Indexed Pacific Estate Preserver

Transcription

1 Pacific Life Insurance Company Client Guide Unleash the Possibilities in Your Estate Plan Indexed Pacific Estate Preserver Last Survivor Indexed Universal Life Insurance IPEP-1F

2 Unleash the Possibilities with Indexed Pacific Estate Preserver >> 1 What started out as your dream is now a successful reality. You ve made it. Now may be a good time to start thinking about how to share your success with the next generation. How will treasured family assets stay in the family? How will the family business continue? Will there be sufficient liquid assets to help pay estate taxes 1 and expenses? Will your estate plan be constrained... or will you unleash the possibilities? You can help address these concerns with Indexed Pacific Estate Preserver last survivor, indexed universal life insurance. 2 Indexed Pacific Estate Preserver insures two lives and pays a death benefit when both insureds have passed away. The policy s death benefit proceeds can help: Pay estate taxes and expenses. Preserve treasured family assets for future generations. Continue the family business by helping to meet debt obligations and other expenses. In addition to life insurance protection, Indexed Pacific Estate Preserver offers guaranteed minimum interest crediting rates as well as the opportunity to earn a higher rate based in part on the performance of major indexes. With its flexible features, you may adapt your life insurance coverage if your needs change. 1 According to the American Taxpayer Relief Act of 2012, the 2015 federal estate, gift and generation-skipping transfer (GST) tax exemption amounts are $5,430,000 individual and $10,860,000 joint (indexed for inflation); the maximum estate, gift and GST tax rates are 40%. Currently, 20 states have estate and/or inheritance taxes, some of which have rates as high as 20%. Source: Where Not To Die in 2015, A. Eberling, Forbes, 9/11/2014; found at 2 Policy Form #P09IEP. This policy does not directly participate in any stock or equity investments. 3 Riders will likely incur additional charges and are subject to availability, restrictions, and limitations. When considering a rider, request a policy illustration from your life insurance producer to see the rider s impact on your policy s values. Investment and Insurance Products: Not a Deposit Not Insured by any Federal Government Agency Not FDIC Insured No Bank Guarantee May Lose Value

3 2 << Benefits of Indexed Pacific Estate Preserver Index-Based Growth Potential Strength of Guarantees Flexible Features for an Evolving Estate Plan Key Product Features Six indexed accounts Each with a guaranteed minimum interest crediting rate. Page 5. Short-Term No-Lapse Guarantee Up to 10 years of no-lapse protection, duration based on the younger insured s age at policy issue. Page 8. No-Lapse Guarantee Rider Option to extend the no-lapse guarantee up to lifetime. Page 8. Flexible benefits while living Including supplemental income potential and benefits for the surviving insured. Pages Three riders 3 with policy exchange provisions If circumstances or needs change, you have option to adjust your plan for life insurance coverage. Page 12. Indexed Growth Potential, Flexible Features for Your Estate Planning Needs

4 >> 3 Flexible Features to Adjust to the Natural Ebb and Flow of Life A legacy is forever. But your plan to protect it can evolve over a lifetime. Indexed Pacific Estate Preserver has options to help. If Your Growth Strategy Changes If You Want to Extend Your Guaranteed Protection If Your Life Insurance Needs Change Wide Range of Accounts: Allocate among any combination of the fixed account and six indexed accounts. See pages 5 and 6 for more information. Up to Lifetime Guaranteed Coverage: Choose to extend your guaranteed protection for any duration up to lifetime, regardless of policy performance via the optional No-Lapse Guarantee Rider. See page 8 for more information. Flexibility to Adjust or Exchange Your Policy: Convert your policy to another joint-life insurance policy. Split your policy into two new policies (one on each insured). See pages 11 and 12 for more information.

