1. Achieving More Together Insured inheritance strategy

2. Achieving More Together Important considerations All comments related to taxation are general in nature and are based on current Canadian tax legislation for Canadian residents, which is subject to change. For individual circumstances, consult with a tax professional. An exempt life insurance policy -- i.e. the savings element is exempt from annual accrual taxation -- is defined in regulations 306 and 307 of the Income Tax Act (ITA). The Act provides that if a policy is to be exempt, the conditions set out in the regulations must be met. The regulations determine the maximum premiums that can be paid while still keeping a policy exempt. Any premium for a Millennium universal life insurance policy that would exceed the maximum premium is put in an account outside the policy (Millennium Account) and credited with interest. Canada Life will report the income to the policyowner each year. This information is current as of May 2005.

3. Achieving More Together Agenda Demographic statistics Insured inheritance strategy Case study #1 – James and Felicia Case study #2 – Ivan and Mary Summary

4. Achieving More Together Our population is aging Number of Canadians over age 65 1978: 2.1 million 1988: 2.75 million 1999: 3.8 million 2006: 4.3 million* 2011: 4.8 million * 2016: 5.7 million * * projection Source: Statistics Canada

5. Achieving More Together Our population is aging Life expectancy Source: Statistics Canada

6. Achieving More Together Increased net worth Canadian Net Worth (in Trillions) 4.2 1980’S2004 Shift in makeup of Canadian net worth - from more than 50 per cent in real estate in the 1980’s - to over 50 per cent in financial instruments in 2004 Source: Statistics Canada 0.8

7. Achieving More Together Discretionary Spending Power Personal Wealth Population Retired Near-retired Mainstream Workforce Youth Need and ability to pay Older Canadians control Wealth Source: Statistics Canada

8. Achieving More Together Consider your client’s net worth cycle: Some of your clients’ net worth will not be used in their lifetime. Does it make sense to pay tax on the growth of their investments every year?

9. Achieving More Together Key questions to ask your clients Do you have surplus capital that you don’t need? Do you have a desire to reduce annual taxes on your investment income? Do you have heirs to whom you want to transfer your assets? Are you concerned about the security of this legacy?

10. Achieving More Together Ideal client profile Your clients are: Generating more income than required for living expenses In a high marginal tax bracket Paying more tax than they’d like to Concerned about giving up control of their assets Concerned about the security of their legacy

11. Achieving More Together Canada Life’s Insured Inheritance strategy provides Permanent life insurance protection Continued client control of capital in a tax-advantaged product Immediate estate enhancement Tax-advantaged accumulation that passes tax-free to beneficiaries upon death Flexibility to change the policy beneficiary, and coverage amount (subject to any underwriting requirements) No probate fees on death benefit with named beneficiary other than the estate (not applicable in Quebec)

12. Achieving More Together Insured inheritance funding options 1. Lump sum purchase of annuity to pay insurance premiums 2. Lump sum prepayment to a Canada Life’s Millennium universal life insurance contract 3. 10 pay out of capital to pay up insurance contract

13. Achieving More Together Insured inheritance strategy Case study #1

14. Achieving More Together Clients: James and Felicia, ages male 67, female 65 Both worked in the public sector and are now retired They have 5 children combined from previous marriages They’re concerned about transferring monies to their 5 children They want to maximize their estate for their heirs and distribute their assets equitably Want to retain control of their assets while they are alive Case study #1

15. Achieving More Together Looking at James and Felicia’s assets... James and Felicia require retirement income of $200,000 RRSPs and pension will supply $220,000 They are in a high marginal tax bracket. $100,000 of their non-registered portfolio is clearly surplus to their income and capital needs

16. Achieving More Together Insured inheritance strategy Taking 100,000 from their non-registered assets Using primarily the fixed income portion $100,000 GIC currently earning 5% Marginal tax bracket 45% $100,000 in fixed income investments –Yielding 5 per cent before tax –With a 45 per cent marginal tax rate Let’s look at their $100,000 primarily fixed income portion of their portfolio over a period of 25 years.

