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Advanced Markets Group

SUN PROTECTOR VUL SALES IDEA

Private Financing (Split Dollar Loan Regime)

with Sun Protector VUL
Funding Trust – Owned Life Insurance Without Making Annual Gifts

Target Market
Dave is a wealthy individual, age 50, divorced, with one child. He anticipates that he will need a

PROTECTOR VUL SALES IDEA

$1,000,000 life insurance policy to cover his estate tax liability. He has already depleted his lifetime gift
tax exemption and has committed his annual exclusions to a gifting program for his child. He wants to
place the insurance into an Irrevocable Life Insurance Trust (ILIT) which has been created and seeded
with income-producing assets. He does not want to make taxable gifts to the ILIT, but rather desires to
fund the insurance in a tax-efficient way (without incurring gift taxes).

Product Solution
Dave enters into a private split dollar agreement with the Trustee of his ILIT. This is also known as a
private loan arrangement. He will make loans to the Trust to be used for premium payments on the life
insurance policy. He will purchase a Sun Protector Variable Universal Life policy* which will accumulate
cash to enable the Trustee to repay the loan during Dave’s lifetime if desired. Otherwise, the death benefit
will be available at Dave’s death. Sun’s Charitable Giving Benefit Rider is available at no additional cost
and will pay a benefit of 1% of initial face amount or $10,000 in this case to a qualified charity.

Strategy

How it Works: Private Split Dollar

Note at applicable federal rate (AFR) from Trust to Grantor

Loan of premiums to Trust Irrevocable Life Insurance Trust (ILIT)
Trust Grantor
Annual interest payment on note Owner/Beneficiary of Policy on
Dave
Repayment of note to estate from cash value or death benefit Grantor’s Life

Payment of Premiums
The ILIT is the owner and beneficiary of a policy on Dave. Dave loans the
premium amount each year to the ILIT in exchange for a demand note at the
applicable federal rate (AFR). The Trust pays the premium to the insurance
Death Benefit Proceeds
company and the annual interest on the note to Dave. The trust has access to
the policy cash value to repay the loan prior to death if desired. When the
death benefit is paid, the loan, if still outstanding, will be repaid to Dave’s estate Life Insurance Company
with the remainder of the death benefit payable to the ILIT estate tax-free.

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Goals Achieved
• The payment of premiums without incurring any gift taxes
• Death proceeds after repayment of the loan are estate and income tax-free
• Cash accumulates in the ILIT for potential distribution to trust beneficiaries and other
purposes (such as repayment of the premium loans).

Additional Benefits
No Collateral
Collateral deposits are not required to secure the loan because it is a non-commercial
arrangement.

Flexibility
The loan can be structured as lump sum or annual. Repayment of the loan can be made
at death or during lifetime. The Sun Protector Variable Universal Life policy will permit a
prepayment of the loan prior to death, if desired.

Minimize Gift Taxes

Gift taxes may be significantly lowered or even avoided. The amount of the annual interest
payment on the loan may be gifted to the trust.

Maximize Transfer of Wealth

Upon death, the life insurance proceeds will pass through the ILIT to the heirs free of
income and estate taxes assuming no transfer-for-value under Internal Revenue Code
Section 101 has been made or that the insured has no incidents of ownership in the policy.

Notes:
Sun Protector Variable Universal Life policy permits:
1) Distributions to be made from ILIT to beneficiaries.
2) Prepayment of loans (if desired)
3) Financial Flexibility

(Any withdrawals from the policy will result in a reduction in the policy death benefit.)

Example
Death Death
Premium Cumulative Loan Cash Value Cash Value Benefit Benefit
Year Advances Advances Interest Paid Repayment Grantor Trust Grantor Trust
1 36,844 36,844 1,842 0 0 36,844 997,205
5 36,844 184,222 9,211 167,169 0 184,222 1,008,597
10 36,844 368,444 18,422 368,444 67,119 368,444 1,023,644
15 368,444 18,422 368,444 234,556 368,444 1,023,644
16 (368,444) 0 247,877 0 1,023,644
20 0 296,359 0 1,023,644
30 0 441,044 0 1,023,644

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 For more information, please contact your
Sun Life Financial Representative.

This information contains references to concepts that have significant legal, accounting and tax implications. It is not intended
as legal, accounting or tax advice. Clients should consult with their own financial and tax advisor regarding the application of
these concepts to any particular situation.
*This case study is designed to present an understanding of the mechanics of Sun Protector VUL in a Private Financing Plan.
Variable Universal Life Insurance policies are subject to market risks, including possible loss of principal. When accessing policy
values, policy holders may receive more or less than they invested. Partial withdrawals and loans will reduce the policy Death
Benefit and the Account Value by the amount of the withdrawal. Withdrawals that exceed the amount of premiums paid into
the policy will be taxable.
Complete VUL illustrations contain three sets of values in the following sequence and should accompany any presentation of
this concept:
1. Based on one assumed rate and current cost of insurance rates;
2. Based on three assumed rates (including 0%) and current cost of Insurance rates.
3. Based on three assumed rates (including 0%) and Guaranteed Cost of Insurance rates.
Variable Universal Life Insurance products are issued by Sun Life Assurance Company of Canada (U.S.), and distributed through
our affiliated broker-dealer, Sun Life Financial distributors, Inc. Variable Universal Life Insurance products are offered by
prospectus. Customers should request a prospectus, which provides more details about charges and expenses, and review it
carefully before investing.
Not FDIC/NCUA insured. May lose value. No bank/credit union guarantee. Not a deposit. Not insured by any federal
government entity.
All guarantees are based on the claims-paying ability of the issuing company, Sun Life Assurance Company of Canada (U.S.)
(Wellesley Hills, MA), or in New York, Sun Life Insurance and Annuity Company of New York (New York, NY). Both are members
of the Sun Life Financial group of companies.
©2008 Sun Life Assurance Company of Canada. All rights reserved. Sun Life Financial and the globe symbol are registered
trademarks of Sun Life Assurance Company of Canada

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ABOUT SUN LIFE FINANCIA L
Sun Life Financial is a leading international financial services organization providing
a diverse range of wealth accumulation and protection products and services to
individuals and corporate customers. Chartered in 1865, Sun Life Financial and its
partners today have operations in key markets worldwide including Canada, the
United States, the United Kingdom, Ireland, Hong Kong, the Philippines, Japan,
Indonesia, India, China and Bermuda. Sun Life Financial Inc. trades on the Toronto (TSX),
New York (NYSE) and Philippine (PSE) stock exchanges under the ticker symbol SLF.

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NOT FOR USE WITH THE PUBLIC. PAGE 4 of 4