5 4 << If You Want Supplemental Income If You Want Additional Coverage on Only One Insured If Surviving Insured Becomes Terminally Ill Cash Value Access: You may access the policy s available cash value via policy loans and withdrawals. 4 See page 10 for more information. One-Life Insured Rider: If only one insured dies, premiums may still be due and no death benefit is paid until both insureds have died. To help expand the policy s flexibility, consider the optional one-life insured term rider 5 that pays a death benefit at the named insured s death (covers one insured or both insureds individually). Request the rider and see your personalized illustration for details. Benefits for Surviving Insured: Accelerate a portion of the death benefit if the surviving insured becomes terminally ill. See page 9 for more information. The information in this client guide is a summary of the product s benefits and features. For additional information, please request a personalized product illustration. Riders will likely incur additional charges and are subject to availability, restrictions, and limitations. When considering a rider, request a policy illustration from your life insurance producer to see the rider s impact on your policy s values. 4 Any policy withdrawals, loans, and loan interest will reduce policy values and may reduce benefits. 5 Annual Renewable Term Rider-Individual (Form #R09ARI).

6 Choose Your Growth Strategy Indexed Pacific Estate Preserver s Indexed Interest Crediting Potential >> 5 Guaranteed Floor Each indexed account offers a 0% guaranteed minimum interest crediting rate (guaranteed floor). With 0% guaranteed, the only reductions to your policy s cash value will be for policy charges and any policy distributions, like loans or withdrawals. Account Choices You may allocate among any combination of a fixed account and six indexed accounts 6 for your growth strategy. The indexed accounts credit interest based in part on the performance of the following U.S. and international indexes, excluding dividends. Fixed Account 2% Guaranteed Minimum Credits interest monthly, based on current declared rate Guarantees current rate for first policy year 1-Year International Indexed Account International Indexed Crediting Potential Credits the average of three international indexes 1-year performance, after each is applied to the current growth cap and 0% guaranteed minimum rate Composite of Indexes (1/3 each): Hang Seng, EURO STOXX 50, and MSCI Emerging Markets 1-Year High Par Indexed Account Credits Higher Rate Based on Modest S&P 500 Index Performance Credits 150% of S&P 500 index s 1-year performance, not to exceed a current growth cap S&P 500 index Guaranteed Minimum Annual Crediting Rates 2% in Fixed Account 0% in All Indexed Accounts 7

7 6 << Allocating to the Indexed Accounts Each Premium Payment (less a premium load) Applied to Fixed Account Earns current interest rate, less policy charges. On 15 th of each month, may be transferred to indexed accounts 8 Choice of Six Indexed Accounts Earn indexed interest credits at end of 1, 2, or 5 years, less policy charges. Original allocated amount, plus any credited interest, may be reallocated at the end of its 1-, 2-, or 5-year segment term to any account of your choosing. Or it may stay in the same account and will start a new 1-, 2-, or 5-year segment. The policy s accumulated value is the total of the accumulated value in the fixed account and indexed accounts. It is reduced by monthly policy charges. See page 13 for more information on policy charges. 1-Year Indexed Account Captures S&P 500 Performance up to Cap Rate 1-Year No Cap Indexed Account Captures All S&P 500 Performance in Excess of the Current Threshold Rate 2-Year Indexed Account Offers High Cap rate for S&P 500 Performance; 2-Year Crediting Duration High Par 5-Year Indexed Account Unlimited Growth Potential, 5-Year Crediting Duration Credits S&P 500 index s 1-year performance up to a current growth cap Credits 100% of S&P 500 performance minus a current Threshold Rate No Cap guaranteed Credits S&P 500 index s performance over 2 years, up to a current growth cap Credits 110% of S&P 500 performance over 5 years. No current growth cap S&P 500 index S&P 500 index S&P 500 index S&P 500 index 6 Each transfer into an indexed account creates a unit of value called a segment. Interest is credited to each segment once it reaches the end of its one-, two-, or five-year segment term. Each indexed account uses a point-to-point measurement of the index performance rate (excluding dividends), except for the High Par 5-Year Indexed Account, which uses a point to last-year-average measurement. Indexed accounts contract names and guaranteed elements: 1-Year (1 Year Indexed Account), 1-Year International (1 Year Indexed Account 2), 1-Year High Par (1 Year Indexed Account 3), 1-Year No Cap (1 Year Indexed Account 4), 2-Year (2 Year Indexed Account), and High Par 5-Year (5 Year Indexed Account 2). Guaranteed 0% minimum annual interest rate in all accounts and guaranteed 100% participation rate in all accounts except the High Par 5-Year (105%) and 1-Year High Par (140%). Guaranteed minimum growth caps: 3% in 1-Year and 1-Year International; 2% in 1-Year High Par; no cap in 1-Year No Cap; 6% over 2 years in 2-Year; and 15% over 5 years in High Par 5-Year. 1-Year No Cap current Threshold Rate is subject to change; guaranteed to be no more than 20% annually. 7 Pennsylvania-issued policies feature a 1% guaranteed minimum annual floor rate, lower current growth caps, and the 5-Year Indexed Account instead of the High Par 5-Year, all of which will be reflected in the product illustration. The 1 Year-No Cap Indexed Account is not available in Pennsylvania. 8 On current basis. Once per quarter, guaranteed minimum.

