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Non-Equity Collateral Assignment Split Dollar for Estate Liquidity

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(1)

Non-Equity Collateral Assignment

Split Dollar for Estate Liquidity

Using Life Insurance

Presented by

<Insurance Professional's Name>

<Insurance Professional's Company>

<Securities Offered Through>

<Insurance Professional's Address>

<Insurance Professional's Telephone Number>

<Insurance Professional's State Insurance License>

(2)

As an Employer,

Attracting,

Retaining,

& Rewarding

Key Executives is a Top Priority

(3)

You Look to Executive Benefits

to Give You an Edge

But…..

(4)

…Many Top Executives Need

More Life Insurance Protection

(5)

Let Me Show You How

This Strategy May Help Meet

Your and Your Executive’s Needs

Non-Equity Collateral Assignment

Split Dollar for Estate Liquidity

(6)

What is Split Dollar?

An arrangement between an

employer and executive

to share

premium payments

and

benefits of a life insurance policy

(7)

How Does the Split Dollar

Arrangement Work?

Premiums

Ownership of Cash Value

Cash Value Net Amount at Risk

Employer Individual or Irrevocable Life Insurance

Trust (ILIT)

Pays the current cost of life insurance

Tax on cost of current life insurance protection

(8)

What is it?

(9)

Why Would You Want to Use the

Non-Equity Collateral

Assignment Split Dollar for

Estate Liquidity Arrangement?

(10)

• ILIT purchases life insurance policy on

you or on both you and your spouse

• Portion of the death benefit proceeds will be

kept out of both your and your spouse’s estate*

• Employer pays all or a majority of the premiums

and is assigned the policy cash value

– If you are a majority shareholder, the

– Employer/Corporation is given a restricted collateral assignment

• ILIT retains the death benefit in excess of

the amount owed to the employer

The Strategy

(11)

Life Insurance Owned

by an ILIT

Let’s See How This Works

Employer/Corporation

(12)

Premium Options

ILIT pays premiums

equal to reportable

economic benefit

(REB)* on its portion

of the death benefit

Employer will

pay remainder

Employer will pay all

premiums due

ILIT will pay

1 2

(13)

Rollout

• Upon termination of the

split dollar arrangement,

ILIT will pay portion

collaterally assigned to

employer

• If ILIT has no other assets

than the life insurance policy,

rollout may cause lapse of policy

(14)

Rollout Strategies

• Pre-fund the ILIT

• Promissory note

• Grantor Retained Annuity Trust

(“GRAT”)

(15)

Advantages

For The Employer

Increases loyalty and

productivity

Generally requires no IRS

approval

Can be reimbursed its total

premium outlay by

withdrawing it

For The Executive

Custom-designed to meet

their individual needs

Can provide them with pre

and post retirement life

insurance protection at a

reasonable cost

(16)

Disadvantages

For The Employer

Premiums are not deductible

to the Employer

Payment of premiums by the

Executive equal to the REB is

taxable to the Employer

For The Executive

No cost basis in the policy

(17)

Consider the Non-Equity Collateral

Assignment Split Dollar for

Estate Liquidity Arrangement if You…

• Want estate tax-free death

benefit proceeds*

• Want to minimize gift element to

REB**

• Can purchase necessary life

insurance coverage without

utilizing exemption amount or

paying gift taxes

(18)

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, 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.

Pacific Life refers to Pacific Life Insurance Company and its affiliates, including Pacific Life & Annuity Company. Insurance products are issued by Pacific Life Insurance Company in all states except New York, and in New York by Pacific Life & Annuity Company. Product availability and features may vary by state. Each company is solely responsible for the financial obligations accruing under the products it issues. Product and rider guarantees are backed by the financial strength and claims-paying ability of the issuing company and do not protect the value of the variable investment options.

Variable insurance products are distributed by Pacific Select Distributors, Inc. (member FINRA & SIPC), a subsidiary of Pacific Life Insurance Company, and are available through licensed third-party broker-dealers.

Pacific Life’s individual life insurance products are marketed exclusively through independent third-party insurance professionals which may include bank-affiliated entities.

Investment and Insurance Products: Not a Deposit – Not FDIC Insured

– Not Insured by any Federal Government Agency – No Bank Guarantee – May Lose Value

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