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Pinney Insurance Center Roseville, California 800-823-4852

Pinney Insurance Center Roseville, California 800-823-4852. PLBD.3307 (05.10). WCLAG.1430 (05.10). Birmingham, AL. Birmingham, AL. Important Information.

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Pinney Insurance Center Roseville, California 800-823-4852

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  1. Pinney Insurance Center Roseville, California 800-823-4852 PLBD.3307 (05.10) WCLAG.1430 (05.10) Birmingham, AL Birmingham, AL

  2. Important Information • This material contains statements regarding the tax treatment of certain financial assets and transactions. These statements represent only our current understanding of the law in general and are not to be considered legal or tax advice by purchasers. The tax treatment of life insurance and Individual Retirement Accounts (IRAs) are subject to change. Income, estate, gift, and generation skipping tax rules are subject to change at any time. Neither West Coast Life nor its representatives offer legal or tax advice. Purchasers should consult with their legal or tax advisor regarding their individual situations before making any tax-related decisions. • The income tax on an IRA is not due until each distribution is taken. If the participant made non-deductible contributions to the IRA, a portion of the IRA proceeds may be an income tax-free return of basis. • While these strategies may help reduce or eliminate income taxes, they may cause an equal or greater amount of estate taxes, depending on the client’s individual situation. • Life insurance is underwritten by West Coast Life Insurance Company, 2801 Highway 280 South, Birmingham, AL 35223. • The contents of this presentation are for illustration purposes only. For current information, please use our WinFlex software.

  3. Are These Your Clients? • Significant IRA / Rollover Assets • Significant Non-Qualified Assets • Doesn’t need the IRA Assets • Except for emergencies • Doesn’t need the RMDs • Tends to complain about taking RMDs every year

  4. Imagine your client’s reaction if you said: If I could show you a way to potentially eliminate the income taxes and future RMDs from your IRA, would you like to see it?

  5. Consider the following: • Are there any income taxes on growth or distribution from a Roth IRA?1 • Are there any RMDs from a Roth IRA? • Are there any income taxes on inheritance of a Roth IRA? • Do beneficiaries pay any income taxes on growth or distribution of an inherited Roth IRA? 1 There are no penalties or taxes on earnings withdrawn after the Roth IRA has been owned for 5 years and the owner is over age 59 ½, death, or disability.

  6. So why doesn’t everybody convert their Traditional IRA to a Roth IRA? They don’t want to pay the taxes.

  7. 2010 Roth Conversion Highlights Why convert? • No Modified AGI Limits in 2010 • Tax spread over 2 years • Tax free legacy to next generation • Future growth tax free • Potential Estate Tax reduction Proceed with caution • Potentially a large tax bill • State may not recognize federal law • Future tax uncertainty 2011, 2012 and beyond

  8. Would you like to have a wayto pay the taxescreated by the conversion?

  9. Without Conversion • Example: • Robert and Mary Williams, ages 70/65 • One child, Mike, age 35 • IRA Value: $500,000 • IRA Annual Growth: 7.00% • Income Tax Rate: 40% (in year of conversion) • Beneficiaries’ Rate: 40% (due to size of inheritance) • Assume Robert passes at age 85 • Then what? This case study is hypothetical and is for illustrative purposes only. Each individual situation will be different based on the age, sex, and health status of your client.

  10. Without Conversion RMDs and IRA values were calculated using the West Coast Life WinFlex software. Rates as of December 14, 2009.

  11. Without Conversion

  12. A Different Approach • When Robert passes away • Mary does Spousal IRA rollover • IRA Value: $653,322 • Then what? ? ? This case study is hypothetical and is for demonstration purposes only. Each individual situation will be different based on the age, sex, and health status of your client.

  13. With Conversion Mary converts Spousal-IRA to Roth-IRA at her age 80 Where can Mary come up with over $261,000 at her husband’s death?

  14. With Conversion • Universal Life with Lapse Protection • Robert purchases $265,000 death benefit today at age 70 • Standard, non-tobacco premium: $9,220 • Where do we find $9,220 per year? Some numbers have been rounded for simplicity.

  15. With Conversion RMDs and Life Insurance Premium values were calculated using the West Coast Life WinFlex software. Rates as of December 15, 2009. Some numbers have been rounded for simplicity.

  16. With Conversion If Mary passes at age 90 without taking any distributions, beneficiaries’ inheritance = $1,285,183 Income Tax Free*! ! ! *Estate taxes may apply.

  17. Compare The Results Inheritance After Income Tax (estate taxes may apply): Total Life Insurance Premium: $9,220 x 15 years = $138,300

  18. Stretch Value to Beneficiaries Mike’s Roth IRA Inheritance $1,285,183 Age 60 Stretches Roth IRA over lifetime Assume 7% rate of return Total Income Tax Free Distributions $3,171,114 Life Expectancies obtained from the United States Life Expectancy Table from the National Vital Statistics Reports, Department of Health and Human Services. Calculation from West Coast Life’s WinFlex software dated December 14, 2009

  19. Planning Advantages • Planner never touches the actual IRA assets • Only works with the RMDs • For clients under age 70, IRA earnings may be used even though Required Distributions have not yet begun • IRA assets remain in client’s estate (Care, Custody & Control) • Provides control • Fully accessible for emergencies (income-tax-free after conversion to Roth) • Surviving spouse has financial flexibility with asset • Only take money from Roth IF needed, income-tax-free • Children inherit an equity asset that: • Inherits income tax free • Grows income tax free • Distributes to them annually income tax free

  20. So just ask a client. . . If I could show you a way to potentially eliminate the income taxes and future RMDs from your IRA, would you like to see it?

  21. Important Information • Life insurance issued by West Coast Life Insurance Company, 2801 Highway 280 South, Birmingham, Alabama 35223. • The contents of this presentation are for illustration purposes only. For current information, please use our WinFlex software. • Premium rates listed are for the West Coast Life LifeTime Platinum III, policy form WC-U15 11-06 and state variations thereof. It is a flexible premium universal life insurance policy. Product features and availability may vary by state. Subject to underwriting. Consult policy for benefits, riders, limitations, and exclusions. Up to a 2-year contestable and suicide period. Benefits adjusted for misstatements of age or sex. In Montana, unisex rates apply. • The policy will not lapse due to insufficient funds as long as the Lapse Protection Account value equals or exceeds policy debt. The amount of premium and any charges determine if the lapse protection is in effect. Loans, partial surrenders, policy changes, and any delinquent premium outlays will affect the length of the protection. The lapse protection guarantees the policy death benefit only, not the cash or surrender value. Refer to policy and endorsements for complete limitations, terms, and conditions. • The death benefit is subject to the claims paying ability of West Coast Life Insurance Company.

  22. Questions?

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