8 Additional Features for Greater Flexibility and Protection >> 7 If your estate is large enough to be subject to estate taxes, 9 you might use an irrevocable life insurance trust (ILIT) to own the life insurance policy. Having your policy owned by an ILIT may exclude the policy s death benefit from your estate s valuation for estate tax purposes. Additionally, you may be able to pay your policy s premiums using gift tax exemptions. 10 Extra Flexibility for Trust Planning Under current tax laws, a transfer of a life insurance policy to an ILIT within three years of your death may be considered a gift and the amount of the policy s death benefit may be included in your estate for estate tax purposes. If you are considering establishing an ILIT to own your policy, talk to your life insurance producer and independent tax and legal advisors about the optional Estate Preservation Rider. 11,12 If elected at policy issue for additional cost, this rider will pay an additional death benefit if both insureds die within the first four policy years. Effectively, such a benefit gives you the flexibility to buy the policy now and take up to a year to move the policy into a trust. If both insureds die within three years of gifting the policy to the trust, this rider s additional death benefit may help offset any applicable estate tax incurred. 9 According to the American Taxpayer Relief Act of 2012, the 2015 federal estate, gift, and generation-skipping transfer (GST) tax exemption amounts are $5,430,000 individual and $10,860,000 joint (indexed for inflation); the maximum estate, gift and GST tax rates are 40%. 10 As of January 1, 2015, the annual gift tax exemption is $14,000 per donee (indexed for inflation). 11 Estate Preservation Rider (Form #R13EPR or ICC13 R13EPR form # based on state of policy issue). 12 Riders will likely incur additional charges and are subject to availability, restrictions, and limitations. When considering a rider, request a policy illustration from your life insurance producer to see the rider s impact on your policy s values.

9 8 << Confidence of Two No-Lapse Guarantees Your policy offers two guarantees to help keep your policy in force, should your policy s cash value drop to zero. One is automatically included in your policy at no extra cost. The other is optional and may extend your no-lapse guarantee duration for any duration up to lifetime. Choose your desired no-lapse guarantee duration and pay your premiums as planned. Changing the amount or frequency of your premium payments may affect the no-lapse guarantee duration. Taking policy loans or withdrawals may require the payment of additional premiums beyond those planned to keep the no-lapse guarantee in force. Up to 10 Years, Automatic Your policy comes with no-lapse protection that guarantees your policy will stay in force from three to 10 years (duration based on younger insured s issue age), as long as you pay at least the Short-Term No-Lapse Guarantee Premiums stated in your policy. 13 Up to a Lifetime, Optional You may choose to extend your no-lapse guarantee for any duration you choose up to lifetime by electing the No-Lapse Guarantee Rider at policy issue for additional cost. 12 As long as the net no lapse guarantee value is positive, your policy is guaranteed to stay in force. 14 Choose your desired no-lapse guarantee duration and pay your premiums as planned for guaranteed protection. Longer no-lapse guarantee durations require higher premiums as shown in the hypothetical chart at right. You Choose Your No-Lapse Guarantee Duration Examples of No-Lapse Guarantee Durations Lifetime To Age 110 To Age 105 To Age 100 To Age 95 Lower Premiums Higher 13 Paying only the Short-Term No-Lapse Premiums will guarantee the death benefit from 3 to 10 years, duration based on the younger insured s age at issue, but will not guarantee cash value accumulation. If you discontinue paying the Short-Term No-Lapse Premiums, the no-lapse feature will terminate before the guaranteed duration. Additional premiums will be required to continue the policy beyond the guaranteed duration. 14 No-Lapse Guarantee Rider (Form #R03FNL). The Lifetime No-Lapse guarantee, depending on how you structure your policy, has a maximum duration of the younger insured s lifetime, subject to certain limits. If your net no-lapse guarantee value is zero, the no-lapse feature terminates. If the no-lapse feature terminates, additional premiums would be required to resume the no-lapse guarantee. If policy performance is such that your policy is being maintained solely by the no-lapse guarantee, your policy will not build cash value.

