiaries, your advisor explains that repositioning those annuity assets inside a life insurance trust may be an effective solution for maximizing the assets that transfer to your beneficiaries. Repositioning Annuity Assets Within an ILIT The annuity owner establishes an Irrevocable Life Insurance Trust (ILIT). The owner begins annual distributions from the annuity, netting after taxes. 3 Each year, the annuity owner gifts the annual distribution to the ILIT to fund the life insurance premiums. 4 At death, the life insurance proceeds will bypass probate and pass to beneficiaries free of federal estate and income taxes. The Result: Your taxable estate will be reduced minimizing potential taxes and maximizing your legacy. 3 Annuity income consists of principal and interest and a portion of each payment will be income taxable. The taxable portion of the annuity is determined by the applicable annuity exclusion percentage. Excess annuity payments above the exclusion percentage are considered ordinary income. Annuity carriers offer specific rules and should be contacted for more information regarding distributions. 4 The annual gift tax exclusion applies to gifts to each donee. The owner may gift up to $14,000 per year, per recipient in 2013. Source: "Frequently Asked Questions on Gift Taxes, IRS, under current federal tax law january 2013: www.irs.gov/businesses/small/article/0,,id=108139,00.html. Page 4 of 9
How could you benefit? Repositioning annuity assets inside a life insurance trust may help: Maximize your legacy. Although taking distributions from your annuity will trigger a taxable event, those dollars can potentially purchase a significant life insurance death benefit for your beneficiaries. Avoid double taxation. Life insurance proceeds bypass probate, swiftly transferring to your beneficiaries free of both federal estate and income taxes. Transfer assets out of your estate. Making tax-free gifts to an ILIT can help reduce the size of your taxable estate. Currently, individuals may gift up to $14,000 annually (per beneficiary) and married couples may combine their gifts to double the annual amount to $28,000 (per beneficiary). Plus, as long as you stay under the $14,000 limit, these annual gifts do not count against your $5.25 million lifetime cumulative gift-tax exemption or your $5.25 million estate-tax exemption. 4 Collect additional retirement income. Rather than letting annuity assets sit unused, this strategy may allow you to enjoy the difference between your annuity s distributions and the life insurance premiums. The following assumptions are used in this analysis to demonstrate how distributions or annuity payments from your deferred annuity could work to provide the payments for the proposed Symetra Life insurance company life insurance policy described in the accompanying illustration: 5 Plan Assumptions Current Annuity Value: $500,000 Annuity Cost Basis: $200,000 Hypothetical Annuity Growth Rate: 6 4.00% Annuitization (Life Only - gross annual income): $35,489 Assumed Federal Income Tax Rate: 35.00% 4 Please refer to footnote 4 on page 4 for source information. 5 Annuity contract fees, including potential surrender charges, are not reflected in this illustration. 6 Illustrated annuity growth rates are purely hypothetical. Page 5 of 9
