1. Leveraged Gifting Help clients leave more to heirs with gifting and life insurance 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] [ Insurance License Number ] Phone [123-123-1234] Fax [123-123-1245] [joe.sample@prudential.com ] Not for Consumer Use. 0262963-00003-00 Ed. 03/2015 Exp. 09/20/2016

2. Topics We Will Discuss Transfer Tax System To Gift or Not to Gift To Insure or Not to Insure 2Not for Consumer Use.

3. Client Profile Single or married ages 55+ Children or grandchildren Desire to minimize taxes Want to leave more to heirs 3Not for Consumer Use.

4. Transfer Tax System “GST Tax” stands for Generation Skipping Transfer Tax Gift Tax GST Tax Estate Tax 4Not for Consumer Use.

5. Transfer Tax System/Gift Tax & Estate Tax During life Upon death Transfers may be subject to Gift Tax Transfers may be subject to Estate Tax There may be federal and/or state gift tax consequences with the funding of an Irrevocable Trust and the gifts necessary to pay the premiums may reduce the size of the estate and/or the amount of lifetime gift tax exemption and/or estate tax exemption amount. 5Not for Consumer Use.

6. Transfer Tax System/GST Tax Transfers, including trust distributions, may also be subject to Generation Skipping Transfer (GST) Tax Levied in addition to any applicable gift or estate tax Designed to disallow “skipping” estate taxation at next generation level Tax rate equal to top estate tax rate at time of transfer Persons two or more generations younger Next generation During life or upon death First generation 6Not for Consumer Use.

7. Annual Exclusion Gifts Single client: $14,000/recipient/year Married client: $28,000/recipient/year* Gift by each spouse:$14,000 Total gift to recipient 1:$28,000 Gift by each spouse: $14,000 Total gift to recipient 2:$28,000 Total gifts to all:$56,000 Total gift tax paid:$0 The 2015 annual gift tax exclusion is $14,000, indexed for inflation, non-cumulative, and must be of a present interest. GST Annual Exclusion rules differ from the basic annual exclusion gifts where the gift must also be for the sole benefit of the recipient and taxed in his or her estate at death. *A $28,000 gift by one spouse to one person can be “split” with the non-grantor spouse (requires filing of a gift tax return). This is a hypothetical example and used for illustrative purposes only to describe how the strategies may work. Which strategy works best for clients will depend on their individual facts and circumstances. Actual results may vary. 7Not for Consumer Use. 1 2

8. Aggregate Exemption Amounts Lifetime Gift Tax Exemption Total amount transferrable to all recipients without gift tax, $5,430,000* In addition to annual exclusion gifts Reduces federal estate tax exemption if used Estate Tax Exemption Total amount transferrable to all recipients without estate tax, $5,430,000* Generation Skipping Transfer Tax Exemption Total amount transferrable to all skip persons without GST Tax, $5,430,000* Can only be allocated to a gift or bequest Unified with above exemptions 8Not for Consumer Use. *Amount for 2015, indexed annually for inflation

9. To Gift or Not To Gift Gifting strategies can help clients Reduce future estate tax exposure Leave more to family, less to government Keep estate assets in tact Preserve a family business Enjoy seeing the recipient benefit during the client’s life 9

10. To Gift or Not To Gift 1 Annual gifts assume 6 total annual exclusions. Lump sum gift assumes each spouse makes a $5,000,000 lifetime gift utilizing part of their $5,430,000 lifetime gift exemption for 2015. 2 Assumes the $84,000 annual gifts would have been accumulated inside the grantors’ estates at a 5% net rate of return then subject to a 40% flat estate tax rate. 2 Assumes the appreciation on the $10,000,000 gift at a 5% net rate of return would have been taxable inside the grantors’ estates at a flat estate tax rate of 40%. Hypothetical Gifts by a Married Couple $84,000/year Annual Exclusion Gifts 1 $10,000,000 Lifetime Exemption Gift 1 Hypothetical Estate Tax Savings by Year 20 2 $1,166,567$6,613,191 This is a hypothetical example and used for illustrative purposes only to describe how the strategies may work. Which strategy works best for clients will depend on their individual facts and circumstances. Actual results may vary. 10Not for Consumer Use.

