Advanced Markets Sales Strategy Private Split Dollar

SITUATION One of the first things that an individual learns in the process of estate planning is that in order to remove valuable assets from an estate for estate tax purposes, the assets generally must be given away irrevocably, either to an individual or a trust. However, the prospect of an irrevocable transfer of assets can be unattractive to many taxpayers for a number of reasons. In addition, the gift tax cost of funding large life insurance policies inside of an Irrevocable Life Insurance Trust (ILIT) can be large, depending on the size of the policy. 1 Private Split Dollar is a flexible solution that can reduce the gift tax cost of funding an ILIT. WHAT IS PRIVATE SPLIT DOLLAR? Split Dollar refers to an agreement between two or more parties to share or split a life insurance policy s death benefit and cash value. Private Split Dollar is a term used to describe a Split Dollar agreement between individuals (or entities created by such individuals) who do not have an employer/employee relationship. Because most Private Split Dollar arrangements involve members of a single family, Private Split Dollar is sometimes referred to as Family Split Dollar. Private Split Dollar is a popular estate planning tool for those individuals who understand the importance of life insurance in estate planning, but also want to reduce their gift tax costs and retain some access to the cash value of the life insurance policy. LIFETIME GIFTS Annual Exclusion Gifts. The gift tax annual exclusion is the maximum amount which a taxpayer can gift each year to any beneficiary without being required to use Sales Strategy Private Split Dollar WHY IS PRIVATE SPLIT DOLLAR USED IN ESTATE PLANNING? his or her lifetime exemption amount from gift tax.² If gifts are limited each year to this annual exclusion amount, the person making the gift is not required to file a gift tax return, and no gift taxes will be due. The amount of the annual exclusion in 2011 is $13,000. The gift tax annual exclusion amount may be adjusted annually based on cost-of-living increases in the Consumer Price Index. If the estate tax rate is 50%, each gift of $13,000 during life can result in a savings of at least $6,000 at death, plus the appreciation on the asset following the gift. Lifetime Gift Exemption. In addition to the gift tax annual exclusion, each person also has an exemption amount from gift taxes that can be used during lifetime. Although using the lifetime gift tax exemption can reduce the amount of exemption that a person has available at death, it can also enable wealthy individuals to make large gifts during lifetime and to remove assets, along Due to the passage of the 2010 Tax Act,the lifetime exemption amount is $5,000,000 per individual in 2011 and 2012 only. On January 1, 2013, the exemption is scheduled to be $1,000,000 (indexed for inflation). Therefore, there is a two-year window to maximize the use of the higher exemption of $5,000,000.³ with the future appreciation and income from those assets, from the taxable estate. This approach can be particularly important for people who own assets that are expected to appreciate in the future and/or can be transferred at a discounted gift tax value, such as interests in a family limited partnership (FLP). 4 Advanced Markets Sales Strategy Private Split Dollar 1

HOW DOES IT WORK? For Single Life Private Split Dollar, the insured usually creates an ILIT and the ILIT trustee enters into a Split Dollar agreement with either the spouse of the insured, the insured, a child of the insured, a family limited partnership or another irrevocable trust. Each year the individual or entity will pay the entire premium. The individual may also make a gift of the annual cost of the life insurance protection, also known as the economic benefit cost, to the ILIT. As a result, the amount that the insured has to gift to the trust is significantly reduced. An annual gift tax exclusion is the amount of annual gifts that each individual can make to each of an unlimited number of people without federal gift tax. In 2011, this amount is $13,000. In order for the gift of the economic benefit amount to qualify for the annual exclusion, the trustee should keep the gift in the trust for at least 30 days and send Crummey withdrawal notices to the trust beneficiaries. After the 30-day period expires, the trustee can use the gift to repay the grantor for the economic benefit amount each year. 5 For Survivorship Private Split Dollar, usually a husband and wife enter into a Split Dollar agreement with an ILIT created by them. The ILIT is typically the owner of the survivorship life insurance policy and, in the most common example, the ILIT and the insureds will split the right to receive the death benefit. The portion of the death benefit payable to the insureds upon termination of the arrangement is ordinarily equal to the greater of cash value or premiums paid. 6 FINAL SPLIT DOLLAR REGULATIONS On September 11, 2003, the IRS released final regulations on Split Dollar, which apply to all Split Dollar arrangements entered into after September 17, 2003. 7 The Final Regulations provide two mutually exclusive tax regimes for the taxation of collateral assignment Split Dollar arrangements: the economic benefit regime and the loan regime. benefits provided as a result of the termination of the arrangement. Private Split Dollar arrangements that are set up as non-equity collateral assignment plans, in which a trust is the owner of the life insurance policy and the greater of the policy s cash value or premiums paid are assigned to the non-owner (the insured) paying the largest portion of the premium, can be structured using the economic benefit regime. In many estate planning situations, the economic benefit regime is preferred over the loan arrangement because of the low gift and income tax costs of the arrangement as well as the minimal cash outlay for the policy owner (usually a trust). Loan Regime. All other collateral assignment Split Dollar arrangements are taxed under a loan regime and treated as a series of loans subject to the principles of Section 7872 of the tax code ( below market loans ), unless interest accrues at, or in excess of, the Applicable Federal Rate (AFR). Whether loan treatment is more advantageous than the economic benefit regime depends on the facts of each particular case. In some cases, it may make sense to start as an economic benefit arrangement and then switch to a loan arrangement (this approach is known as Switch Dollar ) 8 after the economic benefit rates increase. Valuation of Economic. It can be advantageous for a client to use a Split Dollar plan under the economic benefit regime because the measure of the benefit is based on a fraction of the premium and not the full amount, which translates into a low income and gift tax cost for the client. The economic benefit is equivalent to only the term cost or economic value of the death benefit, derived from a government rate table referred to as Table 2001 (The Notice). 9 The economic benefit can be measured using the lower of the IRS Table 2001 rates or the insurer s one-year term rates for a standard risk. The insurer s alternative term rates, if lower than Table 2001, can be used only if the rates meet certain additional requirements. 10 Economic Regime. Under the economic benefit regime, a participant is taxed on the economic value of the insurance provided during the course of the arrangement, and the economic value of any other 2