10 Unleash the Flexibility In Your Estate Planning Needs >> 9 Your policy s cash value growth potential is tax-deferred and may offer tax-free 15,16 supplemental income via policy loans, withdrawals, and dynamic policy riders: Potential to Supplement Your Income Support Widowed Spouse and/or Dependents Help Pay Terminal Illness Expenses for A Surviving Insured Terminal Illness Benefits for Surviving Insured After the death of one insured, the policy provides the ability to accelerate a portion of the death benefit on a potentially tax-free 16 basis if the surviving insured meets certain conditions. This benefit may be used for any reason; medical or non-medical. The Terminal Illness Rider is included with all policies at no additional cost. 17,18 The rider allows the policyowner to accelerate a lump sum payment up to $250,000 of death benefit if the surviving insured is diagnosed with a terminal illness (12 months or fewer to live). If your policy will be owned by a trust, adding the right access provisions can build in future flexibility. Talk to your independent legal and tax advisors about your circumstances. 15 For federal income tax purposes, tax-free income assumes, among other things: (1) withdrawals do not exceed tax basis (generally, premiums paid less prior withdrawals); (2) policy remains in force until death; (3) withdrawals taken during the first 15 policy years do not occur at the time of, or during the two years prior to, any reduction in benefits; and (4) the policy does not become a modified endowment contract. See IRC Sections 72, 7702(f)(7)(B), 7702A. Any policy withdrawals, loans, and loan interest will reduce policy values and may reduce benefits. 16 Benefits paid by accelerating the policy s death benefit may or may not qualify for favorable tax treatment under Section 101(g) of the Internal Revenue Code of Tax treatment of an accelerated death benefit due to terminal illness depends on the life expectancy of the insured at the time benefits are accelerated. Receipt of accelerated death benefits may affect eligibility for public assistance programs such as Medicaid. Tax laws relating to accelerated death benefits are complex. Pacific Life cannot determine whether the benefits are taxable. Clients are advised to consult with qualified and independent legal and tax advisors for more information.

11 10 << Tapping Your Policy s Cash Value Potential The policy s flexibility allows for you to determine the premiums you pay. Here s how your premiums may flow through your policy, from premium payment to accumulated cash value potential. Each premium you pay is reduced by a premium load, then applied to the accumulated value. Adjustable Death Benefit (see page 13) Accumulated Value Grows tax-deferred at interest crediting rates (see pages 5-6). Reduced by monthly policy charges (see page 13). Income Potential Tax-free 15 policy loans and withdrawals may be taken from the available accumulated value. Tax-Deferred Growth, Potential Tax-Free 15 Income Your policy s tax-deferred cash value growth can turn into tax-free 15 income via policy loans and withdrawals. Any withdrawals, policy loans, and accrued policy loan interest will reduce policy values and may reduce your policy s benefits. Consider the options below and talk to your life insurance producer for more details. Withdrawals Available after the first policy year, within policy limits. Standard Loans Credit and charge fixed interest rates on loaned amounts, guaranteed to result in a loan net cost no greater than 0.25% annually. On a current basis, the net cost is even lower: 0% in and after the sixth policy year. 19 Alternate Loans 18,20 Credit interest earned in all the 1-Year Indexed Accounts and charge a current loan rate to the loaned amount. The net cost of Alternate Loans will vary based on how the 1-Year Indexed Accounts crediting rates compare to the loan interest rate charged. Alternate Loans may result in lower or higher net costs, are more volatile, and carry greater risks than Standard Loans. 17 Accelerated Death Benefit Rider for Terminal Illness Last Survivor (Form #R14TSI or ICC14 R14TSI form # based on state of policy issue). There is no up-front cost or monthly rider charge. The cost of exercising the rider is that the death benefit is reduced by an amount greater than the rider benefit payment itself to reflect the early payment of the death benefit. Rider benefit payments will reduce the death benefit, cash surrender value, and any policy debt. Additionally, rider benefit payments may adversely affect the benefits under other riders. 18 Riders will likely incur additional charges and are subject to availability, restrictions, and limitations. When considering a rider, request a policy illustration from your life insurance producer to see the rider s impact on your policy s values. 19 Guaranteed interest charged to Standard Loans: 2.25% in all years. Guaranteed interest credited to policy s accumulated value, based on amount of Standard Loan: 2.00% in all years (2.25% in and after policy year six, current). 20 Alternate Loan Rider (Form #R10ALR) is issued with the policy.

