Omaha Estate Planning Council - PDF document

Omaha Estate Planning Council Tom Lipscomb, CLU September 16 th , 2015 Email: tom.lipscomb@nm.com Direct dial: (913) 676-8020 INCOME TAX IS THE NEW ESTATE TAX: CREATIVE AND RELEVANT STRATEGIES TO MITIGATE THE INCOME TAX IN THE ESTATE PLAN I. The Income Tax: the “New Estate Tax?” • The “old days” • Today’s rates II. Commonly Used (and Powerful) Tools in the Estate Plan • IDGT • ILIT • High death benefit/low premium life insurance • High premium (“overfunded”)/low death benefit life insurance (Why?) III. What Makes an IDGT a Powerful Building Block in the Estate Plan? • What kinds of assets should be considered? • Why an IDGT vs. an ILIT? • IRC §675(4) IV. What is “Overfunded, Blended” Life Insurance? • Where does it “fit”? • What’s the special planning opportunity? V. Planning Ahead, with Foresight VI. Q&A

A Life Insurance Illustration Prepared For Valued Client Presented By Thomas G. Lipscomb III, CLU, Agent 5251 W. 116th Pl. Ste 300 Leawood, KS 66211 (913) 362-5000 FAX (913) 338-0041 August 5, 2015 Assumes a policy date in 2015. Values may be different if the policy is in a different calendar year. Supplemental Life Insurance Illustration Whole Life - Adjustable Policy Form Number ICC15.TT.ACL.(0715) Northwestern Mutual Life - 720 E. Wisconsin Avenue - Milwaukee, Wisconsin 53202 Illustration No. KS3020-RNWDP-132409 Page 1 of 9 ILLUS.ACL.(0608)

$2,370,000 Adjustable CompLife For Valued Client Age 55 Male Base................................................ $60,000 Initial Adjustable Term Protection.. $2,310,000## Contract Premium $150,000.00 (Including $109,652.70 Addl. Premium, $0.00 outside) Policy changed to paid-up at the end of year 8 Non-Guaranteed Dividends used to purchase paid-up additions 1 2 3 4 5 6 7 8 Annual Cash End Annual Benefit Surrender Total Cash Surr. Values of Outlay Received Value Premium Year Insurance* Dividend* (Beg Yr) (Beg Yr)* Increase* Outlay Total* Guaranteed 1 2,370,000 15,925 150,000 0 118,873 150,000 118,873 102,947 2 2,370,000 23,362 150,000 0 131,303 300,000 250,177 210,391 3 2,370,000 37,010 150,000 0 148,857 450,000 399,034 321,015 4 2,370,000 40,541 150,000 0 156,823 600,000 555,858 434,919 5 2,370,000 44,391 150,000 0 165,224 750,000 721,082 552,105 6 2,370,000 48,632 150,000 0 174,090 900,000 895,172 672,538 7 2,370,000 53,545 150,000 0 183,614 1,050,000 1,078,787 796,108 8 2,536,525 59,050 150,000 0 193,688 1,200,000 1,272,475 922,677 9 2,549,930 28,426 0 0 63,840 1,200,000 1,336,316 948,356 10 2,606,528 30,467 0 0 66,803 1,200,000 1,403,120 974,143 11 2,665,410 32,538 0 0 69,812 1,200,000 1,472,932 1,000,021 12 2,726,391 34,576 0 0 72,958 1,200,000 1,545,890 1,026,080 13 2,789,143 36,493 0 0 76,135 1,200,000 1,622,026 1,052,392 14 2,853,535 38,392 0 0 79,365 1,200,000 1,701,391 1,078,975 15 2,919,167 40,107 0 0 82,511 1,200,000 1,783,902 1,105,866 16 2,989,009 43,724 0 0 87,366 1,200,000 1,871,269 1,132,920 17 3,060,293 45,698 0 0 90,592 1,200,000 1,961,862 1,160,101 18 2,990,139 46,071 0 90,000 -450 1,110,000 1,961,411 1,094,956 19 2,968,847 47,069 0 60,000 29,883 1,050,000 1,991,294 1,058,260 20 2,926,590 47,678 0 75,000 14,677 975,000 2,005,972 1,004,810 Initial Contract Premiums Annual Mo. ISA The assumed additions surrenders and policy loans used to produce Base .............. 1,978.20 # 170.72 the outlays and benefits are shown on a separate page. Adj. Term Prot ...... 38,369.10 # 3,311.25 Under present tax law, the illustrated additions surrenders, # Premium included throughout outlays and benefits could be income tax free. Underwriting amount is $2,248,640 Consult tax advisor. Changes after issue are subject to underwriting. Assumed tax bracket 45%. Adjustable Term Protection, initial amount guaranteed 11 years. ## May be extended to age 70 by payment of appropriate premiums. * This illustration includes non-guaranteed dividends and values. Illustrated dividends assume no loans; loans may impact dividends. Illustrated dividends reflect current (2015 scale) claim, expense and investment experience and are not estimates or guarantees of future results. This illustration assumes that the current dividend scale will not change; however, it is likely that dividends actually paid will be larger or smaller than those illustrated. This illustration does not recognize that, because of interest, a dollar in the future has less value than a dollar today. 8% loan provision. TT15 Preferred NT UB2 8/05/15 Submitted by Thomas G. Lipscomb III, CLU Illustration No. KS3020-RNWDP-132409 1426570 The Northwestern Mutual Life - Milwaukee See current Basic Illustration for guaranteed elements and other information. Page 2 of 9