BENEFITS The insurance policy provides liquidity outside of the taxable estate if structured properly. Gift taxes can be reduced since the measure of gift tax is based on the economic benefit or loan interest cost and not the full premium. Annual exclusion gifts can be leveraged significantly when life insurance is structured as a Split Dollar policy. CONSIDERATIONS Sufficient cash flow is required to fund the life insurance premiums. The economic benefit costs increase with age. When a survivorship policy is used, the economic benefit costs will increase at the death of the first spouse on a survivorship policy. It is important to consider a lifetime termination of the plan when designing the life insurance policy, and it may also make sense to add the Return of Premium (ROP) rider to the policy death benefit. 11 When the trust repays the collateral assignment amount to the insured(s), the repayment is included in the insured s taxable estate. CASE STUDY: ELLIE AND JEREMY WALKINS Situation. Ellie (age 53) and Jeremy Walkins (age 55) are in good health and need $10,000,000 of survivorship life insurance for estate liquidity purposes. Although in the next two years they can make significant annual premium gifts to the trust on a tax free basis courtesy of the 2010 Tax Act discussed earlier, after 2012, they may run into a gift tax problem. That is, they each have two annual gift tax exclusions available, but they want to continue to provide their children cash gifts annually. They have sufficient cash flow to fund the policy. The Walkins net estate is currently $10,000,000. Assuming an annual estate growth of 3% (net of taxes), their estate may grow to over $20,000,000 in 25 years. Since the Walkins are still young enough to benefit from low economic benefit rates, their advisor suggests a non-equity collateral assignment Split Dollar plan. Solution. Ellie and Jeremy create an ILIT and the trustee of the ILIT enters into a Private Split Dollar arrangement with the Walkins. The trustee purchases a John Hancock Protection SUL, a current assumption survivorship universal life policy with a face amount of $10,000,000 based on an annual level premium of $67,446 for 10 years. Ellie and Jeremy will pay the entire premium annually. Meanwhile, the gift tax value is the annual cost of the life insurance protection, also known as the economic benefit cost. The trustee of the ILIT will collaterally assign the greater of the policy s cash value or premiums paid to the Walkins as security for repayment of premiums. Upon the death of the surviving spouse, the estate will receive that portion of the death benefit equal to the greater of premiums paid or the policy s cash value. The ILIT will receive the remainder of the death benefit. The table below demonstrates that the amount that the Walkins need to gift to their trust each year can be significantly reduced by using a Private Split Dollar arrangement. Scenario 1 Year of Gift to Trust without Split Dollar of Gift to Trust with Split Dollar (Economic Amount) 1 $67,446 $135 5 $67,446 $312 10 $67,446 $792 15 $0 $67,446 This example assumes the use of a $10,000,000 John Hancock Protection SUL, a current assumption universal life policy based on an annual premium of $67,446 on a male (age 55) and female (age 53) are paid for 10 years when due. This is a supplemental illustration authorized for distribution only when preceded or accompanied by a basic illustration from the issuer. s and values may not be guaranteed; the assumptions on which they are based are subject to change by the insurer. Actual results may be more or less favorable. Refer to the basic illustration for guaranteed elements and other important information. 3

CASE STUDY: ELLIE AND JEREMY WALKINS (CONTINUED) Alternatively, if the Walkins want to take advantage of the current lifetime exemption from gift tax, they can make a lump-sum gift of $2,000,000, for example, into the trust and have that lump sum grow outside the taxable estate. The trustee can pay the annual economic benefit cost from this lump sum as well as use it to repay the Split Dollar loan balance (also referred to as a rollout ) in the future. Assuming a 6% net rate of return on the trust assets, beginning in year 11, the Split Dollar plan can be rolled out using the trust side fund. Because premiums will continue to be due on the policy in this case, the net trust assets can fund the policy premiums annually as well. Take a look... Scenario 2 Year Age Premium Cash Surrender Lump-Sum Gift BOY Split Dollar Loan Balance Economic Due/ Premium Trust Death (net of Rollout) @ 6% Return 1 56/54 $67,446 $0 $2,000,000 $67,446 $135 $9,932,554 5 60/58 $67,446 $100,436 $0 $337,230 $312 $9,662,770 10 65/63 $67,446 $374,845 $0 $674,460 $792 $9,325,540 11 66/64 $67,446 $0 $0 $674,460 $67,446 $10,000,000 15 70/68 $67,446 $0 $0 $0 $67,446 $10,000,000 20 75/73 $67,446 $0 $0 $0 $67,446 $10,000,000 This is a supplemental illustration authorized for distribution only when preceded or accompanied by a basic illustration from the issuer. s and values may not be guaranteed; the assumptions on which they are based are subject to change by the insurer. Actual results may be more or less favorable. Refer to the basic illustration for guaranteed elements and other important information. If the Walkins have another planning vehicle available, such as a Grantor Retained Annuity Trust (GRAT) that is in the process of being created or has already been established, the ILIT could be named as the beneficiary of the GRAT. In this case, at the end of the GRAT term, the proceeds from the GRAT would fund the ILIT. The ILIT could then roll out of the split dollar plan. Note that trusts should be drafted by an attorney familiar with such matters to take into account transfer tax rules as well as the types of assets that may be suitable for such planning approaches. 4