12 What If Your Needs Change? >> 11 If your life insurance needs change, talk to your life insurance producer about your policy s options, which may include adjusting your death benefit (see page 13). If, with the help of your life insurance producer, you decide replacing your policy is in your best interest, your policy comes with options that allow you to convert your existing policy into a new one (one on both lives) or split your existing policy into two new ones (one on each insured). See next page. There are circumstances in which replacing (e.g. converting or splitting) your existing life insurance policy can benefit you. As a general rule, however, replacement is not in your best interest. Your life insurance producer can provide you with detailed information as to how a replacement may affect your plan of insurance. You should make a careful comparison of the costs and benefits, including any applicable surrender charges, of your existing policy and the proposed policy to determine whether replacement is in your best interest. Please note that the issue of a new policy will reinstate any applicable suicide exclusion and because policy charges are generally higher in the policy s early years, may negatively affect the amount of available cash value upon replacement. Additionally, not all policy benefits and riders may be available on the new policy and may be lost as a result of replacement, including the No-Lapse Guarantee Rider.

13 12 << Convert the Policy to a New One EXISTING Survivorship Policy on Both Insureds NEW Survivorship Policy on Both Insureds Split the Policy into Two New Ones NEW Single Life Policy on One Insured NEW Single Life Policy on Other Insured Convert the Policy to a New One Convert your existing policy to any other available Pacific Life survivorship life insurance product in the eighth policy year Conversion Rider. 21 No new medical underwriting required. Any applicable surrender charges on the surrendered policy are waived. Split the Policy into Two New Policies (One on Each Insured) For any reason; no triggering event required, subject to new medical underwriting approval on new policies Policy Split Option Rider. 22 If certain federal estate tax laws change significantly, no new medical underwriting is required Enhanced Policy Split Option Rider. 23 Splitting the policy is subject to income taxation on any gain in the policy. These riders 24 are included in eligible policies at no additional charge. 21 Only the Basic and SVER-LS Coverage components of the policy s Face Amount may be converted per the Conversion Rider (Rider form #R06CON). 22 Rider form #R03PSO. 23 Rider form #R03ESO. 24 Riders will likely incur additional charges and are subject to availability, restrictions, and limitations. When considering a rider, request a policy illustration from your life insurance producer to see the rider s impact on your policy s values.

14 >> 13 Adjustable Death Benefit Your policy covers two lives and pays a death benefit after the death of both insureds. Begin with as little as $100,000 in coverage. You may increase or decrease your coverage, subject to policy limits and in some cases, additional underwriting approval. Note that decreasing death benefit coverage may not necessarily lower policy charges. Requesting or scheduling increases can negate the availability of some riders, like the No-Lapse Guarantee Rider, so talk with your life insurance producer about how to best structure your policy for your needs. You will choose one of the following death benefit options at policy issue. You may switch among them as often as yearly, subject to policy limits. Level (Option A) Death benefit equals Face Amount. Increasing (Option B) Death benefit equals Face Amount plus policy s accumulated value. Return of Premium (Option C) Death benefit equals Face Amount plus sum of all premiums paid, less withdrawals. 25 Policy Charges The cost of the life insurance and benefits provided through the policy is deducted monthly from the accumulated value in the form of policy charges. These charges include an Administrative Charge, Coverage Charge, Cost of Insurance Charge, and any applicable rider charges. Additionally, a premium load is deducted from each premium payment. To understand how the policy charges will affect your policy s cash value, request a personalized illustration that includes the Analysis of Charges report. Indexed Universal Life Insurance generally requires additional premium payments after the initial premium. If either no premiums are paid, or subsequent premiums are insufficient to continue coverage, it is possible that coverage will expire. 25 The maximum issue age for Death Benefit Option C is 80. The maximum Death Benefit calculated will not exceed the amount shown in the Policy Specifications as the Option C Death Benefit Limit except as described in the Death Benefit Qualification Test, Tax Qualification as Life Insurance, and Modified Endowment Contract Tax Status sections of the Policy.

