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Advanced Markets Group

PREMIUM FINANCING

SunSolutions For Life SM

Premium Financed Life Insurance Using

Capital Maximization Strategy and A. I. Credit SM

The following case study discusses a planning technique for large estates using a Sun Universal ProtectorPlus
universal life policy owned in a trust outside the estate and purchased using premium financing borrowing strategy.

Goal
To transfer wealth to the next generation with minimal taxes and settlement costs.

Current Situation
Robert Bergstrom, age 71 and widowed, has an estate of more than $18 million, including rental properties
and desirable undeveloped land currently valued at $16 million. When Robert dies, the estimated costs

FINANCING
to settle his estate may exceed 50% of its worth, or $9 plus million. If the estate’s executor were forced
to sell properties quickly to pay settlement costs, it might be for less than their fair market value, further
shrinking the assets Robert wants to leave to his three children.

Strategy
Robert needs an estate plan strategy that:
 Preserves the existing properties as prime assets
 Allows for a quick and efficient settlement
 Provides liquidity for settlement costs
His attorney suggests using life insurance, which is the least expensive way to create the large amount
of cash his estate will need — and at the very time it’s needed. But there is a limitation: if Robert buys
a large insurance policy and adds it into his estate, a larger percentage of his estate would be liquid, but
the estate would also be that much larger, compounding the costs of settlement.

Solution
Robert purchases $10 million of Sun Universal ProtectorPlus universal life (UL) insurance (allowing for
estate growth) — but it is owned outside of his estate by an Irrevocable Life Insurance Trust (ILIT). The
policy provides:
 Death benefits on Robert’s life; and
 Yields high early and long-term cash value accumulation.

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However, the large premiums represent gifts to the trust, making a premium financing program from a
commercial lender a good solution, especially in a period of sustained low interest rates.*
To offset the loan’s impact on policy death benefits, the Sun Universal ProtectorPlus will use a Return
of Premium death benefit option which will both repay the loan at death and provide Robert’s estate
with a net death benefit of $10 million. Scheduled payments will be for 10 years. Robert will make
annual gifts to the trust equal to loan interest payments,1 which for several years will be less than
the normal premium, lowering his out-of-pocket expenses and gift taxes.

Picture This
Interest/ Death
Collateral Benefits
Irrevocable Life
Lender A.I. Credit Sun Life Financial
Insurance Trust
Loan Buys
Policy

Personal
Guarantee/
Gifts of Annual
Collateral Net Policy Proceeds
Loan Interest
After Loan Repaid

Robert Bergstrom Insured

Trust Beneficiaries (Heirs)
(Grantor — Creates ILIT)

Tax Considerations
 Premiums are not tax deductible
 Interest payments are not tax deductible
 Taxes may apply on amounts gifted to Irrevocable Life Insurance Trust
 Net death benefits are received income tax-free

*The ILIT trustee can apply for the policy and a loan of the premiums through Capital Maximization StrategySM and A. I. Credit, using the
policy as collateral (and perhaps some other assets). They offer a low initial rate based on the London Interbank Offered Rates (LIBOR),2
plus a spread determined by the lender.
1
Subject to applicable gifting codes and regulations.
2
The loan interest rate is fixed for one year, and will rollover on each anniversary to a rate based on the LIBOR in effect at that time.
3
A.I. Credit guarantees the basis point spread over the life of the loan.

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Key Features and Benefits of Sun Universal ProtectorPlus
 Return of premium death benefit option
 Blended death benefits by term rider for better performance
 High early cash values for low balance sheet impact
 Strong tax-deferred long-term accumulation
 Flexible premium payments
 Tax-favored withdrawals and loans
 Unique charitable giving and emergency health riders

This is only a brief description of a one of many complex estate planning options. It is not meant as legal or tax advice, and it is not
appropriate for everyone. Consult with your own financial and tax advisor regarding the application of these concepts to your particular situation.

Ask your Sun Life Financial agent for an illustration of how the flexible
Sun Universal ProtectorPlus life insurance can help you to meet your needs
for additional estate liquidity or wealth accumulation.

This information is for general education of producers and contains references to concepts that have significant legal, accounting and tax implications.
It is not intended as legal, accounting or tax advice. Clients should consult with their own tax advisor regarding the application of these concepts to any
particular situation.
Not FDIC/NCUA insured. May lose value. No bank/credit union guarantee. Not a deposit. Not insured by any federal government entity.
Universal life insurance is issued by Sun Life Assurance Company of Canada (Wellesley Hills, MA) or in New York, Sun Life Insurance and Annuity Company of
New York (New York, NY).
All guarantees are based on the claims-paying ability of the issuing company, Sun Life Assurance Company of Canada (Wellesley Hills, MA), or in New York,
Sun Life Insurance and Annuity Company of New York (New York, NY). All are members of the Sun Life Financial group of companies.
©2008 Sun Life Assurance Company of Canada. All rights reserved. Sun Life Financial and the globe symbol are registered trademarks of Sun Life
Assurance Company of Canada.

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