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PACIFIC INDEXEDACCUMULATOR 5Indexed Universal Life Insurance
ESTATERETIREMENTBUSINESSFAMILY
Client Guide
Pacific Life Insurance Company
16-3
THE FLEXIBILITY OF CASH VALUE LIFE INSURANCE
02
FINANCIAL PROTECTION
A policy’s proceeds are
paid to policy beneficiaries
when the insured dies.
FINANCIAL POTENTIAL
A policy’s cash value
has the potential to grow,
less policy charges.
FINANCIAL FEATURES
A policy’s optional
features are available for
additional life insurance
and financial needs.
PROTECT THE BOTTOM LINE
Your business is your legacy. It’s also your livelihood. Good decisions,
smart money management, and herculean effort have helped you
succeed.
You are wise to surround yourself with top talent. They help your business excel. Their expertise counts. What if they leave? What if they join the competition?
Incentivize your key executives with the opportunity to protect their
families, their futures, and your company’s bottom line.
Pacific Indexed Accumulator 5 is an indexed universal life insurance
product from Pacific Life Insurance Company. It can help provide your
key executives with financial protection for their families through policy
proceeds if the executives die too soon.
Along with financial protection, your key executives can also build cash
value potential to help supplement their retirement income.
Policy form #P15IUL, S15PIA5 or ICC15 P15IUL, ICC15 S15PAI5, based
on state of policy issue.
03
BUSINESS
Premiums, Charges, and Current Rates
POLICY PREMIUMS: Premiums are flexible. Policy-
owners choose the payment amount and timing. As
long as the policy’s cash value is sufficient to pay
ongoing policy charges, the policy will stay in force.
Indexed universal life insurance generally requires
additional premiums after the initial payment. If either
no premiums are paid or subsequent premiums are
insufficient to continue coverage, it is possible the
coverage will expire.
POLICY CHARGES: The cost of insurance and benefits
provided through the policy is deducted monthly in the
form of policy charges, which include an Administrative
Charge, Coverage Charge, Cost of Insurance Charge,
and any applicable rider charges. Additionally, a premi-
um load is deducted from each premium payment.
To understand how policy charges affect the policy’s
cash value, request a personalized illustration that
includes an Analysis of Charges. Policy charges will
reduce the policy’s effective rate of return.
POLICY SURRENDER CHARGES: If the policy
is surrendered within the first 10 policy years, a
surrender charge will apply. A surrender charge will
reduce the policy’s cash value payable at policy
surrender.
POLICY FACE AMOUNT CHANGES: The face
amount may be increased or decreased, subject to
restrictions, which may impact policy charges and
surrender charges.
NON-GUARANTEED ELEMENTS: Non-guaranteed/
current elements are not guaranteed by definition.
As such, Pacific Life Insurance Company reserves
the right to change or modify any of these elements.
This right to change these elements is not limited to a
specific time or reason.
04
BENEFIT YOUR EXECUTIVESWhen you run a successful business, every dollar counts. When you
need to incentivize key executives, it has to make sense to your
company’s bottom line.
Pacific Indexed Accumulator 5 is designed to offer high cash surrender values in the policy’s early years. Because the cash value may be counted as an asset, your business can leverage it to help offset the cost of offering life insurance coverage to your executives.
It can be a smart way to reward top talent in a cost-efficient manner.
05
BUSINESS
06
07
BUSINESS PLANNING STRATEGIES
COVER KEY EXECUTIVES + GAIN BUSINESS ASSETS
If your business loses a key executive, it may suffer financially. Reward top
talent using an endorsement split dollar arrangement to buy cash value
life insurance on key executives. As policyowner, your business pays the
premiums and generally retains access to the cash value as an asset.
Split dollar arrangements may be affected by the Sarbanes-Oxley Act of 2002,
which prohibits personal loans by public companies to directors and executive
officers. IRS regulations may impact the taxation.
OFFER RETIREMENT PLAN + OFFSET PLAN COSTS
For highly compensated executives, contribution limits on qualified plans
and Social Security benefits may mean retirement income shortfalls. Offer
executives supplemental retirement income potential using cash value life
insurance in a nonqualified deferred compensation plan.
The policy’s cash value can help informally fund the plan. As policyowner and
beneficiary, your business may use the policy’s proceeds when the insured
executive dies to help offset the cost of the plan.
Executives should be members of a select group of management or highly
compensated employees per Department of Labor Reg. Sec. 2520.104-23.
INCENTIVIZE EXECUTIVES + ADD A TAX DEDUCTION
In today’s competitive climate, how can your business stand out? Offer
bonuses to your executives in the form of premiums for cash value life
insurance the executive may own. The premiums are generally tax deductible
as a business expense.
The deductibility of the bonuses is subject to the reasonable compensation
limits established by IRC Sec. 162(a). Your employee benefits legal counsel
can tell you whether this is an employee benefit plan under the Employee
Retirement Income Act of 1974 and, if so, whether any additional requirements
are necessary.
BUSINESS
BUSINESS OWNER STRATEGIES
EXPAND YOUR BUSINESS
Along with incentivizing key employees, Pacific
Indexed Accumulator 5 may be used for other
business considerations. While the primary purpose
for buying life insurance is to pay policy proceeds to
the policy beneficiaries at the insured’s death, your
policy also has the potential to accumulate
cash value.
You may use your available cash value to expand
your business. Purchase a new building. Buy a more
optimal piece of land. Upgrade your technology
platform. Refurbish your equipment. Your cash value
is yours to use however you want.