11. Life Insurance As An Asset Class Predictability Leverage Liquidity 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. Guarantees and benefits are based on the claims-paying ability of the issuing insurance company. Broker/dealers, insurance agencies and their affiliates who sell the policy make no representations or guarantees regarding such ability. The policy owner must meet all premium requirements. 11Not for Consumer Use.

12. Predictability Predetermined amount of cash upon death 1 Timing of death is not correlated to the financial markets Can help counter volatility in other estate and/or trust assets at death 1 Assumes premiums are paid, no loans or withdrawals are taken and no benefits have been accelerated. 12Not for Consumer Use.

13. Leverage 1 Annual gifts assume 6 total annual exclusions. Lump sum gift assumes each spouse uses $5,000,000 of their $5,430,000 lifetime exemption for 2015. 2 Assumes the $84,000 annual gifts would have been accumulated inside the grantors’ estates at a 5% net rate of return then subject to a 40% flat estate tax rate. Life Insurance assumptions: Male/Female, both age 62, non smoker plus, PruLife® SUL Protector, guaranteed to age 121. The internal rate of return (IRR) is the after-tax rate of return that would be needed each and every year to accumulate an amount equal to the death benefit by the respective year/age assuming the premiums were alternatively invested. This is a hypothetical example and used for illustrative purposes only to describe how the strategies may work. Which strategy works best for clients will depend on their individual facts and circumstances. Actual results may vary. Hypothetical Gifts by a Married Couple $84,000/year Annual Exclusion Gifts 1 Hypothetical Estate Tax Savings by Year 20 2 $1,166,567 Life Insurance Premium $84,000/year Level pay Death Benefit $6,495,129 Death Benefit IRR at Joint Life Expectancy (age 91) 5.56% 13Not for Consumer Use.

14. Estate Liquidity/ILIT Death Benefit Proceeds 1 Cash to Buy Assets or Loan 2 Assets or Loan Payments 3 If trust assets are used to satisfy any obligation or liability of the deceased’s estate, such as direct payment of estate taxes, then the value of the trust could itself be subject to estate taxes as part of the deceased’s estate. The trustee may be given the option to purchase assets from or make loans to the estate which does not cause such inclusion and can help provide the necessary liquidity the estate needs to pay estate taxes. Estate Tax Payment Irrevocable Trust Life Insurance Policy Government Deceased’s Estate 14Not for Consumer Use.

15. To Insure or Not To Insure Life Insurance assumptions: Male/Female, both age 62, non smoker plus, PruLife® SUL Protector, guaranteed to age 121. This couple’s joint life expectancy is age 91. *Assumes a $10,000,000 up front gift to an irrevocable trust and a 5% net ROR on trust investments. Note too that as a result of this gift, our hypothetical couple would have used up most of their lifetime exemption amount. This is a hypothetical example and used for illustrative purposes only to describe how the strategies may work. Which strategy works best for clients will depend on their individual facts and circumstances. Actual results may vary. ASSET INCOME* $10,000,000 Gift + Invest + Insure Age of Both Insured's Annual Level Premium Death Benefit Other Trust Assets Net Proceeds to Heirs 63500,000 38,711,8519,975,00048,686,851 71500,000 38,711,8519,724,33648,436,187 81500,000 38,711,8519,236,52547,948,376 91500,000 38,711,8518,441,93247,153,783 96500,000 38,711,8517,873,32646,585,177 15Not for Consumer Use.

16. To Insure or Not To Insure Assumes a $10,000,000 upfront gift to an irrevocable trust and a 5% net ROR on trust investments. This is a hypothetical example and used for illustrative purposes only to describe how the strategies may work. Which strategy works best for clients will depend on their individual facts and circumstances. Actual results may vary. Lump Sum Gift + Invest Lump Sum Gift +Invest + Insure Joint Age Joint Life Expectancy Net Proceeds to Heirs 16Not for Consumer Use.

