Annuity Funded
Life
Preserving Assets for the
Next Generation
Deferred Annuities Offer
• Tax deferred investment
• Effective way to accumulate assets for retirement
Many Clients
• Accumulate more than they will use and no longer need
the annuity to supplement retirement needs
• Consider leaving the annuity to beneficiaries
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Income and Estate Tax Obstacles
• Can significantly diminish value
• Apply to growth within annuity
Potential estate tax exposure
• 2011: $5M exclusion, indexed for inflation in future years
(5.25M in 2013), with a 40% maximum rate
• States may impose estate taxes at lower exemption
levels
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
The Annuity Funded Life Strategy
• Uses existing deferred annuities to fund a life insurance
policy
• Leverages the value of the annuity to pass assets to
beneficiaries
Important Note:
MetLife does not support the purchase of any new annuity with the intention of
using the annuity’s income to pay life insurance premiums. MetLife may also place
certain restrictions on transfers from one internal product to another.
Representatives should refer to the Rewritten Business Rules.
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Taking Pay-outs from the Annuity
• Annuitization
• Withdrawals
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
How Annuitization Works
• Systematic liquidation of the annuity contract
• Payable for life or predetermined period of time
• Each payment includes tax free recovery of investment
and ordinary income
• If payments cease at death, there is no value left in the
annuity to pass to beneficiaries — so no estate tax
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Withdrawals
• Taken as needed
• Come from ordinary income first
• Before age 59½ may trigger additional 10% tax
• Remaining annuity death benefit paid to beneficiary
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Risk of Doing Nothing
If clients pass the annuity’s full value to their beneficiaries
at death:
• Income taxes must be paid on amounts exceeding
the contract’s cost basis
• Estate taxes may apply to the value of the annuity
(unless passed to the surviving spouse). A
deduction for Income in Respect of a Decedent is
available to offset a portion of this “double tax”.
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Risk of Doing Nothing Example
Don and Kathy
Feel they have plenty of retirement income and wish
to pass their annuity’s value to their son Rob
Annuity Value
Cost basis
Other assets value
$500,000
$150,000
$3,000,000+
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Case Study- Don and Kathy
Current Approach
Value of Annuity at Death
$500,000 ($150,000 cost basis)
Estate Taxes (40%)
$0
Income Taxes (35% of gain)
-$122,050
Net to Rob
$377,950
For illustrative purposes only. Actual results will vary. This calculation does not include state income or
inheritance taxes.
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Case Study- Don and Kathy
Annuity Funded Life
Life Insurance Death Benefit
Remaining Annuity Value
Estate Taxes (40%)
Income Taxes (35% of gain)
Net to Rob
$601,521
$33,162
0
0
$634,683
For illustrative purposes only. Actual results will vary. This calculation does not include state income or
inheritance taxes.
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
How Annuity Funded Life Works
4
Loans and withdrawals will decrease the cash value and death benefit. If the policy does not perform as expected it may
be necessary to reduce or stop distributions, and/or premium payments may need to be resumed to avoid a policy lapse.
There may be tax consequences if the policy lapses or is surrendered prior to the death of the insured.
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Life Insurance Death Benefit Can Help
• Replace value of the annuity
• Enhance their legacy
• Provide income tax free asset for beneficiaries
• Keep the assets they will pass to beneficiaries out of
their estate for estate tax purposes
• Reduce effect of taxes, since the death benefit can be
received income and estate tax free*
*Only if the death benefit is owned by an irrevocable trust or other third party.
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Results
• Reduces or possibly eliminates income and estate
taxes on the annuity at the time of death
• Creates an income stream to pay life
insurance premiums
• Life insurance death benefit can be free of income
and estate taxes if properly structured
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Important Information
Pursuant to IRS Circular 230, MetLife is providing you with the following notification: The information contained in this document is not
intended to (and cannot) be used by anyone to avoid IRS penalties. This document supports the promotion and marketing of insurance
products. Clients should seek advice based on their particular circumstances from an independent tax advisor.
MetLife, its agents and representatives may not give legal or tax advice. Any discussion of taxes herein or related to this document is for general
information purposes only and does not purport to be complete or cover every situation. Tax law is subject to interpretation and change. Tax results
and the appropriateness of any product for any specific taxpayer may vary depending on the facts and circumstances. Clients should consult with and
rely on their own independent legal and tax advisors regarding their particular set of facts and circumstances.
Like most insurance policies, MetLife’s policies contain charges, limitations, exclusions, termination provisions and terms for keeping them in force.
Contact your financial representative for costs and complete details.
Insurance Products:
• Not A Deposit • Not FDIC-Insured • Not Insured By Any Federal Government Agency
• Not Guaranteed By Any Bank Or Credit Union • May Go Down In Value
Life insurance products are issued by:
MetLife Investors Distribution Company
MetLife Investors USA Insurance Company
5 Park Plaza, Suite 1900
Irvine, CA 92614
And in NY only by:
Metropolitan Life Insurance Company
First MetLife Investors Insurance Company
200 Park Avenue
New York, NY 10166
BDVL23026 L0413315510[0415]
© 2013 METLIFE, INC. PEANUTS © 2013 Peanuts Worldwide
For Producer or Broker/Dealer Use Only. Not for Public Distribution.