15 14 << Pacific Life The Power to Help You Succeed At Pacific Life, we believe a product is more than its illustrated policy values. It s a commitment forged with the life insurance company that issues it. When you buy a life insurance policy from us, you become a voting member of the Pacific Mutual Holding Company, so decisions made in support of our overall financial strength are also made with the policyowners best interests in mind. We take this commitment to our policyowners seriously, as shown in our history of passing along savings in the form of over 120 policy improvements since Buying life insurance is a long-term commitment. The company you choose matters.

16 This material is not intended to be used, nor can it be used by any taxpayer, for the purpose of avoiding U.S. federal, state or local tax penalties. This material is written to support the promotion or marketing of the transaction(s) or matter(s) addressed by this material. Pacific Life Insurance Company, its distributors and their respective representatives do not provide tax, accounting or legal advice. Any taxpayer should seek advice based on the taxpayer s particular circumstances from an independent tax advisor. About the indexes used in Pacific Life s indexed accounts: S&P 500 index The S&P 500 Index is a product of S&P Dow Jones Indices LLC ( SPDJI ), and has been licensed for use by Pacific Life Insurance Company. S&P and S&P 500 are registered trademarks of Standard & Poor s Financial Services LLC ( S&P ); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC ( Dow Jones ); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Pacific Life Insurance Company. Pacific Life Insurance Company s Products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index. Hang Seng Index Hang Seng Indexes Company Limited ( HSIL ) and Hang Seng Data Services Limited ( HSDS ) have licensed Pacific Life Insurance Company to use the Hang Seng Index in connection with this life insurance product. This product and its 1-Year International Indexed Account are not sponsored, endorsed, sold or promoted by HSIL or HSDS. HSIL and HSDS make no representation regarding the advisability of purchasing a life insurance product. Please read the disclaimer in relation to the Hang Seng Index in the policy illustration. For more information about the Hang Seng Index, please visit MSCI Emerging Markets Index The Product and its 1-Year International Indexed Account referred to herein is not sponsored, endorsed, or promoted by MSCI, and MSCI bears no liability with respect to any such Product and any included index. The Policy Contract contains a more detailed description of the limited relationship MSCI has with Pacific Life Insurance Company and any related Product. EURO STOXX 50 Index The EURO STOXX 50 is the intellectual property (including registered trademarks) of STOXX Limited, Zurich, Switzerland and/or its licensors ( Licensors ), which is used under license. The Product that includes the Index is in no way sponsored, endorsed, sold or promoted by STOXX and its Licensors and neither of the Licensors shall have any liability with respect thereto. Pacific Life Insurance Company Newport Beach, CA (800) Pacific Life Insurance Company is licensed to issue insurance products in all states except New York. Product availability and features may vary by state. Insurance products and their guarantees, including optional benefits and any crediting rates, are backed by the financial strength and claims-paying ability of the issuing insurance company. Look to the strength of the life insurance company with regard to such guarantees as these guarantees are not backed by the broker-dealer, insurance agency, or their affiliates from which products are purchased. Neither these entities nor their representatives make any representation or assurance regarding the claims-paying ability of the life insurance company. Non-guaranteed elements are not guaranteed by definition. As such, Pacific Life Insurance Company reserves the right to change or modify any non-guaranteed element. This right to change non-guaranteed elements is not limited to a specific time or reason. Pacific Life Insurance Company s individual life insurance products are marketed exclusively through independent third-party life insurance producers, which may include bank affiliated entities. Some selling entities may limit availability of some optional riders based on their client s age and other factors. Your life insurance producer can help you determine which optional riders are available and appropriate for you. Policy Form #P09IEP IPEP-1F /15