A Smart Way to Preserve Your Estate for Future Generations

1. A Smart Way to Preserve Your Estate for Future Generations OLA 1620 T 1008

2. 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. Clients and other interested parties to whom this material is promoted, marketed, or recommended should be advised to consult with and rely solely on their own independent advisors regarding their particular situation and the concepts presented here.

3. How Is Wealth Lost from Generation to Generation? • Transfer taxes • Divorce • Creditors • Beneficiaries’ lack of asset management skills

4. Influencing the Behavior of Beneficiaries • Wealthy parents have two major concerns: • Future generations are not going to live as well as parents do • Wealth left to children is going to spoil them • How do you bridge gap between these twoconflicting worries? • Answer: By establishing Dynasty Trust

5. What Is a Dynasty Trust? • Used to: • Provide for future generations, and • Minimize taxes on wealth passed on to those generations • Gives ability to magnify wealth over several generations • Not just for the ultra-wealthy • Form of Irrevocable Life Insurance Trust (ILIT) • Leverage use of assets by purchasing life insurance to fund Dynasty Trust

6. Benefits of a Dynasty Trust • Furnishes effective way to transfer significant assets to successive generations of beneficiaries • Provides creditor protection by incorporating: • Spendthrift provision to guard against irresponsible spending habits, or • Provision protecting from loss throughdivorce settlement • Assures continuity of asset management • Can add incentive provisions for beneficiaries

7. Dynasty Trust Planning Considerations • Generation-Skipping Transfer Tax (GSTT) • Dynasty Trust helps maximize GSTT exemption • Proper use of GSTT exemption preserves assets forfuture generations • Some states have “rule against perpetuities” (RAP) • Dynasty Trust’s term may be limited by ruleagainst perpetuities • Term is lifespan of named individual plus 21 years • States that have abolished RAP • Dynasty Trust can continue for many successive generations • Preserves wealth for family indefinitely

8. Dynasty Trust Considerations—Estate Exclusion • Policy proceeds not included in insured’s taxable estate if no incidents of ownership exist at any time within three years prior to death of insured • To keep policy out of grantor’s estate, policy applicant should be third party, such as the trustee of a Dynasty Trust • Grantor would then gift premiums to third-party owner

9. Dynasty Trust Considerations—Gifting to the Trust • Create trust with gift of $2 million ($1 million each) using lifetime gift tax exemption and allocating portion of GSTT exemption • Annual gifts of $24,000 per beneficiary—can be split gifts if from separate property • Trust purchases survivorship life insurance policy on lives of grandparents • Death benefit magnifies trust assets through leverage of premium amounts

10. Example: The Bucks Family • Bill and Barbara Bucks, both 65 years old • Have substantial net worth • Have one daughter, Susan, and three teenage grandchildren: Tom, Eileen, and James

11. The Bucks Family: Goals and Objectives • Would like to pass their wealth on to their grandchildren without paying federal transfer taxes • Want to use their wealth to encourage their grandchildren and future generations to achieve certain goals and maintain desired lifestyles

12. The Bucks Family: Action Steps • Bill and Barbara create Dynasty Trust • Buckses transfer $2 million, each using $1 million of their lifetime GSTT and all of their gift tax exemptions, to trust • Trust structured to pay income to Susan’s children during grandchildren’s lives, and to successive generations thereafter • Buckses gift additional $72,000 to trust, using their annual gift and GSTT exemption, to purchase survivorship policy with death benefit of approximately $5.4 million

13. The Bucks Family: Trust Incentives • Buckses include incentive provisions in trust to encourage grandchildren and their descendants to meet certain goals and maintain desired lifestyle standards: • Trust will pay $50,000 to each grandchild or future descendant who graduates from college • Trust will match 50% of grandchildren’s or future descendants’ earnings • Trust will gift $50,000 to each grandchild or future descendant who marries

14. Summary • Dynasty Trust can help: • Provide a legacy for future generations • Minimize impact of transfer taxes such as gift taxesand GSTT • Encourage descendants to meet certain educational,career, and/or lifestyle-related goals

15. Life insurance products are issued by Transamerica Life Insurance Company, Cedar Rapids, IA 52499, or Transamerica Financial Life Insurance Company, Purchase, NY 10577. All products 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 material is provided for informational purposes only and should not be construed as tax or legal advice. Clients and other interested parties should 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 laws in effect at the time of publication. However, these laws are subject to interpretation and change, and there is no guarantee that the relevant 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 September 2007.

16. A Smart Way to Preserve Your Estate for Future Generations OLA 1620 T 1008