EFTA01454209.pdf

"After-Tax Advantage," this page, illustrates the ben- 3. It's not dependent on an individual's health or efit of owning a higher income tax portfolio in a PPVA death. The fees associated with a PPVA don't depend investment account. After about five years, the PPVA on the health of the individuaL There's no mortality account outperforms the taxable account. component of a PPVA. There are no medical exams required and no underwriting. Practice lip: While the client owns the PPVA investment account and can choose to allocate to PPVA Limitations any of the IDFs offered by the insurance company on As discussed more fully below, while a client may allo- its PPVA investment account platform, the IDFs are cate to any of the IDFs offered on the company's PPVA deemed to be owned by the insurance company's sepa- investment account platform, the client can't control the rate account. Therefore, investors in vehicles like hedge selection of securities within the IDFs. funds would like the fact that the K-Is are delivered to If distributions are taken from the PPVA investment the insurance company, not to the PPVA investment account before age .59%, there's a 10 percent penalty account owner. in addition to income tax on the gain element of the distribution. Charitable Legacy P anning All gains accrued within the PPVA investment Extremely wealthy individuals who plan on making a account are ultimately subject to the potentially higher substantial gift to charity at death have also awakened ordinary income tax rates (unless distrib- uted to charity). And, any balance remaining in the PPVA After-Tax Advantage investment account owned on the client's here are the differences in value between a PPVA account and date of death is subject to both income and a taxable account over a 30-year period, assuming ur different estate tax (unless left to charity). growth rates So, when could it make sense to consider using PPVA? Enhance Tax Efficiency Clients with exposure to traditionally tax- 45; 5X.!?.? 515‘818". 11:4:15 sion 51.35.5K, inefficient asset classes (for example, hedge (S ti.1538 cf.,6O$ VM.9,14 P.2*rr funds, high-yield bonds and growth-orient- 5k 12?3,3;(; 52.Knei 1,4174,j*3 5U53.523 ed equities) could benefit from using PPVA. It's important, however, not to let the tax (N SS4,21., %OM S.4311 It.351.etE 1165*: 1R593.02 "tail" wag the investment "dog." Typically, 10 I5 x only if a top performing manager is available Tent( 0SrS on the PPVA investment account platform could this make sense. Returns se net Sanowned 1 5 peort et tont moverrent lees cc a SS rationinenstment n a More broadly, though, clients with a typi- Belieawn' and a private pkxemert elatemite account 75 melt et tealeed gains' cal multi-asset class portfolio in a higher taxed at Any kerne rates; end no withdrawals o mark belto age S97:. Wino ill(Ofie far income tax regime could also benefit from tale assumed to te 4)1pentni in Veci Ial 492 penent thereafter. Capital gent tax Weis a PPVA. 20.7 percent in Year land 291 waft Moans Assumes thi the itresbned unagement fees A PPVA works in either case for the same ant tax eedinnble in the taxable investment atom! tie b tel2 went of agedgots reasons that retail investors have for years inme litesh% let itertiaKi (Walk' en benefitted from investing in their individual retirement accounts Income tax deferral — SAL( Fund Services almost always makes sense. 22 TRUSTS S ESTATES / wealthmanagement.com DECEMBER 2012 CONFIDENTIAL — PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0112190 CONFIDENTIAL SDNY_GM_00258374 EFTA01454209