Demystifying Estate Planning To Grow Your Practice PRESENTED

Demystifying Estate Planning To Grow Your Practice [PRESENTED BY: [Joe Sample, ] [Designations per field stationery guidelines] [Company Approved Title] [Firm Name] [The Prudential Insurance Company of America] [1234 Main Street, Suite 1, Floor 10] [Anywhere], [ST] [12345] [in required states] [<ST> Insurance License Number <1234567890>] [Phone: 123 -1234] [Fax: 123 -1245] [joe. sample@prudential. com]] 1014990 -00007 -00 Ed. 12/2020 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

Today’s Session • Estate Planning Does Affect Clients • Importance of Estate Planning • 4 Steps to the Estate Planning Process - Protecting The Client’s Legacy - Tax Reduction Strategies - Implementation 2 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

Estate Planning Affects Clients MYTH: Only rich people have estates 3 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE. FACT: Just about everyone has an estate

Importance of Estate Planning • Reduce Expenses and Taxes • Make Wishes Known • Control Asset Distribution • Ease the Transition for Loved Ones 4 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

Estate Planning Process – 4 Steps STEP 1 Protecting The Client STEP 2 Protecting The Client’s Legacy STEP 3 Tax Reduction Strategies STEP 4 5 Implementation CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

STEP 1 Protecting The Client 6 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

What Clients Can Do To Protect Themselves • Durable Power of Attorney • Medical or Advanced Directives • Guardianship • Business Transfer • Life Insurance 7 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

STEP 2 Protecting The Client’s Legacy 8 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

Step 2: Protecting The Client’s Legacy • Creating a Will • Estate and Other Tax Laws • Establishing a Trust • Performing a Beneficiary Review 9 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

When There’s a Will… • Avoid Intestacy • Reduce Expenses, Taxes • Client’s Wishes Known • Makes it Easier for Family Almost 70% of U. S. adults do not have a will. 1 12020 10 Estate Planning and Wills Study, Caring. com. CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

Federal Estate Taxes Aggregate Exemption Amounts Lifetime Gift Tax Exemption • Total amount transferrable to all recipients without gift tax, $11, 700, 000* • Top Rate of 40% • In addition to annual exclusion gifts • Reduces federal estate tax exemption if used Estate Tax Exemption • Total amount transferrable to all recipients without estate tax, $11, 700, 000* • Top rate of 40% Generation Skipping Transfer Tax Exemption • Total amount transferrable to all skip persons without GST Tax, $11, 700, 000* • Top Rate of 40% • Can only be allocated to a gift or bequest • Unified with other exemptions *Amount for 2021, indexed annually for inflation; Note that unused portion is portable to taxpayer’s spouse. 11 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

Don’t Forget State Death Taxes • Estate Taxes • Inheritance Taxes • Other 12 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

Other Taxes Due at Death • Estate income tax • Tax-deferred accounts 13 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

Portability of Exemption for Spouses • Surviving spouse can use decedent’s unused exemption • Benefits the surviving spouse • Continued need for planning remains • Does not apply to GSTT as ece ed D Estate Tax Return Election: DSUEA Died with $3 million estate left to children 14 $20, 400, 000 Applicable Exclusion amount ($11, 700, 000 basic exclusion amount, plus $8, 700, 000 DSUEA) CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

Credit Shelter Trust 1. At death of first spouse, trust is funded with an amount equal to the exclusion amount of first spouse CST 1 2. Surviving spouse gets income/principal distributions 2 3. Corpus of trust distributed upon death of second spouse to children/beneficiaries 3 15 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

Trusts – General Types • Trusts are legal arrangement where a trustee owns assets for benefit of another. - Revocable Trust - Irrevocable Trust 16 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

Perform A Beneficiary Review • Review Insurance Policies and Investment Accounts, such as Annuities and IRAs • Life Changes • Provide For Your Loved Ones • Avoid Probate 17 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

STEP 3 Tax Reduction Strategies 18 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

