Give a Gift of a Lifetime Uncovering the Money Stages of Whole Life Insurance

Transcription

1 Give a Gift of a Lifetime Uncovering the Money Stages of Whole Life Insurance A CONSUMER GUIDE FOR ILLUSTRATION UNDERSTANDING IN JUVENILE GIFTING SCENARIOS: USING GUARDIAN WHOLE LIFE PAID-UP AT AGE 65

2 Whole Life Insurance Whole life insurance is designed to protect, grow and accumulate value throughout your lifetime. You can depend on the valuable guarantees that this asset provides helping you achieve financial independence. Lifetime protection is a special advantage of whole life insurance. But it isn t the only benefit. In fact, a whole life insurance policy can keep changing for the better, with more benefits built into its structure the longer it stays in force. Whole Life Can Also Be a Great Gift for a Lifetime! New baby? Birthday? Graduation? What about giving the gift of life insurance? Guardian s Whole Life not only provides guaranteed protection but it can accumulate funds to help offset any number of future financial obligations. What other gift can offer the following long term benefits: Tax-advantaged accessible cash accumulations and income tax-free death benefit Guaranteed level premiums Many policies can be paid-up in advance of a cash accumulation goal while still continuing to increase in value over a lifetime Guaranteed values not affected by market fluctuations Locks in insurability now A Personal Illustration Can Provide a Long-term View Your Guardian financial professional will prepare and deliver a customized illustration based on your goals. We urge you to evaluate all Money Stages shown in this brochure within the context of your personal illustration, and with the help of your financial professional.

3 Owning whole life insurance means having a very flexible financial tool that develops significant value and usefulness over time. Because life insurance policies aren t static, illustrations are helpful in explaining key features and benefits of a policy over many years. Illustration Map The illustration on the right is an example of the kind of information contained in the concept illustration. The various sections show the following: Insured age as of your nearest birthday. On this sample, the age is shown as 2. An assumed risk class for which you may qualify, based on your health, medical history and other factors. The risk class will be determined after you apply for the policy and may be different than illustrated here. This class affects the cost of your life insurance protection, and your agent may give you a new illustration after the policy is issued. The benefit amount including the basic face amount of insurance, plus any amounts covered by optional riders. 2 The plan of insurance plus any optional riders. Optional riders The annual premium, including the basic policy premium plus outlays for any riders chosen. The dividend option, which is the method selected for applying the dividends that Guardian credits. Policyholders share in the company s profits through annual dividends (if declared) that can be used to increase cash value, enhance legacy value or reduce net after tax outlay. Some of the options are to: - Receive dividends in cash or reduce part or all of the premium; - Reinvest dividends to automatically purchase more life insurance coverage, called Paid Up Additions. The risk class is shown as non-smoker. The benefit is a $4,000,000 face amount. The plan of insurance is Life Paid-Up at 65, a whole life policy with level annual premiums payable through age 65. (Life Paid-Up at 65 Form 10-L65). Enhanced Guaranteed insurability Option. This rider allows the policy owner to purchase additional insurance on the insured s life without evidence of insurability on each option date. For this sample, option dates are insured s ages 25,28,31,34,37,40,43,46. An alternate option date may be used in place of the next scheduled option date for the following events in the life of the insured: marriage, birth/adoption of child/grandchild, purchase of a new home, enrollment of a child in college, salary increase of 20% or more. Enhanced Paid-Up Additions (EPUA) Rider. This rider gives the policy owner the right to purchase paid-up additional participating insurance on the insured s life in addition to the base face amount. These additions have their own cash value, which is included in both the total cash surrender value, and the loan value. Additions purchased under the terms of the EPUA rider enhance the policy s total cash value and death benefits. The EPUA Rider earns its own dividends which can further enhance the policy values. The premium is $28,000. The premium may be paid in several ways, including a single sum at the start of the year or quarterly installments. The dividend option is shown as Paid Up Additions. Across the Columns Across the illustration from left to right, there are a number of columns that reflect information that you should consider: Policy Year The number of years the policy is in force, starting from the first year. Age at Start of Year The insured person s age at the beginning of each Policy Year. The insurance age is as of the nearest birthday. Base Policy Annual Premium The cost of the coverage each Policy Year, not including any added riders. This may be paid via cash payment or by policy loans and surrendering the policy s paid up additions, if available. Base Guaranteed Cash Value If the annual premium is paid every year, this is the minimum cash value at the end of each year. Increase in Base Guaranteed Cash Value The year-to-year Base Guaranteed Cash Value increase. Annual Dividend* 1 The Annual Dividend payable at the beginning of each year, assuming the dividend scale currently paid by Guardian never changes. Dividends probably will change every year to reflect Guardian s investment experience, claims paid, expenses and other factors. If you pay less premium in cash or take policy loans, your dividends would be different than shown. Net Premium* The cash payment for the annual premium for the base policy and any riders at the beginning of the year. Cumulative Net Premium* The sum of this year s Net Premium plus Net Premiums in all prior years. Net Cash Value* The cash value payable if you surrendered the insurance at the end of any policy year. It includes guaranteed and non-guaranteed cash values. Increase in Net Cash Value* The year-to-year Net Cash Value increase. Net Death Benefit* The end of the year guaranteed base policy death benefit plus the life insurance amount provided by dividend additions and any riders. Net After Tax Outlay The amount of money that either comes out of the clients pocket, if the number is positive, or goes into the clients pocket if the number is negative net of any taxes due. *Any column marked with an asterisk is dependent upon dividends. Values reflect the illustration s assumptions and indefinite continuation of the 2013 dividend scale. If the premium is paid internally (premium offset), it is not guaranteed and is dependent on the non-guaranteed dividend. 1 Dividends are not guaranteed. They are declared annually by Guardian s Board of Directors. 2 Riders may incur additional costs.