1. Trusts should be drafted by an attorney familiar with such matters in order to take into account income and estate tax laws (including the generation-skipping transfer tax). Failure to do so could result in adverse tax treatments of trust proceeds. 2. Gifts to a trust may qualify for the annual exclusion if they are present interest gifts and the trust beneficiaries must have Crummey rights of withdrawal over the gifts. 3. Under the current law, which is based on the Unemployment Insurance Reauthorization and Job Creation Act of 2010, (2010 Tax Act) the maximum estate tax rate is 35% with a $5,000,000 exemption for each individual. For 2012, this $5,000,000 will be indexed for inflation, taking into account inflation that occurred from January 1, 2010, through December 31, 2011. The $5,000,000 exemption amount can be used either during lifetime, as a gift tax exemption amount, or at death as an estate tax exemption. In addition, each individual has a $5,000,000 exemption to the generation-skipping transfer (GST) tax; this $5,000,000 can be used during life or at death. If an individual passes away with an unused amount of exemption remaining, that individual s surviving spouse can use the unused portion of the decedent s $5,000,000 exemption, to shelter a transfer from either gift or estate taxes. The Unemployment Insurance Reauthorization and Job Creation Act of 2010 will sunset at the end of 2012, returning us to the estate tax rate and exemption that existed in 2001. 4. Under IRC Sec. 2035, certain gifts made within three years of death will be includable in the decedent s estate when calculating the gross estate. The three-year rule applies to certain gifts such as life insurance proceeds, and gifts with a retained life estate. 5. See IRC 2503(b). The annual exclusion is indexed annually for inflation and subject to specific rules. In order for the gift of the economic benefit amount to qualify for the annual exclusion, the trustee should keep the gift in the trust for at least 30 days and send Crummey withdrawal notices to the trust beneficiaries. After the 30-day period expires, the trustee can use the gift to repay the grantor for the economic benefit amount each year. 6. The IRS has recently affirmed that no federal estate tax inclusion results from the life insurance proceeds in a survivorship non-equity Private Split Dollar arrangement if the arrangement is properly structured. The IRS also affirmed that the annual gift to the trust is the cost of current life insurance protection and that the arrangement will be taxed under the economic benefit rules. See Private Letter Rulings 200825011 and 200822003. A private letter ruling (PLR) is a written statement from the IRS in response to a specific request from a particular taxpayer for clarification and guidance and may not be used or cited as precedent. 7. Existing Split Dollar arrangements, established prior to September 18, 2003, will continue to be governed under the economic benefit rules outlined in Revenue Ruling 64-328 and Revenue Ruling 66-110. Although the parties to these existing plans may terminate the arrangement or convert it from an economic benefit plan to a loan arrangement, termination or conversion of a policy will presumably cause taxation of any gain in the life insurance policy in excess of premiums paid. 8. When a life insurance policy with high cash accumulation is used, the Switch Dollar plan can also help a client to minimize the amount of the collateral assignment by switching to a loan arrangement before the policy is in a gain position. 9. IRS Notice 2002-8 directs taxpayers to make appropriate adjustments to the government Table 2001 rates for survivorship cases. IRS Notice 2002-59 forbids the use of Table 2001 (or the insurer s lower published premium rates) to determine the value of economic benefit in reverse split dollar arrangements. 10.Under IRS Notice 2002-8 and the final split dollar regulations, the insurer s annual renewable term rate may be used if it is lower than the economic benefit value produced by Table 2001 as long as: (i) the insurer generally makes the availability of such rates known to persons who apply for term insurance coverage from the insurer, and (ii) the insurer regularly sells term insurance at such rates to individuals who apply for term insurance coverage through the insurer s normal distribution channels. However, these guidelines are subject to change and may be revised by the IRS in the future. 11.The Return of Premium (ROP) rider allows clients to select the percentage of the return of premium desired. The rider will increase the death benefit each year by that percentage of the premium loan so that in any given year, the lender will get back from the death benefit what it paid to date in premiums, keeping the original face amount intact for the heirs. There are costs associated with the rider, as well as limitations on the cumulative amount that can be returned. This material does not constitute tax, legal or accounting advice and neither John Hancock nor any of its agents, employees or registered representatives are in the business of offering such advice. It was not intended or written for use and cannot be used by any taxpayer for the purpose of avoiding any IRS penalty. It was written to support the marketing of the transactions or topics it addresses. Comments on taxation are based on John Hancock s understanding of current tax law, which is subject to change. Anyone interested in these transactions or topics should seek advice based on his or her particular circumstances from independent professional advisors. Products and features may not be available in all states. Insurance products are issued by John Hancock Life Insurance Company (U.S.A.), Boston, MA 02116 (not licensed in New York) and John Hancock Life Insurance Company of New York, Valhalla, NY 10595. 2011 John Hancock. All rights reserved. IM1479 07/11 MLINY07131115262 Policy Form Series: 11PROSUL INSURANCE PRODUCTS: Not FDIC Insured Not Bank Guaranteed May Lose Not a Deposit Not Insured by Any Government Agency

