OLA 1103 T 1008

Preserving Assets forYour Loved Ones

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This material was not intended or written to be used, and cannot be used, to avoid penalties imposed under the Internal Revenue Code. This material was written to support the promotion or marketing of the products, services, and/or concepts addressed in this material. Anyone to whom this material is promoted, marketed, or recommended should consult with and rely solely on their own independent advisors regarding their particular situation and the concepts presented here.

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The Bypass Trust—An Important Part of Estate Planning Bypass Trust is often created to protect surviving spouse

during his/her lifetime─to provide income, if needed, and access for emergencies

After death of surviving spouse, trust will usually provide distributions to his/her children or other heirs

Trust is often called “Bypass” or “B” trust because, if properly structured, its value will bypass estate of surviving spouse and not be subject to estate taxes at his/her death

Trustee of Bypass Trust should be trusted friend or family member other than surviving spouse to prevent inadvertent inclusion of trust assets in his/her estate

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Enhancing Trust Value withLife Insurance

Bypass Trust purchase of life insurance policy has several benefits:

Diversifies and lowers investment risk of trust assets

May greatly magnify value of trust for future generations

Life insurance policy cash values grow tax–deferred

May reduce trust’s income tax liabilities

Policy death benefit can be guaranteed

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When Purchase of Insurance by aBypass Trust May Be Appropriate Consider income needs of surviving spouse

Depending upon his/her income needs, may want to magnify trust value for children and/or grandchildren

Life insurance premiums can be paid using assets already in trust, avoiding need for gifts to trust from surviving spouse

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Example: How It Works

Mary, age 72

After her husband’s death, executor funded Bypass Trust with $2 million in stocks and bonds from husband’sseparate property

Trust assets may benefit Mary during her lifetime and will pass to her three children at her death

Mary has substantial assets and does not need to use trust income or access principal

Mary wants to maximize trust’s value for her children

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Example: Maximizing Trust Value

Assume trust earns 7% annual income on $2 million in trust assets:

40% tax bracket

Assumes 35% federal and 5% state tax bracket

Trustee uses $84,000 of after-tax earnings to purchase universal life insurance policy with $3 million guaranteed death benefit

Trust’s first-year after-tax earnings = 100% – 40% = 60% x 7% x $2 million = $84,000

Life insurance policy cash values grow tax–deferred

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Year Trust Value withoutLife Insurance*

Trust Value withLife Insurance**

5 $2,456,793 $5,059,000

10 3,017,915 5,059,000

15 3,707,195 5,059,000

20 4,553,906 5,059,000

25 5,594,003 5,059,000

Example: Comparing Trust Values

* Trust growth shown at 7% with combined 40% federal and state income tax bracket.** Trust value with life insurance equals $2 million plus life insurance death benefits.

TransACE® is a nonparticipating, flexible-premium universal life insurance policy issued by Transamerica Life Insurance Company, Cedar Rapids, IA 52499. Policy Form #1-12611107 (CVAT), Group Certificate #2-72336107 (CVAT) for certificates issued under a group policy issued to the Rhode Island National Consumer Protection Trust. Policy form and number may vary, and this policy may not be available in all jurisdictions. In most states, in the event of suicide during the first two policy years, death benefits are limited only to the return of premiums paid. In Missouri, suicide is no defense to payment of benefits unless the Company can show that the insured intended suicide at the time of application for coverage.

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Example: More Trust Value for Loved Ones

For a long period of time, exceeding 20 years, life insurance provides more trust value for Mary’s loved ones. Consider the following projections:

Year Trust Value withoutLife Insurance

Trust Value withLife Insurance

10 $3,017,915 $5,059,000

20 4,553,906 5,059,000

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* Consult your attorney and financial advisors to determine the proper course of action regarding the purchase of life insurance by a Bypass Trust.

Evaluating the Bypass Trust

Several factors should be evaluated before Bypass Trust purchases life insurance policy:*

Beneficiary needs

Trust terms

Investment alternatives

Type of life insurance policy

Overall estate plan

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Estate Enhancement

A life insurance policy purchased by a Bypass Trust may enhance an estate and allow individuals to pass on their legacies free of estate taxes

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Transamerica Life Insurance Company, Transamerica Financial Life Insurance Company (collectively “Transamerica”), and their representatives do not give tax or legal advice. This presentation is provided for informational purposes only and should not be construed as tax or legal advice. Clients and other interested parties must consult with and rely solely upon their own independent advisors regarding their particular situation and the concepts presented here.

Discussions of the various planning strategies and issues are based on our understanding of the applicable federal income, gift, and estate tax laws in effect at the time of this presentation. However, tax laws are subject to interpretation and change, and there is no guarantee that the relevant tax authorities will accept Transamerica’s interpretations. Additionally, this material does not consider the impact of applicable state laws upon clients and prospects.

Although care is taken in preparing this material and presenting it accurately, Transamerica disclaims any express or implied warranty as to the accuracy of any material contained herein and any liability with respect to it. This information is current as of April 2007.

Transamerica Financial Life Insurance Company is authorized to conduct business in New York. Transamerica Life Insurance Company is authorized to conduct business in all other states.

OLA 1103 T 1008

Preserving Assets forYour Loved Ones