Analysis of Current Annuity Upon Death Based on current assumptions. Not guaranteed. It is assumed that your annuity has no distributions and a hypothetical growth rate of 4%. Tax calculations assume death occurs at the end of the indicated year. The supplemental illustration assumes that the death benefit equals the contract value of the annuity. Annual Income Estate Beginning Earnings @ Ending Taxes Taxes Net to Year Balance 4.00% Balance Due* Due Beneficiaries 1 $500,000 $20,000 $520,000 $108,319 $17,091 $394,590 2 $520,000 $20,800 $540,800 $113,675 $25,411 $401,714 3 $540,800 $21,632 $562,432 $119,168 $34,064 $409,200 4 $562,432 $22,497 $584,929 $124,807 $43,063 $417,060 5 $584,929 $23,397 $608,326 $130,599 $52,421 $425,306 6 $608,326 $24,333 $632,659 $136,554 $62,155 $433,951 7 $632,659 $25,306 $657,965 $142,680 $72,277 $443,008 8 $657,965 $26,319 $684,284 $148,988 $82,805 $452,491 9 $684,284 $27,371 $711,655 $155,487 $93,753 $462,414 10 $711,655 $28,466 $740,121 $162,188 $105,140 $472,794 11 $740,121 $29,605 $769,726 $169,099 $116,982 $483,645 12 $769,726 $30,789 $800,515 $176,232 $129,297 $494,985 13 $800,515 $32,021 $832,536 $183,599 $142,105 $506,832 14 $832,536 $33,301 $865,837 $191,210 $155,426 $519,202 15 $865,837 $34,633 $900,470 $199,076 $169,279 $532,115 16 $900,470 $36,019 $936,489 $207,211 $183,687 $545,591 17 $936,489 $37,460 $973,949 $215,626 $198,671 $559,652 18 $973,949 $38,958 $1,012,907 $224,335 $214,254 $574,318 19 $1,012,907 $40,516 $1,053,423 $233,351 $230,460 $589,612 20 $1,053,423 $42,137 $1,095,560 $242,688 $247,315 $605,557 21 $1,095,560 $43,822 $1,139,382 $252,359 $264,844 $622,179 22 $1,139,382 $45,575 $1,184,957 $262,381 $283,074 $639,502 23 $1,184,957 $47,398 $1,232,355 $272,769 $302,033 $657,553 24 $1,232,355 $49,294 $1,281,649 $283,537 $321,751 $676,361 25 $1,281,649 $51,266 $1,332,915 $294,704 $342,257 $695,953 26 $1,332,915 $53,317 $1,386,232 $306,287 $363,584 $716,361 27 $1,386,232 $55,449 $1,441,681 $318,302 $385,764 $737,616 28 $1,441,681 $57,667 $1,499,348 $330,768 $408,831 $759,749 29 $1,499,348 $59,974 $1,559,322 $343,706 $432,820 $782,796 30 $1,559,322 $62,373 $1,621,695 $357,133 $457,769 $806,792 The purpose of this supplemental illustration is to show how the performance of the underlying deferred annuity could effect its value and death benefit. This supplemental illustration is hypothetical and is not intended to serve as a projection. Annuity contract fees, including potential surrender charges, are not reflected in this supplemental illustration. *Income taxes reflect deduction for the Income in Respect of a Decedent (the "IRD" deduction). Page 6 of 9
Repositioning Annuity Assets Within an ILIT Based on current assumptions. Not guaranteed. Tax Amount Gross on Net Gifted to Net Insurance Total Annuity Annuity Annuity ILIT Spendable Death to Year Payout Payout Payout (Insurance Outlay) Income Benefit Beneficiaries 1 $35,489 $8,046 $27,443 $23,068 $4,375 $1,053,750 $1,053,750 2 $35,489 $8,046 $27,443 $23,068 $4,375 $1,053,750 $1,053,750 3 $35,489 $8,046 $27,443 $23,068 $4,375 $1,053,750 $1,053,750 4 $35,489 $8,046 $27,443 $23,068 $4,375 $1,053,750 $1,053,750 5 $35,489 $8,046 $27,443 $23,068 $4,375 $1,053,750 $1,053,750 6 $35,489 $8,046 $27,443 $23,068 $4,375 $1,053,750 $1,053,750 7 $35,489 $8,046 $27,443 $23,068 $4,375 $1,053,750 $1,053,750 8 $35,489 $8,046 $27,443 $23,068 $4,375 $1,053,750 $1,053,750 9 $35,489 $8,046 $27,443 $23,068 $4,375 $1,053,750 $1,053,750 10 $35,489 $8,046 $27,443 $23,068 $4,375 $1,053,750 $1,053,750 11 $35,489 $8,046 $27,443 $23,068 $4,375 $1,053,750 $1,053,750 12 $35,489 $8,046 $27,443 $23,068 $4,375 $1,053,750 $1,053,750 13 $35,489 $8,046 $27,443 $23,068 $4,375 $1,053,750 $1,053,750 14 $35,489 $8,046 $27,443 $23,068 $4,375 $1,053,750 $1,053,750 15 $35,489 $8,046 $27,443 $23,068 $4,375 $1,053,750 $1,053,750 16 $35,489 $8,046 $27,443 $23,068 $4,375 $1,053,750 $1,053,750 17 $35,489 $12,421 $23,068 $23,068 $0 $1,053,750 $1,053,750 18 $35,489 $12,421 $23,068 $23,068 $0 $1,053,750 $1,053,750 19 $35,489 $12,421 $23,068 $23,068 $0 $1,053,750 $1,053,750 20 $35,489 $12,421 $23,068 $23,068 $0 $1,053,750 $1,053,750 21 $35,489 $12,421 $23,068 $23,068 $0 $1,053,750 $1,053,750 22 $35,489 $12,421 $23,068 $23,068 $0 $1,053,750 $1,053,750 23 $35,489 $12,421 $23,068 $23,068 $0 $1,053,750 $1,053,750 24 $35,489 $12,421 $23,068 $23,068 $0 $1,053,750 $1,053,750 25 $35,489 $12,421 $23,068 $23,068 $0 $1,053,750 $1,053,750 26 $35,489 $12,421 $23,068 $23,068 $0 $1,053,750 $1,053,750 27 $35,489 $12,421 $23,068 $23,068 $0 $1,053,750 $1,053,750 28 $35,489 $12,421 $23,068 $23,068 $0 $1,053,750 $1,053,750 29 $35,489 $12,421 $23,068 $23,068 $0 $1,053,750 $1,053,750 30 $35,489 $12,421 $23,068 $23,068 $0 $1,053,750 $1,053,750 The purpose of this supplemental illustration is to show how the systematic use of proceeds from an annuity, net of income taxes, can be used to purchase life insurance. In addition, it shows the amount left to heirs including the life insurance death benefit and any remaining proceeds from the annuity reduced by estate and income taxes. This supplemental illustration is hypothetical and is not intended to serve as a projection. Annuity contract fees, including potential surrender charges, are not reflected in this supplemental illustration. Page 7 of 9
Comparison of After Tax Proceeds Left to Beneficiaries Based on current assumptions. Not guaranteed. Repositioning Current Annuity Annuity New Proceeds to Proceeds to Approach Year Beneficiaries Beneficiaries Advantage 1 $1,053,750 $394,590 $659,160 2 $1,053,750 $401,714 $652,036 3 $1,053,750 $409,200 $644,550 4 $1,053,750 $417,060 $636,690 5 $1,053,750 $425,306 $628,444 6 $1,053,750 $433,951 $619,799 7 $1,053,750 $443,008 $610,742 8 $1,053,750 $452,491 $601,259 9 $1,053,750 $462,414 $591,336 10 $1,053,750 $472,794 $580,956 11 $1,053,750 $483,645 $570,105 12 $1,053,750 $494,985 $558,765 13 $1,053,750 $506,832 $546,918 14 $1,053,750 $519,202 $534,548 15 $1,053,750 $532,115 $521,635 16 $1,053,750 $545,591 $508,159 17 $1,053,750 $559,652 $494,098 18 $1,053,750 $574,318 $479,432 19 $1,053,750 $589,612 $464,138 20 $1,053,750 $605,557 $448,193 21 $1,053,750 $622,179 $431,571 22 $1,053,750 $639,502 $414,248 23 $1,053,750 $657,553 $396,197 24 $1,053,750 $676,361 $377,389 25 $1,053,750 $695,953 $357,797 26 $1,053,750 $716,361 $337,389 27 $1,053,750 $737,616 $316,134 28 $1,053,750 $759,749 $294,001 29 $1,053,750 $782,796 $270,954 30 $1,053,750 $806,792 $246,958 This analysis compares the potential federal estate and income tax impact on a non-qualified deferred annuity versus using all or a portion of your current annuity's contract value for the purchase of life insurance. Please refer to the basic refer to the basic illustrations for more information regarding the specifics of the illustration, including guaranteed elements. Non-guaranteed elements are not guaranteed and actual results may be more or less favorable. Page 8 of 9
Comparison of After Tax Proceeds Left to Beneficiaries Based on current assumptions. Not guaranteed. 0 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 5 10 15 20 25 30 Year of Death Current Annuity Repositioning Annuity This analysis compares the potential federal estate and income tax impact on a non-qualified deferred annuity versus using all or a portion of your current annuity's contract value for the purchase of life insurance. Please refer to the basic illustrations for more information regarding the specifics of the illustration, including guaranteed elements. Non-guaranteed elements are not guaranteed and actual results may be more or less favorable. Page 9 of 9