John Hancock Life Insurance Company (U.S.A.) Valuable Information About Your Life Insurance Illustration d Client Mrs. d Client Survivorship Universal Life Insurance The Survivorship Universal Life Insurance policy which you are considering provides flexible death benefit protection on two lives and premium payment flexibility. The values in the insurance contract grow based on the amount and timing of each premium payment, plus the interest rate and other credits applied to the policy, less insurance and other charges. Initial Death $10,000,000 Death Option 1; Cash Accumulation Test Based on Current Charges and an Initial Current Rate of 5.20% received. Death benefit option changes, loans, withdrawals, rider termination or change, and/or face amount decreases will also affect the Death Protection feature. If a policy loan is outstanding, the Death Protection feature will not prevent your policy from lapsing if the Policy falls to zero. Certain aspects of the policy cannot be predicted with absolute certainty. These nonguaranteed elements are described on the following pages. For example, the interest rate credited may exceed the guaranteed rate and monthly charges may be less than the maximum guaranteed charges. This is an illustration only and is not intended to predict actual performance. Death The life insurance provided in this illustration reflects a Total Initial Death of $10,000,000. The Death is composed of $10,000,000 in Face Amount (Option 1). The net death benefit reflects total loan plus any loan interest due. Death Protection This policy illustration shows the Death Protection feature guaranteeing the policy death benefit to the younger Life Insured s attained age 88. As long as the Death Protection feature is in effect and no loan is outstanding, your policy cannot lapse even if the Cash Surrender falls to zero or below. The Death Protection feature will stay in effect as long as the reference value called the Death Protection is greater than zero. The Death Protection is a reference value and is only used to determine whether or not the Death Protection feature will stay in effect. The policyowner cannot access the reference value. Like your Policy, the Death Protection is directly affected by the timing and amounts of premiums paid. To ensure that you have the Death Protection feature in effect for the period illustrated, it is important that premium payments are paid when they are due, otherwise your policy may lapse. Planned Premium Outlay One of the advantages of Survivorship Universal Life Insurance is premium payment flexibility, allowing you to vary the amount of your payments. This illustration assumes an Initial Planned Premium Outlay of $67,446.00 and that all subsequent premium payments are made at the beginning of each modal period. Reduced or discontinued premiums in future years are only possible if the premiums paid and amounts credited are sufficient to cover the cost of insurance and administrative expenses. These factors, as well as any outstanding policy loans or withdrawals, could necessitate additional premiums to maintain your insurance coverage. Payments in excess of the planned premium are subject to underwriting approval. Guaranteed Coverage Premium Based on the initial death benefit shown in the illustration, the level annual premium to guarantee coverage for life is $120,032.75. Death benefit option changes, loans, withdrawals, policy changes, and face amount changes will cause this premium to be recalculated. Premiums are subject to maximum guidelines allowed by the Internal Revenue Code. For purposes of calculating your Death Protection, we will apply premiums retroactively to the beginning of the policy month in which they are Interest Rate Interest is illustrated at an initial assumed effective annual rate of 5.20%. We determine the rate of interest Version: 7.1JHFN[0-0-24600-3584-8192] Page 1 of 11

John Hancock Life Insurance Company (U.S.A.) Valuable Information About Your Life Insurance Illustration (cont'd) d Client Mrs. d Client to be credited to the Policy based on our assessment of investment yields and other considerations as outlined in your policy. The current rate may increase or decrease, but at no point will the interest credited to the policy be lower than the guaranteed annual rate of 2.50%. Our obligations under your policy are backed by our general account assets. In addition to fixed income investments, such as corporate bonds, we expect to invest a portion of the premiums received under this class of policies in equities and other longer-duration assets. This investment approach, which may be different from the mix expected with other survivorship universal life policies, is intended to produce results that would permit us to credit values that maximize your policy s performance over the longer term. However, this approach could also cause the policy to experience a higher degree of variability of results year-to-year relative to other survivorship universal life policies. It is important to review your annual statement and request periodic in-force illustrations to make sure your policy continues to meet your objectives. 3.70% 40 3.20% 38 2.70% 36 2.50% Minimum Rate 36 Initial Death $10,000,000 Death Option 1; Cash Accumulation Test Based on Current Charges and an Initial Current Rate of 5.20% * In this table, the lapse year is hypothetical only, based upon the assumed factors, and is not guaranteed. For instance, the mortality charges used in these calculations are less than the maximum charges, and the Persistency Credit assumed is greater than the guaranteed minimum. Accessing Policy After your policy has been in force for one year, you can make partial cash withdrawals. You can surrender your policy for cash at any time. We will pay you the policy value less a surrender charge and any policy debts you may have. You can also borrow the available cash value at any time. Amount Credited This is the interest earned on the Policy, including the amount of interest credited on the Loan Account, plus the Persistency Credit. Illustrations will be shown at the guaranteed minimum interest rate, and an assumed rate (or rates). An assumed illustrated rate will never be higher than the current rate, or lower than the guaranteed minimum rate. s illustrated at the current or an assumed rate are not guarantees or estimates, but merely illustrate results on the basis of the selected assumption. Changes in the rate of interest that we declare will affect both the interest and Persistency Credit applied to your Policy. The table below shows how these changes could affect the continuation of your coverage, keeping other assumptions constant (including planned premiums, issue age, risk class and current charges): Interest Rate Assumption 5.20% Initial Current Rate N/A 4.70% 45 4.20% 42 Policy Year at Lapse* Policy Loans Policy loans may be taken against the Policy at any time, and if projected on an illustration, are assumed to be taken at the beginning of the year. The maximum loan amount available is the Surrender less any indebtedness, one year of policy charges, and one year s loan spread. The net cost of a loan equals the loan interest rate charged less the loan interest rate credited to the portion of Policy securing the loan. This differential is guaranteed to be no greater than 1.5% in policy years 1-10. In subsequent years, the differential is currently 0.00%, and guaranteed not to exceed 0.25%. Loan interest is payable in arrears. The loan interest rate used in this policy illustration is shown in the Policy Summary. Loan interest rates are variable and subject to change annually on the policy anniversary. Annual Loan Interest Version: 7.1JHFN[0-0-24600-3584-8192] Page 2 of 11

