Wealth Security Ira

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THE WEALTH SECURITY IRA FINANCIA L SITUATION Having worked hard and prepared well for retirement, an IRA owner may want income from the IRA, but also to provide for heirs. The IRA likely has considerable value. Since a traditional IRA is subject to both estate and income taxes, over half of its value may be depleted by the time the heirs receive any benefit. Wanting to ensure a guaranteed income and a guaranteed amount to the heirs, the following is a means to achieve that goal.*

POSSIBLE SOLUTION Consider the Wealth Security IRA. Supplemented with life insurance, the Wealth Security IRA can transfer significantly more wealth to heirs than an IRA inherited at the owner’s death while simultaneously guaranteeing the IRA owner a lifetime stream of income.

STRATEGY Assuming the IRA owner is insurable, the IRA owner directs the purchase of a Single Premium Immediate Annuity (SPIA) in the IRA, selecting fixed payments guaranteed for the life of the owner.1 If the owner is over 70½ years old, the entire annual annuity payment is used to satisfy the Required Minimum Distributions (RMDs). After paying income tax on each distribution, he/she gifts (to the extent of annual exclusion/exemption amounts) to an Irrevocable Life Insurance Trust (ILIT) the amount necessary to purchase a life insurance policy on the owner’s life to replace the value of the IRA.2 If properly established, the life insurance proceeds will be free of estate and income taxes and provide for the owner’s family upon the IRA owner’s death. The balance of the SPIA payments will be used by the IRA owner for his/her personal use.

*All guarantees are based on the claims-paying ability of the issuing company. Payments received from a fixed annuity remain constant and are guaranteed for the contractual period chosen. There are various SPIA payment options available, the fixed option with payments for life-only is one. Payments received from variable SPIAs fluctuate based upon market factors. Clients should consult their advisors to determine the appropriate payment option for their specific circumstances.

1

If a life-only SPIA payment is chosen, the payments terminate at the death of the annuitant making the return a function of the actual life of the annuitant. Life insurance may be purchased to replace the value of the life-only SPIA.

2

FOR PRODUCER USE ONLY. NOT FOR USE WITH THE PUBLIC.

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HOW IT WORKS

1

IRA

SPIA is purchased within the IRA that will provide the owner with a guaranteed income for life.

2

Owner takes the SPIA payment as the Required Minimum Distribution (RMD) from the IRA. After payment of income tax on the withdrawal, the amount necessary to pay premiums on a life insurance policy to replace the value of the IRA is gifted to the ILIT by use of annual exclusion/exemption amounts.

3

4

ILIT ILIT purchases an insurance policy.

Upon death, insurance proceeds are received by the heirs free of federal income and estate taxes.

Not FDIC/NCUA insured. May lose value. No bank/credit union guarantee. Not a deposit. Not insured by any federal government entity. FOR PRODUCER USE ONLY. NOT FOR USE WITH THE PUBLIC.

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RESULTS AND EXAMPLE The following example demonstrates the potential benefit using this strategy. A 72 year old male has a $2,500,000 estate and three married children. Part of his estate is an IRA worth $1,000,000. If he did no planning, the IRA would be worth $982,865 at the end of 12 years (his life expectancy), assuming a 5% growth rate and netting the annual RMDs3. If he were to die that year, after payment of estate and income taxes (IRD), his children would inherit $414,107.4 Alternatively, he directs the purchase of a $1,000,000 fixed payment SPIA within the IRA. The SPIA will guarantee him an income stream for life in the amount of $99,264, which will be used to satisfy his RMD. After paying income tax at 35%, each year he will net $64,521. Using his annual gift tax exclusions, he transfers $32,251 to an ILIT annually. The ILIT purchases a life insurance policy on his life with a death benefit of $1,000,000.5 After making the annual premium gifts to the ILIT, he has $32,270 in additional disposable income guaranteed for life from the SPIA in the IRA. If he were to die in year 12, his children would receive $1,000,000 free of estate and income taxes. Using this strategy, the children would receive more than twice as much!

Using the Wealth Security IRA Technique

With No Planning Value of IRA at Year Inception 12 $1,000,000

Amount of IRA Growth at 5% Beneficiaries SPIA per year; RMD after EstateReceive Purchased Taxes Year Removed in IRA and IRD6 $982,865

1-12 $1,000,000

$414,107

Guaranteed Income for Life

Net Disposable Income (Annual)

Life Insurance Premium (Annual)

Amount Received by Beneficiaries

$99,264

$32,270

$32,251

$1,000,000

5% growth rate used for all of owner’s assets including the IRA.

3

42% estate tax and 35% income tax rates used for all of owner’s assets including the IRA.

4

Using Sun Universal Protector®, male age 72, preferred non-tobacco.

5

Income in Respect to a Decedent.

6

Contact our Advanced Planning Attorneys at 800-432-1102, ext. 1846, 1756, 1838, or 1969, or the Advanced Case Design Team at ext. 2450. FOR PRODUCER USE ONLY. NOT FOR USE WITH THE PUBLIC.

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ABOUT SUN LIFE FINANCIA L Sun Life Financial is a leading international financial services organization providing a diverse range of wealth accumulation and protection products and services to individuals and corporate customers. Chartered in 1865, Sun Life Financial and its partners today have operations in key markets worldwide including Canada, the United States, the United Kingdom, Ireland, Hong Kong, the Philippines, Japan, Indonesia, India, China and Bermuda. Sun Life Financial Inc. trades on the Toronto (TSX), New York (NYSE) and Philippine (PSE) stock exchanges under the ticker symbol SLF.

This material contains references to concepts that have significant legal, accounting and tax implications. It is not intended as legal, accounting or tax advice. Clients should always consult with their own attorney and/or tax advisor regarding the application of these concepts to any particular situation.

Sun Life Assurance Company of Canada and Sun Life Insurance and Annuity Company of New York are members of the Insurance Marketplace Standards Association (IMSA).

Universal Life Insurance products are issued by Sun Life Assurance Company of Canada. In New York, Universal Life Insurance products are issued by Sun Life Insurance and Annuity Company of New York. All guarantees are based on the claims-paying ability of the issuing company, Sun Life Assurance Company of Canada, Sun Life Assurance Company of Canada (U.S.), or in New York, Sun Life Insurance and Annuity Company of New York. All are members of the Sun Life Financial group of companies. ©2007 Sun Life Assurance Company of Canada. All rights reserved. Sun Life Financial and the globe symbol are registered trademarks of Sun Life Assurance Company of Canada.

XMSD 44/547 SLPC 17131 03/07 Exp. Date 06/10 FOR PRODUCER USE ONLY. NOT FOR USE WITH THE PUBLIC.