$2,370,000 Adjustable CompLife For Valued Client Age 55 Male Base................................................ $60,000 Initial Adjustable Term Protection.. $2,310,000## Contract Premium $150,000.00 (Including $109,652.70 Addl. Premium, $0.00 outside) Policy changed to paid-up at the end of year 8 Non-Guaranteed Dividends used to purchase paid-up additions 1 2 3 4 5 6 7 8 Annual Cash End Annual Benefit Surrender Total Cash Surr. Values of Outlay Received Value Premium Year Insurance* Dividend* (Beg Yr) (Beg Yr)* Increase* Outlay Total* Guaranteed 21 2,998,197 50,128 0 0 92,915 975,000 2,098,887 1,026,242 22 2,998,281 51,097 0 50,000 43,623 925,000 2,142,511 996,505 23 2,941,955 50,749 0 90,000 1,967 835,000 2,144,479 924,709 24 3,012,705 52,568 0 0 94,020 835,000 2,238,500 942,584 25 2,995,187 52,942 0 65,000 28,017 770,000 2,266,517 893,765 26 2,958,094 52,843 0 80,000 11,303 690,000 2,277,821 828,078 27 2,961,931 53,837 0 50,000 40,956 640,000 2,318,777 791,042 28 2,933,659 53,706 0 75,000 14,303 565,000 2,333,080 727,402 29 3,001,826 55,031 0 0 90,293 565,000 2,423,374 738,396 30 2,988,123 54,711 0 65,000 23,569 500,000 2,446,944 683,063 31 2,993,114 54,819 0 50,000 37,310 450,000 2,484,254 641,645 32 2,967,740 54,625 0 75,000 10,219 375,000 2,494,474 573,840 33 3,033,861 56,234 0 0 85,763 375,000 2,580,238 580,633 34 3,041,153 56,820 0 50,000 34,666 325,000 2,614,904 536,473 35 3,049,243 57,538 0 50,000 33,758 275,000 2,648,663 491,447 36 3,117,532 59,884 0 0 85,162 275,000 2,733,826 496,137 37 3,187,133 61,600 0 0 86,914 275,000 2,820,740 500,731 38 3,257,643 62,976 0 0 88,823 275,000 2,909,563 505,320 39 3,328,872 64,207 0 0 91,147 275,000 3,000,711 509,999 40 3,400,668 65,345 0 0 94,406 275,000 3,095,117 514,938 Initial Contract Premiums Annual Mo. ISA The assumed additions surrenders and policy loans used to produce Base .............. 1,978.20 # 170.72 the outlays and benefits are shown on a separate page. Adj. Term Prot ...... 38,369.10 # 3,311.25 Under present tax law, the illustrated additions surrenders, # Premium included throughout outlays and benefits could be income tax free. Underwriting amount is $2,248,640 Consult tax advisor. Changes after issue are subject to underwriting. Assumed tax bracket 45%. Adjustable Term Protection, initial amount guaranteed 11 years. ## May be extended to age 70 by payment of appropriate premiums. * This illustration includes non-guaranteed dividends and values. Illustrated dividends assume no loans; loans may impact dividends. Illustrated dividends reflect current (2015 scale) claim, expense and investment experience and are not estimates or guarantees of future results. This illustration assumes that the current dividend scale will not change; however, it is likely that dividends actually paid will be larger or smaller than those illustrated. This illustration does not recognize that, because of interest, a dollar in the future has less value than a dollar today. 8% loan provision. TT15 Preferred NT UB2 8/05/15 Submitted by Thomas G. Lipscomb III, CLU Illustration No. KS3020-RNWDP-132409 1426570 The Northwestern Mutual Life - Milwaukee See current Basic Illustration for guaranteed elements and other information. Page 3 of 9