John Hancock Life Insurance Company (U.S.A.) Valuable Information About Your Life Insurance Illustration (cont'd) d Client Mrs. d Client This is the interest charged on the outstanding Policy Debt. In the event that you do not pay the loan interest charged in any Policy Year, it will be borrowed against the policy and added to the Policy Debt in arrears at the Policy Anniversary. Withdrawals Withdrawals reduce the Policy and the Death. Withdrawals, if illustrated, are assumed taken at the beginning of the year. Life Expectancy The estimated joint life expectancy is 33.7 years assuming 2001 CSO Smoker/Nonsmoker Mortality Table. It does not predict when the second life will die. It is expected that more than half of the insureds will live longer than the average. Policy Continuation at Age 121 Provided your coverage is in effect on the policy anniversary nearest the date on which the younger life insured reaches attained age 121, or would have reached age 121 if living, coverage will continue after age 121 and interest will be credited. No additional charges, other than those for any outstanding policy loans, will be deducted. The tax implications with respect to policies that continue beyond age 100 are not clear at the present time. We urge you to consult your tax advisor regarding this issue if there are questions about what happens after age 100. Taxation of Life Insurance The information contained in this illustration is based on certain tax and legal assumptions. We suggest that you seek professional counsel regarding the interpretation of current tax laws and accounting practices as they relate to your actual situation. The Technical and Miscellaneous Revenue Act (TAMRA) of 1988 classifies some policies as Modified Endowment Contracts (MECs). Distributions from these policies (excluding death benefits but including policy loans and withdrawals) are taxed differently and may be subject to an IRS 10% penalty tax. TAMRA testing has been performed on the current scale only. The initial annual 7-pay premium for this policy is Initial Death $10,000,000 Death Option 1; Cash Accumulation Test Based on Current Charges and an Initial Current Rate of 5.20% $438,838.00. Based on our interpretation of TAMRA, this policy as illustrated would not be considered a Modified Endowment Contract (MEC). Employer-owned Life Insurance. Where the owner of the policy is the employer of the insured, Section 101(j) of the Internal Revenue Code specifies a number of requirements in order for life insurance death benefits to be excluded from income taxation. Potential insureds must be limited to the employer s directors and "highly compensated" employees (as defined by the law). Also, before the issuance of the policy, the potential insured must (1) be notified in writing that the employer/policyowner intends to insure the employee's life and the maximum face amount for which the employee could be insured; (2) give his or her written consent to being a life insured under the policy, and agree that such coverage may continue after the life insured terminates employment; and (3) be informed in writing that the employer/policyowner will be a beneficiary of any proceeds payable upon the death of the employee. Finally, the policyowner is required to keep records and make an annual report concerning its employer-owned life insurance policies. Taxpayers should seek the counsel of qualified tax advisors to determine the applicability of IRC 101(j) or other provisions of federal tax law and/or compliance with the requirements of any such law or regulation. Other Considerations This is an illustration only. An illustration is not intended to predict actual performance. Unless otherwise stated, amounts credited and other values set forth in the illustration are not guaranteed. This illustration assumes that the currently illustrated nonguaranteed elements will continue unchanged for all years shown. This is not likely to occur, and the actual results may be more or less favorable. Future credits and deductions can vary at the company's discretion depending upon factors such as death claims, investment earnings and expenses, as well as policy owner actions such as the timing and amount of premium payments, Version: 7.1JHFN[0-0-24600-3584-8192] Page 3 of 11

John Hancock Life Insurance Company (U.S.A.) Valuable Information About Your Life Insurance Illustration (cont'd) d Client Mrs. d Client policy lapse and reinstatement, loans and withdrawals, and contractual changes. Initial Death $10,000,000 Death Option 1; Cash Accumulation Test Based on Current Charges and an Initial Current Rate of 5.20% To ensure that your policy continues to meet your objectives, we suggest that in addition to reviewing annual statements, you periodically request in force illustrations. In force illustrations will provide an updated projection of policy performance. Protection SUL is issued by John Hancock Life Insurance Company (U.S.A.) of Boston, MA 02117. John Hancock Life Insurance Company (U.S.A.) consistently receives high financial strength ratings from independent rating agencies such as Fitch Ratings, A.M. Best, Standard & Poor's, and Moody's. For more information, please visit our website at www.johnhancock.com. For more than a century, John Hancock has offered security and high quality products to its customers. The company's experience and resources allow it to provide first class financial solutions to customers in every market in which it operates. Version: 7.1JHFN[0-0-24600-3584-8192] Page 4 of 11

John Hancock Life Insurance Company (U.S.A.) Basic Illustration Summary d Client Mrs. d Client Coverage Summary Initial Initial Coverage Description Amount Premium Face Amount - Level for all years $10,000,000 $67,446.00 Policy Summary Initial Death $10,000,000 Death Option 1; Cash Accumulation Test Based on Current Charges and an Initial Current Rate of 5.20% State Ohio Death Option 1 From 1 Thru 68 Definition of Life Insurance CVAT Payment Mode Annual Charges Current Assumed Interest Rate 5.20% From 1 Thru 68 Loan Interest Rate 5.75% From 1 Thru 68 Owner Tax Bracket 35.00% From 1 Thru 68 Initial 7-Pay Premium Target Premium $438,838.00 $75,058.36 Minimum Initial Premium $2,006.87 Death Protection Period Based on Illustrated Assumptions 35 Years Interest Adjusted Indexes on Insured at 5% -------Payment------- 10 Year 20 Year ----------Cost---------- 10 Year 20 Year Guaranteed Current Non-guaranteed Element 6.74 6.74 0.00 6.74 6.74 0.00 4.77 3.90 0.87 5.72 3.50 2.22 Interest Adjusted Indexes These indexes provide a means for evaluating the comparative cost of the policy under stated assumptions. They can be useful in comparing similar plans of insurance, a lower index being better than a higher one. These indexes reflect the time value of money. Indexes are approximate because they involve assumptions, including the rate of interest used. PSUL11 Version: 7.1JHFN[0-0-24600-3584-8192] Page 5 of 11

