1 For Producer Use Only. Not for Use with the Public. Insurance Planning in the New Economy American Taxpayer Relief Act of 2012...and the Opportunities!

1For Producer Use Only. Not for Use with the Public.

Insurance Planning in the New EconomyAmerican Taxpayer Relief Act of

2012

. . .and the Opportunities!

The GoodThe Bad

The Ugly . . .


Important informationAmerican General Life Companies, www.americangeneral.com, is the marketing name for a group of affiliated domestic life insurers, including American General Life Insurance Company (AGL) and The United States Life Insurance Company in the City of New York (US Life). Please note that AGL and USL are solely the providers of the insurance products. The companies, their employees, agents, representatives, and affiliates do not provide tax, legal, or financial advice.

The intent of this presentation is to communicate the potential benefits of several insurance and estate planning strategies. It is not an exhaustive list of possible advantages and disadvantages for each strategy. It is important to understand that, although every effort was made to ensure the accuracy of the information, the presentation is strictly for illustrative and educational purposes only and no representation or warranty, express or implied, is made by AGL or USL as to the accuracy or completeness of the information. All sample scenarios are hypothetical and software was used for some of the calculations. Many values were rounded to aid in presentation. To determine whether a strategy described herein is appropriate for a client’s situation, refer the client to his/her own tax, legal and financial advisors.

Each agent should verify the accuracy and reliability of the information (federal income tax statutes, rulings, and regulations contained in this material may have changed since this presentation was created). AGL and US Life shall not be liable for any loss or damage caused by the use of, or reliance on, the tax and legal items contained in this material.

To ensure compliance with requirements imposed by U.S. Treasury Regulations, we inform you that any tax advice contained in this presentation (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

©2013. All rights reserved.

AGLC106943 REV0813


We will discuss Dealing with the changes Congress has

delivered

How to approach all clients and potential clients

Need for life insurance policy review (and audit)

Life insurance sales opportunities


The Good “Fiscal cliff”

avoided

ATRA signed January 2013

“Permanent” tax law



avoided



The Bad

The process

The “pork”

Omissions



avoided



The Bad The Ugly

The process

The “pork”

Omissions

All income taxes are increased


Great opportunity abounds –The broad view

Clients’ interest heightens

even when tax change

does not affect them


Opportunity 1Survivor income factors

Increased income taxes for all

The prospect for higher inflation rates in the future

Decreased interest rates paid on savings


Opportunity 1

5% Account

2007 Plan in 2013

Becky

Amt: $56K/yrInflation Adj.: 4%Duration: 20 yearsTerry

Terry’s $1M

Policy At Terry’sdeath, policypays $1M

2007 Plan

Becky

Amt: $50K/yrInflation Adj.: 3%Duration: 45 yearsTerry

Terry’s $1M

Policy

7% Account

At Terry’sdeath, policypays $1M

New Coverage Needed: $800K

Current rates make coverage inadequate


Opportunity 1Where client meeting may lead

For Advisor Use Only. Not for Use with the Public.

Policy review on adequacy of principal (death benefit) to support spouse and children

Review of coverage for“Dual Income” (DINC)households (to replaceincome, pay forchild care)

Beneficiary Reviewfor prospectiveclients


Opportunity 2Income tax future uncertain

Taxed Never

Taxed LaterTaxed Now

1 The deductibility of an IRA contribution may be phased out if you or your spouse has access to a qualified plan at work.

2 Cash value life insurance policies are subject to Modified Endowment Contract rules that discourage over funding based on face amount, insured's age and other factors. Consult a policy illustration for details.


Opportunity 2Income tax future uncertain


Opportunity 3

INCOME TAX ITEM 2012 2013 Federal Capital Gains Rate 15.0% 20.0% PPACA Surtax on Investment Income 0.0% 3.8% Average State Capital Gains Rate 4.1% 4.7% Pease Limitation on Deductions 0.0% 1.2%

Total 19.1% 29.7%

Percent Increase 55.5%

Higher taxation on the sale of appreciated assets


Opportunity 3Higher taxation on the sale of appreciated assets

5% Account

Current Plan: Sell a $2M Asset with a basis of $250K

Children

$500K in Federal & state taxes

$1.5M net sales proceeds

$75K/year

$1.5M atdeath

Married Couple


Opportunity 3Higher taxation on the sale of appreciated assetsProposed Plan: Fund CRUT and WRT

Children

$1.5M at death

Married Couple

5% CRUT

Investsproceedsfrom sale

WRT

Survivor Life

Policy

Survivor Life

Policy

$290K tax benefits

$2M stock portfolio

$100K/year

Gifts $18K/year

CHARITY$2M at death


Opportunity 3Higher taxation on the sale of appreciated assetsThe Results:


Opportunity 3Factoids

Joint and survivor income

Can be one’s own trustee

More income to client

Create money to pay premium(individual or survivorship life insurance)

Greater inherited wealth

Can choose and change charities



Large life sale forwealth

replacement

Life Insurance Policy


Opportunity 4Gift asset to child in lower tax bracket

Gift of Capital Asset

Lower capital gains rate

Investment return taxed at lower rate

Discounted after-tax dollars for life premiums

Parents Children

Sale of Capital Asset


Opportunity 5“Portability” use it or not?

DSUEA – Deceased Spouses Unused Exempt Amount

DecedentSpouse

Surviving Spouse

Unlimited marital deduction

and

(New law)DSUEA


Why? Save legal fee Doubles

Federal exemption

Gives surviving spouse control

Why not? Beware Not available for

state estate tax No creditor

protection No predator

protection Growth is

taxable Widow(er) can

redirect assets Increased state

estate tax

Must file IRS 706 at first death (federal estate tax form)

Opportunity 5DSUEA: To use or not to use


Opportunity 6Estate Tax Planning is Alive and Well(especially in Hawaii, Connecticut, New York…)

For many clients, reduced or no federal estate tax

For some clients, increased federal estate tax

For some clients, increased state estate tax


Opportunity 6States with a state estate taxAs of August 1, 2013

1 Non-resident Hawaiian property owners receive a $1,000,000 exemption.

2 On January 1, 2014, top rate increases to 20% and exemption indexed for inflation.

Reminder:No portability for state estate taxes

ST Exemption Top Rate

CT $2,000,000 12%

DC $1,000,000 16%

DE $5,250,000 16%

HI1 $5,250,000 16%

IL $4,000,000 16%

ME $2,000,000 12%

MD $1,000,000 16%

MA $1,000,000 16%

MN $1,000,000 16%

NJ $675,000 16%

NY $1,000,000 16%

OR $1,000,000 16%

RI $910,725 16%

VT $2,750,000 16%

WA2

$2,000,000 19%


Opportunity 6States with a state estate tax


Opportunity 6States with a state estate tax



Need for survivorship policies

Adequacy of survivorship policies

Need for additional single life coverage

The “economics” of existing coverage

Review of ownership & beneficiary designation


Insurance Planningin the

New Economy


Thank you

Documents

1 For Producer Use Only. Not for Use with the Public. Insurance Planning in the New Economy American Taxpayer Relief Act of 2012...and the Opportunities!