4 L65, $4,000,000 Face Amount Male/Female Blend Age 2, Non-Smoker Class 2013 Dividend Scale Not Guaranteed Age: 2 Non-Smoker Class Benefit $4,000,000 Whole Life L65 Total First Year Premium Dividend Option: Paid Up Additions (D) Premium $21, Enhanced Paid-Up Additions Rider: $6, Enhanced Guaranteed Insurability Option: $62.50 $28, POL YR AGE BEG OF YR GUARAN- TEED PREMIUM ANNUAL DIVIDEND * ANNUAL LOAN CUMULA- TIVE LOAN NET AFTER TAX OUTLAY * POLICY COST BASIS NET CASH VALUE * NET DEATH BENEFIT * , ,000 28,000 6,499 4,103, , ,000 56,000 29,743 4,209, ,330 5, ,000 84,000 54,337 4,391, ,330 6, , ,000 80,212 4,572, ,330 6, , , ,471 4,750, ,330 6, , , ,163 4,927, ,330 7, , , ,362 5,104, ,330 7, , , ,217 5,279, ,330 8, , , ,798 5,454, ,330 8, , , ,135 5,629, ,330 9, , , ,056 5,805, ,330 10, , , ,713 5,991, ,330 12, , , ,172 6,186, ,330 13, , , ,387 6,390, ,330 15, , , ,558 6,602, ,330 16, , ,762 6,561, ,330 19, (60,000) 360, ,396 5,989, ,330 19, (60,000) 300, ,060 5,467, ,330 20, (60,000) 240, ,885 4,965, ,330 20, (60,000) 180, ,022 4,483, ,330 42, (180,000) - 1,017,745 4,729, , , ,000 (200,000) - 4,067,679 7,617, , , ,320 (200,000) - 4,052,627 7,568, , , ,293 (200,000) - 4,033,546 7,508, , , ,265 (200,000) - 4,010,337 7,436, , ,331 1,126,595 (200,000) - 3,982,327 7,354, , ,064 1,379,659 (200,000) - 3,948,865 7,260, , ,186 1,642,845 (200,000) - 3,908,768 7,154, , ,714 1,916,559 (200,000) - 3,861,798 7,037, , ,662 2,201,221 (200,000) - 3,807,159 6,907, , ,049 2,497,270 (200,000) - 3,744,398 6,764, , ,891 2,805,161 (200,000) - 3,672,759 6,607, , ,206 3,125,368 (200,000) - 3,591,379 6,437, , ,015 3,458,382 (200,000) - 3,499,040 6,252, , ,335 3,804,718 (200,000) - 3,394,917 6,053, , ,189 4,164,906 (200,000) - 3,277,971 5,838, , ,596 4,539,502 (200,000) - 3,145,577 5,607, , ,580 4,929,083 (200,000) - 2,996,770 5,359, , ,163 5,334,246 (200,000) - 2,831,220 5,095, , ,370 5,755,616 (200,000) - 2,647,662 4,811, , ,225 6,193,840 (200,000) - 2,444,429 4,509,291