Step 3: Creating Tax Efficiencies • Gifting Goals • Annual Gifting • Trusts 19 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

Gifting Goals • Reduce future estate tax exposure • Leave more to family, less to government • Preserve a family business • Enjoy seeing the recipient benefit during the client’s life 20 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

Annual Gifting Gift $30, 000 To Each 21 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

Accelerated Gifting $75, 000 529 Plan Contribution Using the “Five-Year Gifting Election 529 PLAN 22 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

Gifting-Annual vs. Lump Sum 3 Hypothetical Gifts by a Married Couple Hypothetical Estate Tax Savings by Year 202 $90, 000/year $20, 000 Annual Exclusion Gifts 1 Lifetime Exemption Gift 1 $1, 249, 893 $13, 226, 382 1 Annual gifts assume 6 total annual exclusions. Lump sum gift assumes each spouse makes a $10, 000 lifetime gift utilizing part of their $11, 700, 000 lifetime gift exemption for 2021. 2 Assumes the $90, 000 annual gifts would have been accumulated inside the grantors’ estates at a 5% net rate of return then subject to a 40% flat estate tax rate. 3 Assumes the appreciation on the $20, 000 gift at a 5% net rate of return would have been taxable inside the grantors’ estates at a flat estate tax rate of 40%. This is a hypothetical example and used for illustrative purposes only to describe how the strategies may work. Which strategy works best for clients will depend on their individual facts and circumstances. Actual results may vary. 23 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

Why Gift and Life Insurance Hypothetical Gifts by a Married Couple Hypothetical Estate Tax Savings by Year 202 $1, 249, 893 Life Insurance Premium $90, 000/year Level pay for 20 years Death Benefit IRR at Joint Life Expectancy (age 91) 1 $90, 000/year Annual Exclusion Gifts 1 $4, 529, 380 5. 07% Annual gifts assume 6 total annual exclusions. 2 Assumes the $90, 000 annual gifts would have been accumulated inside the grantors’ estates at a 5% net rate of return then subject to a 40% flat estate tax rate. Life Insurance assumptions: Male/Female, both age 62, non smoker plus, survivorship variable universal life insurance policy, guaranteed to age 121, 6. 5% annual gross returns. The internal rate of return (IRR) is the after-tax rate of return that would be needed each and every year to accumulate an amount equal to the death benefit by the respective year/age assuming the premiums were alternatively invested. This is a hypothetical example and used for illustrative purposes only to describe how the strategies may work. Which strategy works best for clients will depend on their individual facts and circumstances. Actual results may vary. 24 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

Irrevocable Life Insurance Trust When properly used, an ILIT will receive the death benefit proceeds of a life insurance policy both income and estate-tax free. 25 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

Irrevocable Life Insurance Trust 1. Client’s attorney drafts trust and client gifts premium to trust* 2. ILIT purchases policy on client’s life 4. ILIT distributes proceeds to trust beneficiaries *There may be federal gift-tax consequences associated with the funding of an Irrevocable Life Insurance Trust. 26 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE. 3 2 3. Upon death, policy pays death benefit to ILIT federal income and estate tax free 1 4

Spousal Lifetime Access Trust (SLAT) Grantor Spouse Beneficiary Spouse Future Heirs Gifted $$$ from grantor spouse Distributions, via trustee, to beneficiary spouse Distributions to other trust beneficiaries Irrevocable Life Insurance Trust (ILIT) Life Insurance Policy The ILIT pays premiums to the insurance company. Upon death, the death benefit is paid to the ILIT income and estate tax free, generally. The trustee, at their discretion, can make distributions to the spouse while living • Only one spouse (grantor spouse) can make gifts to the ILIT which must be done while he or she is alive (beneficiary spouse can not make such gifts) • Lifetime trust distributions to the beneficiary spouse and/or other trust beneficiaries, can be made through policy loans and withdrawals* • Indirect access to trust assets could be lost upon divorce or beneficiary spouse pre-deceasing the grantor spouse (consider “floating spouse” provisions) * Outstanding loans and withdrawals will reduce policy cash values and the death benefit and may have tax consequences. 27 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