17. To Insure or Not To Insure Internal Rate of Return (IRR) on Net Proceeds to Heirs Assumes a $10,000,000 upfront gift to an irrevocable trust and a 5% net ROR on trust investments. The IRR on Net Proceeds to Heirs represents the level annual after-tax rate of return at which the initial lump sum gift amount must be accumulated annually to generate the net proceeds to heirs at death by the corresponding years shown. This is a hypothetical example and used for illustrative purposes only to describe how the strategies may work. Which strategy works best for clients will depend on their individual facts and circumstances. Actual results may vary. Joint Life Expectancy 17Not for Consumer Use.

18. Beyond Trusts and Life Insurance Medical expenses* Tuition expenses* 529 Plans (5 years up front) UGMA or UTMA accounts *Individuals can pay these expenses on behalf of another without incurring gift tax but payment must be made directly to the health care provider or education institution. In the case of health care institutions, individuals can pay for the following expenses on behalf of another without incurring gift tax: 1)Diagnosis, care, mitigation, treatment and prevention of disease, 2)Transportation and lodging related to medical care, 3)Qualified long term care services, 4)Some health insurance premiums. 18Not for Consumer Use.

19. President Obama’s 2016 Budget Proposals A Law is Only Permanent Until Congress Decides to Change It ! Estate and GST Exemptions $3.5M, Lifetime Gifts $1M, no indexing, Top Rate 45% Gifts or Bequests of Appreciated Property is a Capital Gains realization event Decouple Annual Gift Tax Exclusions from Crummey powers by creating new category of gifts to trusts of $50k per donor per year Grantor Retained Annuity Trusts (GRAT) 90 year perpetual trust limit Sale to Intentionally Defective Grantor Trust Eliminate non-spouse stretch IRA’s, must be distributed within 5 yrs Limit on total of tax-deferred retirement accounts to provide maximum annuity permitted under DB plan(currently $3.4M at age 62) Required Minimum Distributions for Roth IRA’s at 70 ½ 19

20. President Obama’s 2016 Budget Proposals Key Points – Tax Payer Friendly Proposals Permit non-spouse beneficiary to roll over to a inherited IRA within 60 days vs. direct trustee to trustee transfer No RMD’s from IRA’s and retirement accounts if aggregate value does not exceed $100k 20Not for Consumer Use.

21. Benefits of Using a Gifting Strategy For Clients Leave more to family, less to government More control over wealth Approval of family members For Advisors Deepen client relationships Client retention Preserve or enhance AUM Grow overall business 21Not for Consumer Use.

22. Summary Transfer Tax System To Gift or Not to Gift To Insure or Not to Insure 22Not for Consumer Use.

23. Important Considerations 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. 23Not for Consumer Use.

24. 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. Your client should consider developing a comprehensive financial plan to take into account current and future income & expenses in conjunction with implementing a strategy discussed herein. 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. 24Not for Consumer Use.

25. Other Considerations Ability to purchase life insurance is based on medical and financial underwriting. Policy owner won’t receive the value of the gift used for life insurance, until the insured’s death. Some life insurance policies require enough policy value to maintain charges; therefore, clients may need to pay additional premiums in later years if the policy does not perform as originally illustrated. For GST trust strategies, clients should consider the Rule Against Perpetuities which is a complex rule designed to prevent trusts from lasting forever.* *Generally, this rule allows trusts to last until 21 years after the death of the youngest beneficiary alive at trust creation. Many states have abolished or significantly modified the rule allowing trusts to last for much longer or indefinitely without limit. 25Not for Consumer Use.

26. Thank You! Questions? 26Not for Consumer Use.

27. Important Information This material has been prepared by The Prudential Insurance Company of America to assist financial professionals. PruLife SUL Protector is issued by Pruco Life Insurance Company, except in New York where, it is issued by Pruco Life Insurance Company of New Jersey. Both are Prudential Financial companies located in Newark, NJ. Prudential, the Prudential logo, and the Rock symbol are service marks of Prudential Financial, Inc. and its related entities. 27Not for Consumer Use.

28. Client Identification 28Not for Consumer Use.