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For Agent use only. This material may not be used with the public. Dynasty Trust MLINY02281318320 DOLU022813.

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Presentation on theme: "For Agent use only. This material may not be used with the public. Dynasty Trust MLINY02281318320 DOLU022813."— Presentation transcript:

1 For Agent use only. This material may not be used with the public. Dynasty Trust MLINY DOLU022813

2 For Agent use only. This material may not be used with the public. 2 of 15 Using Dynasty Trusts Flexible ILIT Planning

3 For Agent use only. This material may not be used with the public. 3 of 15 What is a Dynasty Trust? A special type of Irrevocable Life Insurance Trust If properly drafted, may help to –Provide distributions to many generations while avoiding the Generation-Skipping Transfer Tax (GST Tax) –Keep trust proceeds out of the estate –Keep trust proceeds out of the beneficiaries estates If your clients fund a Dynasty Trust with life insurance, the amounts available for their loved ones may be greatly increased - Trusts should be drafted by an attorney familiar with such matters in order to take into account income and estate tax laws (including the generation-skipping tax). Failure to do so could result in adverse tax treatment of trust proceeds.

4 For Agent use only. This material may not be used with the public. 4 of 15 How does it work? Each individual has a GSTT Exemption –Amount of money each person may give to grandchildren without paying GST Taxes –GST Exemption is $5,250,000 in 2013 Annual Exclusion Gifts* –$14,000 per recipient per year in 2013 –Free from gift taxes Note: Clients making annual exclusion gifts to a Dynasty Trust should generally allocate GSTT exemption to these gifts unless the gifts qualify under IRC Section 2642(c). When annual exclusion gifts are made to a Dynasty Trust, some estate planners suggest limiting these gifts to the greater of $5,000 or 5% of the trust estate per beneficiary. See IRC Section 2514(e).

5 For Agent use only. This material may not be used with the public. 5 of 15 How it works Client Dynasty Trust (ILIT) John Hancock Life Insurance Policy Annual Gifts (Apply GSTT Exemption) Death Benefit Premiums Distributions for health, education, maintenance & support Great- Grandchildren Grandchildren Children

6 For Agent use only. This material may not be used with the public. 6 of 15 Considerations Total premiums on the life insurance policy cannot exceed available GSTT exemption(s). Since trust assets can be held for multiple generations, it may take many years for all the trust proceeds to be distributed. Trust can stipulate when income distributions are to be made and to whom in what generation.

7 For Agent use only. This material may not be used with the public. 7 of 15 Case Study: John and Alison Smith

8 For Agent use only. This material may not be used with the public. 8 of 15 Case Study: The Facts John (age 65) and Alison (Age 65) are both Preferred Non-smokers, CT residents. Current estate of $10,000,000 growing after- tax at about 4% a year. They have two children and three grandchildren. Neither has used any of their GSTT Exemption. Would like to create a lasting legacy for their heirs.

9 For Agent use only. This material may not be used with the public. 9 of 15 Leveraging the Lifetime Exemption How much more does the $5.25M exemption provide over multiple generations? Make gift of $1M and $5.25M to a lifetime exemption trust and compare the leverage Assume: –Gift in trust is used to purchase SUL on married couple, both age 65 preferred non-smokers –Premiums are based on trust earning a net 4% on gift

10 For Agent use only. This material may not be used with the public. 10 of 15 Case Study – The Recommendation Compare approaches: –Gift $1M to trust growing at 4% after-tax $38,462 annual premium paid at beginning of year $ 3,448,262 death benefit –Gift $5.25M to trust growing at 4% after-tax $201,923 annual premium paid at beginning of year $18,177,888 death benefit This is a supplemental illustration. Not all benefits and values are guaranteed. The assumptions on which the non-guaranteed elements are based are subject to change by the insurer. Actual results may be more or less favorable.

11 For Agent use only. This material may not be used with the public. 11 of 15 Leveraging Lifetime Exemption $1M Exemption This is a supplemental illustration. Not all benefits and values are guaranteed. The assumptions on which the non-guaranteed elements are based are subject to change by the insurer. Actual results may be more or less favorable. Non-insurance data shown is taken from a hypothetical calculation which assumes a hypothetical rate of return and may not be used to project or predict actual results. The annual premiums of $38,462 based on a John Hancock SUL policy for $3,448,261 Death Benefit with a current crediting rate of 5.20% on a married couple, both age 65 Preferred Non Smokers, Connecticut residents.

12 For Agent use only. This material may not be used with the public. 12 of 15 Leveraging Lifetime Exemption $5.25M Exemption This is a supplemental illustration. Not all benefits and values are guaranteed. The assumptions on which the non-guaranteed elements are based are subject to change by the insurer. Actual results may be more or less favorable. Non-insurance data shown is taken from a hypothetical calculation which assumes a hypothetical rate of return and may not be used to project or predict actual results. The annual premiums of $192,308 based on a John Hancock SUL policy for $18,177,888 Death Benefit with a current crediting rate of 5.20% on a married couple, both age 65 Preferred Non Smokers, Connecticut residents.

13 For Agent use only. This material may not be used with the public. 13 of 15 Summary Dynasty Trusts can help: –Reduce estate taxes –Use your GSTT effectively When used with life insurance, the benefit of a Dynasty Trust can be multiplied and provide a lasting legacy for your heirs.

14 For Agent use only. This material may not be used with the public. 14 of 15 For more information, please contact your Regional Director or call Advanced Markets at (888) , option 3

15 For Agent use only. This material may not be used with the public. 15 of 15 Insurance products are issued by: John Hancock Life Insurance Company (U.S.A.), Boston, MA (not licensed in New York) and John Hancock Life Insurance Company of New York, Valhalla, NY This material does not constitute tax, legal or accounting advice and neither John Hancock nor any of its agents, employees or registered representatives are in the business of offering such advice. It was not intended or written for use and cannot be used by any taxpayer for the purpose of avoiding any IRS penalty. It was written to support the marketing of the transactions or topics it addresses. Anyone interested in these transactions or topics should seek advice based on his or her particular circumstances from independent professional advisors. Insurance policies and/or associated riders and features are not available in all states. Guaranteed product features are dependent upon minimum premium requirements and the claims-paying ability of the issuer. Trusts should be drafted by an attorney familiar with such matters in order to take into account income and estate tax laws (including the generation-skipping tax). Failure to do so could result in adverse tax treatment of trust proceeds. © 2013 John Hancock. All rights reserved. Disclosures


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