5 The Money Stages of Whole Life Insurance Six ways a whole life insurance policy can keep changing for the better, the longer you own it. Maximum Annual Gift Tax Exclusion: Every person can give away a tax-free gift up to, or equal to, the IRS-mandated annual 1. exclusion amount ($14,000 in 2013) to any number of people each year. The annual exclusion amount is only available if the gift is of a present interest. A present interest gift is a gift with no strings attached so that the person receiving the gift has control over the money or property received. A married couple can make a joint gift of $28,000 to each donee. Example: In this case, a married couple would gift the annual premium of $28,000 to the policy owner. Self-Supporting Policy* Once you reach Stage 2, there may be enough dividend value built up so that the policy 2. can become self-supporting. At that time, future premiums can be paid by using annual dividends and previously earned dividends. Example: Starting in Year 16, the illustration shows no further cash premiums; yet the cash value continues to grow. The policy is guaranteed fully paid up at insured s age 65. Distribution for College (Higher Education) At Stage 3, there is a tax-free cash withdrawal from policy to cover 3. education expenses from age 19-22, (however, unlike many education plans, this can be used for much more than education). Example: In this case $60,000 is being withdrawn annually for 4 years. Recovery of Cost Basis In Stage 4, cash value is withdrawn up to cost basis. This lump sum could be used to 4. finance a new home purchase, fund a business venture, or to satisfy any number of financial needs. Example: In our sample case, $180,000 is being withdrawn tax free at age 40, bringing the cost basis down to zero. 5. Retirement Distributions At Stage 5 tax-free loans are taken to supplement the insured s retirement for a 20-year period. Example: In this illustration, $200,000 is borrowed annually from ages (However, unlike many retirement plans this could have started before 59 1/2) Residual Death Benefit After all distributions have been taken there is still a substantial amount of death benefit 6. remaining for heirs. Example: On the sample illustration there is over $4.5M of death benefit remaining at age 86 after distributions have been taken. Top Reasons to Gift Life Insurance to a Child 1. A participating whole Life insurance policy is designed to grow in value over the long term through the accumulation of guaranteed cash values and dividends, as long as the required premiums are paid and the policy has no loans, loan interest, or withdrawals. 2. Provides a future cash resource for things such as college tuition payments, seed money for a new business, supplemental retirement income, or a down payment for a new home.* 3. Gifting life insurance is an intelligent strategy in estate planning. 4. Establishes a financial foundation that will endure. 5. Leverages dollars to provide a significant legacy for a child s future use (the child may assume payment of the policy in the future as an adult to further enhance death benefit and cash value growth). Interest is subject to taxes. Guardian, its subsidiaries, agents or employees do not give tax or legal advice. You should consult your tax or legal advisor regarding your individual situation. The example shown is based on a hypothetical policy not available for sale, using Guardian s whole life paid-up at age 65 and averaging male and female values for issue age 2. Keep in mind that the accompanying summary illustration is designed to explain basic contract mechanics and is not a complete illustration. A complete illustration must be reviewed before purchasing any life insurance contract. Values are based on the 2013 dividend scale. The stages described do not take into account the time value of money. The cash value increases are a result of both the premium payments and dividends on the existing cash value. * Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under 59 1/2 any taxable withdrawal is also subject to a 10% tax penalty.

6 Policy Form No. 12-L65 Pub 6200 (10/13) The Guardian Life Insurance Company of America 7 Hanover Square New York, NY