For Insurance Professional use only. Not for distribution to the general public NFM-5506AO.3 (09/11)...

For Insurance Professional use only. Not for distribution to the general publicNFM-5506AO.3 (09/11)

Basic Trust Planning

From Nationwide® Advanced Sales: The Specialists

For broker dealer use only. Not for distribution to the general publicNFM-1234A0 (03/10)


Some things you need to know• This presentation was not intended by the author to be used, by anybody for

the purpose of avoiding any penalties that may be imposed on you pursuant to the Internal Revenue Code. The information contained herein was prepared to support the promotion, marketing and/or sale of life insurance contracts, annuity contracts and/or other products and services provided by Nationwide Life Insurance Company.

• Federal tax laws are complex and subject to change. Neither the company nor its representatives give legal or tax advice. Please talk with your attorney or tax advisor for answers to your specific questions.



Some things you need to know• Life insurance is issued by Nationwide Life Insurance Company or

Nationwide Life and Annuity Insurance Company, Columbus, Ohio, member of Nationwide Financial®.

• © 2010, Nationwide Financial Services, Inc. All rights reserved.

• Not a deposit • Not FDIC or NCUSIF insured • Not guaranteed by the institution

• Not insured by any federal government agency • May lose value



Agenda• Uses of Trusts

• Types of Trusts

• Advanced Trust Planning

• Summary and Conclusion

*Please consult with a licensed estate planning attorney for further information on estate planning.



Misconceptions of Trusts• Complicated

• Expensive

• Confusing

• Only for the Ultra-wealthy

• Time Consuming



Uses of Trusts• Transfer Wealth• Pay Estate Taxes• Manage Estate• Control Distributions• Protect Heirs from Creditors• Avoid Probate• Provide for Charity• Provide for Future Generations



Common Terms• Trustee

– Fiduciary that manages trust assets for another’s benefit

• Corpus/Trust Assets– Property and income managed for another

• Real Estate• Negotiable Instruments/Cash• Life Insurance/Annuities• Intellectual Property

• Grantor/Settlor– Person(s) that establishes/creates trust



Basic Types of Trusts• Revocable

– May be modified or cancelled by Grantor at any time prior to death

• Irrevocable– Generally may not be changed or cancelled

after established– May provide for future changes in tax law



Revocable Trusts• Uses in Estate Planning

– Avoidance of Probate• Usually passes by will provisions• General assets are gathered and distributed• Includes all property wherever situated• Complicated estates could be costly to settle

– Requires re-titling of assets to be effective– May avoid public disclosure of assets



Revocable Trusts• Does not alter estate tax liability

• Generally non-contestable

• Trust may be changed or revoked during life

• Becomes irrevocable at death

• Efficient tool for property transfer



Irrevocable Trusts• May not be changed or cancelled after

established

• Assets transferred cannot be retrieved by grantor

• Generally, assets bypass probate and estate taxation– Life insurance exception



Irrevocable Trusts• Life Insurance Trusts

– If policy owned by trust at inception, no lookback rule for estate tax inclusion

– If existing policy transferred to trust, three year lookback for estate tax purposes

• Entire death benefit of policy included

– Possible gift tax consequence to premium payments



Life Insurance Trusts• Gift tax considerations

– Present interest gift exclusion– Reduction of applicable exclusion amount

• “Crummey” beneficiaries and rights of withdrawal

• I.R.S. Form 709– Gifts of future interests

• Premium payment made by trustee to life insurance company


Estate Tax Exclusions

Tax YearApplicable Exclusion

Amount Highest Rate

2009 $3,500,000 45%

2010 REPEAL: Unlimited REPEAL: NA

2011-12 $5,000,000 35%

2013 $1,000,000 55%



Tax Qualified Proceeds• Qualified plan or IRA proceeds generally

pay to named beneficiary– Will be included in taxable estate– May be included in probate estate

• Trust can be beneficiary

• May look through trust for distributions over beneficiary’s life expectancy



Non-qualified Annuities• Already avoid probate, but trust may be

used to limit receipt by beneficiaries

• No I.R.S. authority to look through trust for lifetime payouts

• Proceeds must be paid out of annuity within five years– Trust may provide longer payout period



Alternative Estate Planning Tools

• Credit Shelter Trusts

• Personal Residence Trusts

• GRAT’S and GRIT’S

• Charitable Trusts

• Domestic Relations Trusts



Trusts Don’t Have To Be• Complicated

• Expensive

• Confusing

• Only for the Ultra-wealthy

• Time Consuming



Agenda Review• Uses of Trusts

• Types of Trusts

• Advanced Trust Planning

Questions?

• Independent Dealer: 1-800-321-6064• Financial Institutions: 1-800-893-5399• Wirehouse/Regionals: 1-800-720-1511• Nationwide Agents: 1-888-333-4202• Nationwide Financial • Network: 1-877-223-0795• BGA: 1-888-767-7373

For Insurance Professional use only. Not for distribution to the general public NFM-5506AO.3 (09/11)...

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