John Hancock Life Insurance Company (U.S.A.) Numeric Summary d Client Mrs. d Client GUARANTEED ASSUMPTIONS These policy benefits and values are GUARANTEED NON-GUARANTEED ASSUMPTIONS based on the guaranteed interest of SUMMARY YEARS ASSUMPTIONS Midpoint Scale Assumed Scale 2.50% and guaranteed charges. Based on your Planned Premium Outlay, the Years Premium Paid in Cash 36 36 66 policy would remain in force until policy year 36, month 6*. NON-GUARANTEED ASSUMPTIONS Summary Year 5 These policy benefits and values are Surrender 75,561 87,756 100,436 based on non-guaranteed elements that Death 10,000,000 10,000,000 10,000,000 are subject to change by the insurer. Actual results may be more or less Summary Year 10 favorable. Surrender 259,541 314,907 374,845 ASSUMED SCALE: Death 10,000,000 10,000,000 10,000,000 Policy benefits and values are based on the initial current interest rate of 5.20% Summary Year 20 and current charges. Based on your Surrender 355,515 712,948 1,124,103 Planned Premium Outlay, the policy Death 10,000,000 10,000,000 10,000,000 would remain in force until younger insured age 121*. Summary Year 30 MIDPOINT SCALE: Surrender 0 0 1,658,508 Assumes the midpoint interest rate Death 10,000,000 10,000,000 10,000,000 and charges which are halfway between current and guaranteed. Based on your Planned Premium Outlay, the policy would remain in force until policy year 36, month 6*. Premiums are assumed to be paid at the beginning of each modal period. Policy values, including surrender values and death benefits, are illustrated as of the end of the year, unless otherwise noted. I have received a copy of this illustration and understand that any non-guaranteed elements illustrated are * See Policy Continuation at Age 121 on "Valuable Information" page. Initial Death $10,000,000 Death Option 1; Cash Accumulation Test subject to change and could be either higher or lower. The representative has told me they are not guaranteed. I further understand that the guarantees provided by the Death Protection feature are directly affected by the amount and timing of premiums paid. Representative's Address: *.... <ins1si> <ins1dt> Applicant: Date: (Signature) (mm/dd/yyyy) <ins2si> <ins2dt> Applicant: Date: (Signature) (mm/dd/yyyy) I certify that this illustration has been presented to the applicant and that I have explained that any non-guaranteed elements illustrated are subject to change. I have made no statements that are inconsistent with the illustration. <asi> <adt> Representative: Date: (Signature) (mm/dd/yyyy) Version: 7.1JHFN[0-0-24600-3584-8192] Page 6 of 11

Policy Year John Hancock Life Insurance Company (U.S.A.) Guaranteed and Nonguaranteed s d Client Mrs. d Client EOY Age Planned Premium 1 56 54 67,446 34,822 0 10,000,000 36,283 0 10,000,000 2 57 55 67,446 71,381 0 10,000,000 75,843 0 10,000,000 3 58 56 67,446 108,187 0 10,000,000 117,397 6,175 10,000,000 4 59 57 67,446 145,080 36,293 10,000,000 161,012 52,224 10,000,000 5 60 58 67,446 181,866 75,561 10,000,000 206,741 100,436 10,000,000 6 61 59 67,446 218,283 114,508 10,000,000 254,627 150,852 10,000,000 7 62 60 67,446 254,020 152,821 10,000,000 304,697 203,499 10,000,000 8 63 61 67,446 288,671 190,097 10,000,000 356,953 258,379 10,000,000 9 64 62 67,446 321,758 225,844 10,000,000 411,424 315,509 10,000,000 10 65 63 67,446 352,748 259,541 10,000,000 468,052 374,845 10,000,000 Totals: 674,460 End of Year Guaranteed Assumptions 2.50% Minimum Rate, Maximum Charges Policy Surrender Death Initial Death $10,000,000 Death Option 1; Cash Accumulation Test End of Year Non-Guaranteed Assumptions 5.20% Initial Current Rate, Current Charges Policy Surrender Death 11 66 64 67,446 382,271 291,806 10,000,000 528,500 438,035 10,000,000 12 67 65 67,446 408,597 320,910 10,000,000 591,334 503,647 10,000,000 13 68 66 67,446 430,989 346,116 10,000,000 656,459 571,586 10,000,000 14 69 67 67,446 448,531 366,507 10,000,000 723,644 641,620 10,000,000 15 70 68 67,446 460,229 381,077 10,000,000 792,764 713,612 10,000,000 16 71 69 67,446 464,610 388,342 10,000,000 861,797 785,529 10,000,000 17 72 70 67,446 460,083 401,392 10,000,000 931,597 872,907 10,000,000 18 73 71 67,446 444,191 401,920 10,000,000 1,000,985 958,714 10,000,000 19 74 72 67,446 414,547 387,525 10,000,000 1,069,754 1,042,732 10,000,000 20 75 73 67,446 368,447 355,515 10,000,000 1,137,035 1,124,103 10,000,000 Totals: 1,348,920 21 76 74 67,446 329,891 329,891 10,000,000 1,229,089 1,229,089 10,000,000 22 77 75 67,446 269,002 269,002 10,000,000 1,318,646 1,318,646 10,000,000 23 78 76 67,446 180,859 180,859 10,000,000 1,404,064 1,404,064 10,000,000 24 79 77 67,446 59,422 59,422 10,000,000 1,483,342 1,483,342 10,000,000 25 80 78 67,446 0 0 10,000,000 1,554,057 1,554,057 10,000,000 26 81 79 67,446 0 0 10,000,000 1,613,303 1,613,303 10,000,000 27 82 80 67,446 0 0 10,000,000 1,657,682 1,657,682 10,000,000 28 83 81 67,446 0 0 10,000,000 1,683,291 1,683,291 10,000,000 29 84 82 67,446 0 0 10,000,000 1,685,523 1,685,523 10,000,000 30 85 83 67,446 0 0 10,000,000 1,658,508 1,658,508 10,000,000 Totals: 2,023,380 ## Indicates that the policy has lapsed under the illustrated assumption. Additional premium would be required to maintain policy benefits. Version: 7.1JHFN[0-0-24600-3584-8192] Page 7 of 11