OPTIMIZE YOUR ASSETS
As a business owner, you most likely review your
assets periodically. The same goes for your life
insurance coverage. If you own multiple policies or
are simply exchanging one cash value policy for
another, consider optimizing and/or consolidating
your coverage.
Pacific Indexed Accumulator 5 offers the potential for
higher early cash values, so you might retain more of
the cash value you’ve built up from an existing policy.
There are circumstances in which replacing your
existing life insurance 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.
08
DIVERSIFY YOUR TAX LIABILITIES
If you’re a business owner with an eye toward
retirement, your financial portfolio is probably
well diversified across assets. But are your tax
liabilities? Consider the tax treatment of your assets
at distribution. Failure to diversify tax liabilities at
retirement can chip away your net retirement income.
With its tax-deferred growth potential and tax-free
distribution potential through policy loans and
withdrawals from the available cash value, a Pacific
Indexed Accumulator 5 policy can help provide a tax-
advantaged source of supplemental retirement income.
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
Secs. 72, 7702(f)(7)(B), 7702A. Any policy withdrawals,
loans and loan interest will reduce policy values and
may reduce benefits.
09
BUSINESS
10
Zero FloatsWhat goes up must come down. Or does it?
Indexed universal life insurance is a form of cash value life insurance. What makes it
different is the way it credits interest to your policy’s cash value if you allocate among
the indexed accounts. Imagine the interest rate your policy credits as a buoy riding
along the waves of stock market movements.
Your policy’s buoy is anchored, meaning it can only float up to a certain point. This
maximum is called the growth cap and it limits your interest crediting rate on the upside.
Your interest rate is guaranteed to be no less than 0%. If the market drops, your cash
value stays where it was, reduced only by policy charges and any distributions you take,
such as withdrawals and policy loans.
With 0% guaranteed, your policy’s cash value is protected against market-based losses.
Indexed accounts do not directly participate in any stock or equity investments, but they
do credit an interest rate based in part on the movements of stock market indexes.
11
THE POTENTIAL TO GROW
The cash value of a Pacific Indexed Accumulator 5 life insurance policy has the potential to accumulate and grow.
Each premium you pay, less a premium load, is applied to the policy’s
fixed account, where it will earn a current interest rate, less monthly
policy charges.
You may transfer your policy’s accumulated value from the fixed
account to any combination of available indexed accounts on the 15th
of each month. Each transfer into an indexed account creates a unit of
value called a segment. Any applicable interest is credited at the end
of each segment’s term, based in part on the performance of a major
stock market index, excluding dividends.
Talk to your life insurance producer about your financial goals and
the accounts that might match your and your business’ current
and long-term needs.
BUSINESS
Tax Considerations:
POLICY PROCEEDS: For federal income tax
purposes, life insurance death benefits generally
pay income tax-free to beneficiaries pursuant to IRC
Section 101(a)(1) In certain situations, however, life
insurance death benefits may be partially or wholly
taxable. Situations include, but are not limited to:
the transfer of a life insurance policy for valuable
consideration unless the transfer qualifies for an
exception under IRC Section 101(a)(2) (i.e. the “transfer-
for-value rule”); arrangements that lack an insurable
interest based on state law; and an employer-owned
policy unless the policy qualifies for an exception
under IRC Section 101( j).
POLICY LOANS AND WITHDRAWALS: 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.
12
POLICY PROCEEDS Your policy’s proceeds are paid tax-free to your policy beneficiaries
when you die. Along with replacing your income, the proceeds might
be used to pay off the family home, satisfy debts, provide for business
succession planning, and/or help ensure efficient estate transfer.
You have three choices for your policy’s payout structure:
A Level Death benefit equals the policy’s face amount.
B IncreasingDeath benefit equals the policy’s face amount,
plus the policy’s accumulated cash value.
C Return of Premium
Death benefit equals the policy’s face
amount plus the sum of premiums paid,
less any withdrawals.
How you structure your policy will affect its charges and surrender
charges, so work with your life insurance producer to build the coverage
that meets your needs or that of your business.
Accessing the Cash ValueAny available cash value accumulated in a Pacific Indexed Accumulator 5
policy may be accessed through policy loans and withdrawals tax-free.
BUSINESS
13
Financial Features
Your policy offers optional features called riders for
additional life insurance and financial needs. Riders
help expand the flexibility and protection of your
policy. Some riders are automatically included with
eligible policies. Other riders must be elected at
policy issue for additional costs.
Ask your life insurance producer to provide you with
more details on the financial features available to
you through riders.
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
15
PACIFIC LIFE THE POWER TO HELP YOU SUCCEEDWhen it comes to choosing the company you will trust with the purchase
of your life insurance policy, consider their treatment of the policyowners
who have purchased before you. Pacific Life has a history of passing along
savings to our policyowners in the form of over 120 pricing improvements to
our inforce policies since 1985.
When you buy a policy from Pacific Life, you become a voting member in our
mutual holding company structure. We make decisions that benefit you and
the long-term financial strength of the company.
You matter to us.
Buying life insurance is a long-term commitment. The company you choose matters.
BUSINESS
16-3 15-44237-00 5/16
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, its affiliates, their distributors and 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 or attorney.
Pacific Life Insurance CompanyNewport Beach, CA
(800) 800-7681 • www.PacificLife.com
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.
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 broker-dealer or firm can help you determine which optional riders and investment options are available and appropriate for your clients.
Investment and Insurance Products: Not a Deposit Not Insured by any Federal Government Agency
Not FDIC Insured No Bank Guarantee May Lose Value