Planning for Beneficiaries with Special Needs • Government assistance programs • Letter of Intent • Reaching the age of majority • Avoiding a mistake with financial gifts or inheritance • Special Needs Trust and life insurance 28 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

EPIC (ESTATE) FAILS 29 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

Prince • No Will or Trusts • Unexpected or Unknown Heirs A Will is imperative to designate heirs. 30 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

Sonny Bono • No will or trusts – the state appointed the administrator • Administrator forced to defend claims A Will is imperative to support intentions. 31 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

Marlon Brando • Dispute over an alleged, verbal promise • Without specific documentation in the will, the estate settled a claim for $125, 000 Wishes need to be documented in a Will and made specific. 32 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

Phillip Seymour Hoffmann • Will not updated to include children born after drafting • $30 million taxed at 40% • Missed tax deferral opportunity It’s critical to update one’s Will due to life changes and to implement a plan to account for estate taxes. 33 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

Diana, Princess of Wales • “Letter of wishes” not carried out. Was not referenced in her will. Stating specific intentions in one’s Will is imperative. 34 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

STEP 4 Implementation 35 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

Step 4: Implementation • Team Approach - Attorney - Financial Professional - CPA - Prudential Representative 36 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

Questions The Client Should Discuss With Their Team Of Professionals • Are you aware of what the current estate tax landscape looks like? • Do you have a Will? If so, do you have an executor or executrix named for your Will? • Have you considered establishing a trust to help disperse your assets? • When was the last time you performed a beneficiary review? If the client fails to plan, plan to fail! 37 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

Questions? 38 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.

Important Information Variable life insurance is issued by Pruco Life Insurance Company except in New York, where it is issued by Pruco Life Insurance Company of New Jersey and offered through Pruco Securities, LLC (member SIPC). All are Prudential Financial companies located in Newark, NJ. Clients should consider the investment objectives, risks, and charges and expenses carefully before investing in the contract and/or underlying portfolios. The prospectus and, if available, the summary prospectus contain this information as well as other important information. A copy of the prospectus(es) may be obtained by contacting your Prudential Life Wholesaler or from prudential. com. Clients should read the prospectus(es) carefully before investing. It is possible to lose money by investing in securities. This material has been prepared by The Prudential Insurance Company of America to assist financial professionals. It is designed to provide general information in regard to the subject matter covered. It should be used with the understanding that Prudential Financial, its affiliates, and/or their financial representatives are not rendering legal, accounting or tax advice. Such services should be provided by the client’s own advisors. Guarantees are based on the claims-paying ability of the issuing insurance company and do not apply to the underlying investment options. They are not backed by, the broker/dealer and/or insurance agency selling the policy, nor by any of their affiliate, and none of them makes representations or. FOR guarantees regarding the claims-paying ability 39 CREATED EXCLUSIVELY FOR any FINANCIAL PROFESSIONALS. NOT CONSUMER USE. of the issuing insurance company.

Important Information This material is being provided for informational or educational purposes only and does not take into account the investment objectives or financial situation of any of your clients or prospective clients. The information is not intended as investment advice and is not a recommendation about managing or investing your client’s retirement savings.  lients seeking information regarding their particular investment needs should contact a financial professional. Although this material is intended to be accurate as of the date of initial publication, Prudential does not assume any liability or responsibility for any errors or omissions in such materials or undertake any obligation to update such materials. Death benefit proceeds are generally received federal income tax free as provided in Internal Revenue Code Section 101(a). Investment and Insurance Products: Not Insured by FDIC, NCUSIF, or Any Federal Government Agency. May Lose Value. Not a Deposit of or Guaranteed by Any Bank, Credit Union, Bank Affiliate, or Credit Union Affiliate. © 2020 Prudential Financial, Inc. and its related entities 40 CREATED EXCLUSIVELY FOR FINANCIAL PROFESSIONALS. NOT FOR CONSUMER USE.