Policy Year John Hancock Life Insurance Company (U.S.A.) Guaranteed and Nonguaranteed s (cont'd) d Client Mrs. d Client EOY Age Planned Premium 31 86 84 67,446 0 0 10,000,000 1,690,881 1,690,881 10,000,000 32 87 85 67,446 0 0 10,000,000 1,776,194 1,776,194 10,000,000 33 88 86 67,446 0 0 10,000,000 1,859,422 1,859,422 10,000,000 34 89 87 67,446 0 0 10,000,000 1,939,884 1,939,884 10,000,000 35 90 88 67,446 0 0 10,000,000 2,016,932 2,016,932 10,000,000 36 91 89 67,446 ## ## ## 2,084,467 2,084,467 10,000,000 37 92 90 67,446 2,145,745 2,145,745 10,000,000 38 93 91 67,446 2,189,603 2,189,603 10,000,000 39 94 92 67,446 2,221,734 2,221,734 10,000,000 40 95 93 67,446 2,239,856 2,239,856 10,000,000 Totals: 2,697,840 End of Year Guaranteed Assumptions 2.50% Minimum Rate, Maximum Charges Policy Surrender Death Initial Death $10,000,000 Death Option 1; Cash Accumulation Test End of Year Non-Guaranteed Assumptions 5.20% Initial Current Rate, Current Charges Policy Surrender Death 41 96 94 67,446 2,241,041 2,241,041 10,000,000 42 97 95 67,446 2,221,450 2,221,450 10,000,000 43 98 96 67,446 2,175,989 2,175,989 10,000,000 44 99 97 67,446 2,097,742 2,097,742 10,000,000 45 100 98 67,446 1,977,252 1,977,252 10,000,000 46 101 99 67,446 1,801,453 1,801,453 10,000,000 47 102 100 67,446 1,552,096 1,552,096 10,000,000 48 103 101 67,446 1,466,650 1,466,650 10,000,000 49 104 102 67,446 1,499,938 1,499,938 10,000,000 50 105 103 67,446 1,534,082 1,534,082 10,000,000 Totals: 3,372,300 51 106 104 67,446 1,569,357 1,569,357 10,000,000 52 107 105 67,446 1,606,648 1,606,648 10,000,000 53 108 106 67,446 1,646,621 1,646,621 10,000,000 54 109 107 67,446 1,690,195 1,690,195 10,000,000 55 110 108 67,446 1,738,456 1,738,456 10,000,000 56 111 109 67,446 1,787,914 1,787,914 10,000,000 57 112 110 67,446 1,838,756 1,838,756 10,000,000 58 113 111 67,446 1,890,617 1,890,617 10,000,000 59 114 112 67,446 1,942,427 1,942,427 10,000,000 60 115 113 67,446 1,995,561 1,995,561 10,000,000 Totals: 4,046,760 ## Indicates that the policy has lapsed under the illustrated assumption. Additional premium would be required to maintain policy benefits. Version: 7.1JHFN[0-0-24600-3584-8192] Page 8 of 11

Policy Year John Hancock Life Insurance Company (U.S.A.) Guaranteed and Nonguaranteed s (cont'd) d Client Mrs. d Client EOY Age Planned Premium 61 116 114 67,446 2,053,307 2,053,307 10,000,000 62 117 115 67,446 2,122,059 2,122,059 10,000,000 63 118 116 67,446 2,214,309 2,214,309 10,000,000 64 119 117 67,446 2,355,146 2,355,146 10,000,000 65 120 118 67,446 2,597,054 2,597,054 10,000,000 66 121 119 67,446 2,463,614 2,463,614 10,000,000 67 122 120 0 2,844,186 2,844,186 10,000,000 68 123 121 0 30,760 30,760 10,000,000 69 124 122 0 32,360 32,360 10,000,000 70 125 123 0 34,043 34,043 10,000,000 Totals: 4,451,436 End of Year Guaranteed Assumptions 2.50% Minimum Rate, Maximum Charges Policy Surrender Death Initial Death $10,000,000 Death Option 1; Cash Accumulation Test End of Year Non-Guaranteed Assumptions 5.20% Initial Current Rate, Current Charges Policy Surrender Death 71 126 124 0 35,813 35,813 10,000,000 72 127 125 0 37,675 37,675 10,000,000 Totals: 4,451,436 ## Indicates that the policy has lapsed under the illustrated assumption. Additional premium would be required to maintain policy benefits. Version: 7.1JHFN[0-0-24600-3584-8192] Page 9 of 11

