A New Approach to Old Challenges

This material was not intended or written to be used, and cannot be used, to avoid penalties imposed under the Internal Revenue Code. This material was written to support the promotion or marketing of the products, services, and/or concepts addressed in this material. Anyone to whom this material is promoted, marketed, or recommended should consult with and rely solely on their own independent advisors regarding their particular situation and the concepts presented here. For producer use only. Not for presentation to the public.

New Approach… Old Challenge The good news… Large bonus or commission check Sale of real estate Sale of business The bad news… These all come with a large tax liability Qualified plans may not always be an answer Plan contribution limits Level annual funding requirements For producer use only. Not for presentation to the public.

New Approach… Old Challenge Enhanced Charitable Trust creates a way to: Leverage charitable gifts through purchase of life insurance policy Provide current charitable income tax deduction Make meaningful contribution to charity Transfer significant wealth to loved ones For producer use only. Not for presentation to the public.

New Approach to Charitable Giving Enhanced Charitable Trust Charitable Lead Annuity Trust (CLAT) Small annual lead payout to charity Large final payout to charity and trust beneficiary at death of insured For producer use only. Not for presentation to the public.

How Does It Work? Individual has large non-recurring taxable item and makes gift to CLAT Donor receives charitable deduction to help offset income taxes due CLAT receives cash and purchases life insurance For producer use only. Not for presentation to the public.

How Does It Work? (Cont.) Upon death of insured: Portion of death benefit paid to charitable trust beneficiary Remainder of death benefit paid to non-charitable trust beneficiary (subject to gift tax) Gift tax based on original gift amount less charitable income tax deduction If grantor dies before the trust term ends there are issues of the recapture of the charitable income tax deduction and inclusion of estate taxes For producer use only. Not for presentation to the public.

How Does It Work? (Cont.) CLAT also purchases fixed income vehicle to provide annual income to charity Grantor trust: Grantor subject to income tax on its earnings paid to charity Muni-bonds viable option for lead payment to charity Small annual lead payment to charity Approximately 10-15% of donated assets goes towards purchase of income producing product Majority of charitable contribution stems from life insurance proceeds For producer use only. Not for presentation to the public.

Enhanced Charitable Trust Illustrated 1. Taxable Asset 2. Cash gifted to CLAT… Donor receives charitable income tax deduction 3. CLAT purchases muni bonds to provide annual income to charity 4. CLAT purchases life insurance policy 5. Upon insured’s death life insurance proceeds paid out to charity and non-charitable trust beneficiary who also receives remainder of trust assets For producer use only. Not for presentation to the public.

Flexible Design Ability to customize a strategy tailored to meet client’s specific goals/needs Amount passed on to charity Amount passed on to loved ones (subject to gift tax) Amount of income tax deduction desired No guesswork, remainder is guaranteed through life insurance Charity/ Deduction Loved Ones Charity/ Deduction Loved Ones For producer use only. Not for presentation to the public.

Client Profile High net–worth client Expects to receive large amount of taxable income Bonus or commission check Sale of real estate Sale of business Needs options on what to do with non-recurring taxable income High net–worth retirees Large IRA, Qualified Plan, annuity balance Age 60 or older For producer use only. Not for presentation to the public.

Hypothetical Example Male business owner, age 60: Considering selling business valued at $1,000,000 Goals: Maximize wealth transfer to loved ones Minimize impact of taxes due to sale of business Provide benefit to charity Current and future tax implications: 45% estate and gift tax rate 4.4% Section 7520 rate For producer use only. Not for presentation to the public.

Hypothetical Example (Cont.) Step 1 $1,000,000 sale of business Step 2 $1,000,000 gifted to CLAT* $482,950 current charitable income tax deduction Step 3 CLAT purchases $100,000 in muni bonds, earning 4%, generating $4,000 annual income to charity Step 4 $3,801,000 TransACE® life insurance policy purchased by trust with single premium of $900,000 Step 5 Upon grantor’s death, charity receives $1,000,000 from trust. Non-charitable trust beneficiary receives $2,801,000 from trust death benefit plus remaining trust assets* *$517,050 subject to gift tax For producer use only. Not for presentation to the public.

Summary Benefits to the grantor: Current income tax deduction Leverage assets to pass on wealth to loved ones through purchase of life insurance Gifted assets removed from estate Benefit a charity that he/she believes in Benefits to the charity: Annual income Large lump-sum gift at death of insured For producer use only. Not for presentation to the public.

Market Opportunities Business professionals Attorneys Stockbrokers Executives Business owners Real estate investors High net–worth retirees Large IRA, annuity or Qualified Plan balances Have sufficient assets for retirement income For producer use only. Not for presentation to the public.

Enhanced Charitable Trust TransACE® is a nonparticipating, flexible-premium universal life insurance policy issued by Transamerica Life Insurance Company, Cedar Rapids, IA 52499. Policy Form #1-12611107 (CVAT), Group Certificate #2-72336107 (CVAT) for certificates issued under a group policy issued to the Rhode Island National Consumer Protection Trust. Policy form and number may vary, and this policy may not be available in all jurisdictions. Transamerica Life Insurance Company, Transamerica Financial Life Insurance Company (collectively “Transamerica”), and their representatives do not give tax or legal advice. This presentation is provided for informational purposes only and should not be construed as tax or legal advice. Clients and other interested parties must be urged to consult with and rely solely upon their own independent advisors regarding their particular situation and the concepts presented here. Discussions of the various planning strategies and issues are based on our understanding of the applicable federal income, gift, and estate tax laws in effect at the time of this presentation. However, tax laws are subject to interpretation and change, and there is no guarantee that the relevant tax authorities will accept Transamerica’s interpretations. Additionally, this material does not consider the impact of applicable state laws upon clients and prospects. Although care is taken in preparing this material and presenting it accurately, Transamerica disclaims any express or implied warranty as to the accuracy of any material contained herein and any liability with respect to it. This information is current as of May 2009. For producer use only. Not for presentation to the public.

A New Approach to Old Challenges