Reward & Retain with Simplicity Direct Gifts Using Life Insurance ©2014 Voya Services Company. All rights reserved. CN0509-9953-0516 An Efficient Way To

Reward & Retain with Simplicity

Direct Gifts Using Life Insurance

©2014 Voya Services Company. All rights reserved. CN0509-9953-0516

An Efficient Way To Preserve Family Wealth

Direct Gifts Using Life Insurance

1

©2014 Voya Services Company. All rights reserved. CN0509-9953-0516 2

Disclosures

The Voya™ Life Companies and their agents and representatives do not give tax or legal advice. The strategies suggested may not be suitable for everyone and you should consult with your tax and legal advisors before implementing any of the strategies suggested here.

These materials are not intended to and cannot be used to avoid tax penalties, and were prepared to support the promotion or marketing of the matter addressed in this document. The taxpayer should seek advice from an independent tax advisor.

Life insurance products are issued by ReliaStar Life Insurance Company (Minneapolis, MN), ReliaStar Life Insurance Company of New York (Woodbury, NY) and Security Life of Denver Insurance Company (Denver, CO). Within the state of New York, only ReliaStar Life Insurance Company of New York is admitted and its products issued. Securities and investment advisory services offered through Voya Financial Advisors, member SIPC. All are members of the Voya™ family of companies.

All guarantees are based on the financial strength and claims paying ability of the issuing insurance company who is solely responsible for all obligations under its policies.


Two Questions

Are you planning to leave an inheritance to your children or grandchildren?


Two Questions

Are you planning to leave an inheritance to your children or grandchildren?

If so, how are you planning to do it?


Passing on money at death can be difficult:

Estate taxes

Claims of creditors

The expenses of settling your estate

Asset transfer expenses (fees & commissions)

Potential investment losses


One way to be sure of passing on money to your children and grandchildren is to make gifts to them while you are alive.


Lifetime gifts have several potential advantages:

Potential growth in the value of the gift

Potential to reduce your federal income taxes

Potential to reduce your estate taxes

You can watch the gift being used


But there may also be disadvantages:

Assets may be poorly invested and lose value

Creditors may be able to take over the funds

If there’s a divorce, some or all of the funds may wind up in the

hands of an ex-spouse

When you make a gift, you lose control of what you’ve given


How can you make gifts and retain enough control to keep the value of the assets in the family?


Make your gifts to a trust where the trust agreement and a trustee control the assets


Gifts to a Trust

The trust is set up to benefit your children; it should be irrevocable.

While the assets are in the trust, they may potentially be protected

from creditors’ claims.

A trustee is appointed to manage the property in the trust for the

benefit of the beneficiaries.


Some Advantages of Making Gifts to a Trust

1. The trust document helps you retain some control even though you no longer own what you’ve given away

You name the trustee(s) The trust agreement tells the trustee how to manage

and distribute the assets


Some Advantages of Making Gifts to a Trust

1. The trust document helps you retain some control even though you no longer own what you’ve given away

You name the trustee(s) The trust agreement tells the trustee how to manage

and distribute the assets

2. It tells the trustee: What investments can be used What investments to avoid When to pay out benefits How to treat claims from creditors and ex-spouses


How do you make gifts to a trust without paying gift taxes?


How do you make gifts to a trust without paying gift taxes?

Two possible strategies


Minimizing Gift Taxes

Option #1 — The Gift Tax Annual Exclusion The gift tax applies to large gifts; small gifts are exempt

The annual exclusion is $14,000 per recipient per year

The recipient must have the right to take the gift immediately (a “present interest” e.g.

recipient is granted a temporary withdrawal power, sometimes called a “Crummey Power”)


Minimizing Gift Taxes

Option #1 — The Gift Tax Annual Exclusion

Option #2 — The Lifetime Gift Tax Exemption Each person has one

Applies to gifts that don’t qualify for the gift tax annual exclusion

The lifetime exemption is currently capped at $5,340,000 per donor

When the total of your lifetime exemption gifts exceeds $5,340,000, you begin to pay gift

taxes


It Can Be Difficult to Grow Wealth in a Trust

Problem #1 — Investment Growth Trustee may not have much money management experience

Even trustees with experience may not do well

Long-term investment growth can be difficult to achieve


It Can Be Difficult to Grow Wealth in a Trust

Problem #1 — Investment Growth Trustee may not have much money management experience

Even trustees with experience may not do well

Long-term investment growth can be difficult to achieve

Problem #2 — Federal Income Taxes The federal income tax rates for trusts are severe

The federal income tax rates are compressed; the maximum rate (39.6%)

is applied to all taxable income in excess of $11,950


Is there a way to potentially minimize federal income taxes the trust pays and possibly increase its long term value to the beneficiaries?


Consider using

Life Insurance to help grow the

Long-Term Value of The Trust


Why Use Life Insurance?

Life Insurance can be an efficient way to grow the funds given to a

trust for two reasons:

Reason #1 — Potential For Growth

– Gross policy death benefits usually exceed the total premiums paid

– The difference between total premiums and policy death benefits represents

additional assets that may be paid to policy beneficiaries


Why Use Life Insurance?

Life Insurance can be an efficient way to grow the funds given to a

trust for two reasons:

Reason #1 — Potential For Growth

– Gross policy death benefits usually exceed the total premiums paid

– The difference between total premiums and policy death benefits represents

additional assets that may be paid to policy beneficiaries

Reason #2 — Tax Benefits

– Policy cash values grow income tax deferred

– Proceeds from a life insurance policy are generally income tax free, and if properly

structured, may also be free from estate tax


An Irrevocable Life Insurance Trust that uses part of its assets to purchase life insurance is called an “ILIT”


Direct Gifts In Action - John and Louise Wells*

John and Louise Wells are both age 70 and in standard health; they

have five children, ten grandchildren and a $4 million net worth.

They are confident they won’t need more than $2,000,000 of the their

estate to live on for the rest of their lives.

They are willing to make annual exclusion gifts to increase what they

pass on to their children.

* The hypothetical investment results are for illustrative purposes only and should not be deemed a representation of

past or future results. This example does not represent any specific product, nor does it reflect sales charges or other

expenses that may be required.


John and Louise Wells

1

John and Louise have their attorney draft an Irrevocable Life Insurance Trust (ILIT).



21


John will be the grantor and will make annual gifts of $70,000 to the ILIT; these

gifts are designed to qualify for the gift tax annual exclusion ($14,000 for each of the

five children).



21 3




five children).

The ILIT purchases a $3,000,000 life insurance policy on John’s life.






five children).

The ILIT purchases a $3,000,000 life insurance policy on John’s life.

John dies after 20 years. The ILIT receives the $3,000,000 policy death benefit.

21 3 4



What John and Louise accomplished:

John leveraged his $1,400,000 of gifts into $3,000,000 of life

insurance death benefits.






The $3,000,000 death benefit was paid free of federal income taxes.







The $3,000,000 death benefit is passed on free of estate taxes.







The $3,000,000 death benefit is passed on free of estate taxes.

The trust protected the gifts and the policy from loss due to claims.

from any of the children’s creditors.


Your Voya representative can show how this idea might work in your situation.

Ask for a proposal customized to fit your situation.

Documents

Reward & Retain with Simplicity Direct Gifts Using Life Insurance ©2014 Voya Services Company. All rights reserved. CN0509-9953-0516 An Efficient Way To