John Hancock Life Insurance Company (U.S.A.) Glossary of Terms d Client Mrs. d Client Face Amount The Face Amount is the coverage provided by the base policy. Any decreases to the Face Amount after the first policy year must fall within policy minimums. If a Death Option Change is illustrated, this column also includes the amount by which the Face Amount has increased as a result of that change. Initial Death $10,000,000 Death Option 1; Cash Accumulation Test Based on Current Charges and an Initial Current Rate of 5.20% and reinstatement, loans and withdrawals, and contractual changes. The Persistency Credit in this illustration assumes that all nonguaranteed elements of this policy will continue unchanged, and that the policy owner s actions will not vary from those illustrated. You can see a projection of the effect that a policy owner action might have on the Persistency Credit by requesting an in-force illustration. Monthly Administrative Charge A monthly Administrative Charge of $15.00 will be assessed in all years, current and guaranteed. Contract Charge The Contract Charge is a rate of $7.395 per $1,000 of the Premium Charge Limit, and deducted each policy month for the first 20 policy years. This charge varies by each insured's issue age, gender, risk classification, and the policy duration. Premium Charge Limit The policy s Premium Charge Limit is $300233.44. This value is used in the calculation of the Premium Charge, Surrender Charge, and Contract Charge. Cost Of Insurance Current insurance charges are based on Company experience. The current rates may change, but are guaranteed never to exceed the maximum rates. Maximum rates reflect the 2001 CSO Sex and Smoker Distinct Age Nearest Birthday Ultimate Mortality Table. Death Option Death Option 1 provides a level amount of coverage. It will increase only when necessary to maintain the definition of life insurance. Death Option 2 provides coverage equal to the Face Amount plus the Policy plus any amount necessary to maintain the definition of life insurance. Death The Death illustrated is the Face Amount plus any Required Additional Death. This is the value that is payable upon the death of the surviving insured as stated on the front page of the policy. The actual amount payable may be decreased by loans or increased by additional insurance benefits. Death s are illustrated as of the end of the year. Death reflects the total loan plus any loan interest due. Income Income reflects any illustrated withdrawal, policy loan and/or loan interest due. Persistency Credit Beginning in Policy Year 11, a Persistency Credit is added to your Policy on each monthly processing date. The Persistency Credit is guaranteed to be no less than 0.025% of the Policy. The amount of Persistency Credit that we declare above the guaranteed minimum will be determined in a uniform and non-discriminatory manner. We will determine the Persistency Credit taking into account our investment experience and other company factors, and policy owner actions such as the actual timing and amount of premium payments, policy lapse Surrender The Surrender is the Policy less surrender charge(s), and is illustrated as of end of the year. This amount is shown net of withdrawals and total loans plus interest due. During the surrender charge period, there is a surrender charge assessed if all or part of the Face Amount is reduced. If the policy terminates for any reason, the amount of any outstanding loan (that was not previously considered income) could result in a considerable tax. Under certain situations involving large amounts of outstanding loans, you might find yourself having to choose between high premium requirements to keep Version: 7.1JHFN[0-0-24600-3584-8192] Page 10 of 11

John Hancock Life Insurance Company (U.S.A.) Glossary of Terms (cont'd) d Client Mrs. d Client your policy from lapsing and a significant tax burden if you allow the lapse to occur. Please consult your tax advisor for further information. Initial Death $10,000,000 Death Option 1; Cash Accumulation Test Based on Current Charges and an Initial Current Rate of 5.20% Planned Premium Outlay The Planned Premium Outlay is the amount which the policyholder plans to pay. This illustration assumes that planned premiums are paid at the beginning of each modal period indicated. Additional premiums may be paid while the policy is in force, subject to our minimum and maximum limits. Policy When premiums are paid, the balance, after premium charges are deducted, goes into the Policy. The Policy is credited daily with a guaranteed interest rate of 2.50% or the current rate, whichever is greater. Also, once each month, administrative and insurance charges are deducted. Required Additional Death The death benefit will automatically be increased if necessary to maintain the minimum amount of insurance needed to comply with current federal tax law (Section 7702 of the Internal Revenue Code). This will ensure that your policy maintains the favorable tax treatment associated with being a life insurance policy. Risk Class Classifications represent groups of people with similar risk characteristics and help to determine the cost of insurance. Final risk classification for a proposed insured is determined upon completion of the underwriting process, and may vary from what is shown on this illustration. If so, you will receive a Revised Basic Illustration prior to or upon delivery of your insurance contract. Version: 7.1JHFN[0-0-24600-3584-8192] Page 11 of 11

John Hancock Life Insurance Company (U.S.A.) Input Summary ~~ Internal Use Only ~~ Internal Use Only ~~ d Client Mrs. d Client Initial Death $10,000,000 Death Option 1; Cash Accumulation Test Product & Concept Concept Invest In Your Life Approved in Ohio Product Type Universal Life -- Survivorship Product Protection SUL 11 Concept Design Owner Tax Rate 35.00% Policy Design Insured Name d Client Sex Male Issue Age / Birthdate 55 State Ohio Risk Class Standard Plus NonSmoker Total Face Amount 10,000,000 Death Option Option 1 Definition of Life CVAT Insurance Test Premium Schedule -- Solve 1 Lifetime Premium Duration Lifetime Premium Mode Annual Target Cash 1.00 Target Year Lifetime Crediting Rate Current Agent Name * Insured 2 Insured Mrs. d Client Name Insured 2 Sex Female Insured 2 Issue Age / 53 Birthdate Insured 2 Risk Class Standard Plus NonSmoker Policy Options Estimated Policy Issue Today + 1 Month Date Charges Current Lump Sum Month Year 1 1 Lump Sum Month 1 Years 2+ MEC Testing Allow MEC Target Cash 1.00 Target Year Lifetime Withdrawal Cap Basis Loan Cap None Loan Interest Payment Borrow Type Variable Loan Interest 5.75% Rate Optional Reports Optional Reports Yes Input Summary Yes John Hancock used the fully allocated expense method to test and verify all products for compliance with the NAIC Life Insurance Illustration Model Regulation. Version: 7.1JHFN[0-0-24600-3584-8192]

Invest In Your Life THE ADVANTAGES OF OWNING LIFE INSURANCE Prepared For: d Client & Mrs. d Client Prepared By : * June 09, 2011 Insurance products issued by: John Hancock Life Insurance Company (U.S.A.) Boston, MA 02116 MLI1208067255