17. Achieving More Together $100,000 in fixed income investments –yielding 5 per cent before tax –with a 45 per cent marginal tax rate

18. Achieving More Together Let’s compare Compare the fixed income portion of their investment in this example to the insured inheritance strategy over a period of 25 years. We’ll examine the three different funding options available to James and Felicia

19. Achieving More Together Funding Option #1 - James and Felicia used $100,000 to buy ten- year term certain prescribed annuity Income of $12,096.96 annually –Taxable amount $2,096.96 annually –Tax payable $943.63 annually $11,153 ($12,096.96 - $943.63) is used to fund Millennium for 10 years. The funding schedule purchases $318,000 of insurance

20. Achieving More Together Annual tax payable comparison

21. Achieving More Together Insured inheritance strategy: tax- advantaged accumulation

22. Achieving More Together Funding Option #2 James and Felicia use $100,000 to lump sum fund a Millennium Universal life policy Fully absorbed into the insurance contract in 4 years - tax payable on income earned “outside” contract $100,000 lump sum deposit purchases $345,000 of insurance

23. Achieving More Together Annual tax payable comparison

24. Achieving More Together Insured inheritance strategy: tax- advantaged accumulation

25. Achieving More Together Funding Option #3 James and Felicia transfer $10,000 a year from non-registered assets to Millennium The entire $10,000 can be deposited into the policy each year –No taxes are payable as the policy generates tax- advantaged accumulation $10,000 a year deposit purchases $284,000 of life insurance

26. Achieving More Together Annual tax payable comparison

27. Achieving More Together Summary of Funding Options Funding Option #1 Funding Option #2 Funding Option #3 Cumulative insurance/annui ty premium (10 years) $111,530$100,000 Initial Face amount purchased $318,000$345,000$284,000

28. Achieving More Together Summary of Funding Options Funding Option #1 Funding Option #2 Funding Option #3 Alternative investment cumulative taxes payable (10 years) $25,499$29,302$12,044 Insured inheritance cumulative taxes payable $0$2,302$0

29. Achieving More Together Insured inheritance strategy Case Study #2

30. Achieving More Together Case study #2 Ivan is 63 years old and Mary is 61 Ivan and Mary Smith own Smith Tool & Die They have owned the business for over 25 years. The Smith’s have two grown children, neither of whom is interested in continuing the business The employees have offered the Smith’s $7 million dollars for the company.

31. Achieving More Together Case study #2 Capital gain$6,000,000 Inclusion rate 50% Taxable capital gain$3,000,000 Marginal tax rate 50% Tax Payable$1,500,000 Sale proceeds less taxes payable leaves $5,500,000 net After doing a full financial planning review, it is determined that $4.5 million is sufficient to sustain their lifestyle needs SO THEY HAVE $1 MILLION “EXTRA” AVAILABLE

32. Achieving More Together Before creating an illustration… Address the following questions: HOW MUCH WILL $1Million BUY? WHAT IS THE INSURANCE FOR? –Capital Gains on Investment Portfolio? –Tax on accumulating RRIF balance? –Does estate maximization motivate the client?

33. Achieving More Together Insured inheritance strategy What is the most efficient method of funding? 1. Lump sum purchase of annuity to pay insurance premiums 2. Lump sum prepayment to a Canada Life’s Millennium universal life insurance contract 3. 10 pay out of capital to pay up insurance contract

34. Achieving More Together Summary of Funding Options Funding Option #1 Funding Option #2 Funding Option #3 Cumulative insurance/annui ty premium (10 years) $990,000$1,000,000 Initial Face amount purchased $3,661,000$4,448,000$3,668,000

35. Achieving More Together Summary of Funding Options Funding Option #1 Funding Option #2 Funding Option #3 Alternative investment cumulative taxes payable (10 years) $244,270$399,007$131,738 Insured inheritance cumulative taxes payable $0$21,889$0

36. Achieving More Together Summary

37. Achieving More Together Canada Life’s Insured inheritance strategy allows the client to maintain control by providing –Choice of investment options –Change premium payment –Change face amount –Change beneficiary

38. Achieving More Together Canada Life’s Insured Inheritance strategy provides Permanent life insurance protection Continued client control of their capital in a tax-advantaged environment A potentially higher transfer amount to beneficiaries (on the death of the second insured) than traditional taxable investments Immediate estate enhancement Tax-advantaged accumulation that passes tax-free to beneficiaries upon death Flexibility to change the policy beneficiary, and coverage amount (subject to any underwriting requirements) No probate fees on death benefit with named beneficiary other than the estate (not applicable in Quebec)

39. Achieving More Together Why Canada Life? Canada Life’s wide range of permanent life insurance products allow clients to customize their insurance coverage to match their estate planning needs. Permanent products –Whole life –Universal life Term products

40. Achieving More Together Why Canada Life (continued…)? Estate planning strategies  Preserve your wealth  Real estate, real solutions  Planned giving using life insurance  Insured inheritance  Retirement income enhancer  Insured RRIF  Insured annuity Estate planning client material  Estate planning checklist  Annual review  If you die without a will summary  Tax worksheet calculator  Preserve your wealth calculator  Personal records organizer  For your family  For your executor

41. Achieving More Together Next steps... Talk with your clients about Estate planning and introduce them to Canada Life’s Insured Inheritance strategy

42. Achieving More Together Thank You