Omaha Estate Planning Council - - PDF document

Omaha Estate Planning Council Tom Lipscomb, CLU September 16th, 2015 Email: tom.lipscomb@nm.com Direct dial: (913) 676-8020 INCOME TAX IS THE NEW ESTATE TAX: CREATIVE AND RELEVANT STRATEGIES TO MITIGATE THE INCOME TAX IN THE ESTATE PLAN I. The Income Tax: the “New Estate Tax?”

• The “old days”
• Today’s rates

II. Commonly Used (and Powerful) Tools in the Estate Plan

• IDGT
• ILIT
• High death benefit/low premium life insurance
• High premium (“overfunded”)/low death benefit life insurance (Why?)

III. What Makes an IDGT a Powerful Building Block in the Estate Plan?

• What kinds of assets should be considered?
• Why an IDGT vs. an ILIT?
• IRC §675(4)

IV. What is “Overfunded, Blended” Life Insurance?

• Where does it “fit”?
• What’s the special planning opportunity?

V. Planning Ahead, with Foresight VI. Q&A

A Life Insurance Illustration

Prepared For

Valued Client

Presented By Thomas G. Lipscomb III, CLU, Agent 5251 W. 116th Pl. Ste 300 Leawood, KS 66211 (913) 362-5000 FAX (913) 338-0041 August 5, 2015

Assumes a policy date in 2015. Values may be different if the policy is in a different calendar year. Supplemental Life Insurance Illustration Whole Life - Adjustable Policy Form Number ICC15.TT.ACL.(0715) Northwestern Mutual Life - 720 E. Wisconsin Avenue - Milwaukee, Wisconsin 53202 Illustration No. KS3020-RNWDP-132409 ILLUS.ACL.(0608) Page 1 of 9

$2,370,000 Adjustable CompLife For Valued Client Age 55 Male Base................................................ $60,000 Initial Adjustable Term Protection.. $2,310,000## Contract Premium $150,000.00 (Including $109,652.70 Addl. Premium, $0.00 outside) Policy changed to paid-up at the end of year 8 Non-Guaranteed Dividends used to purchase paid-up additions End 1 2 3 Annual 4 Annual Benefit 5 Cash Surrender 6 Total 7 8 Cash Surr. Values

• f

Year Insurance* Dividend* Outlay (Beg Yr) Received (Beg Yr)* Value Increase* Premium Outlay Total* Guaranteed 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 2,370,000 2,370,000 2,370,000 2,370,000 2,370,000 2,370,000 2,370,000 2,536,525 2,549,930 2,606,528 2,665,410 2,726,391 2,789,143 2,853,535 2,919,167 2,989,009 3,060,293 2,990,139 2,968,847 2,926,590 15,925 23,362 37,010 40,541 44,391 48,632 53,545 59,050 28,426 30,467 32,538 34,576 36,493 38,392 40,107 43,724 45,698 46,071 47,069 47,678 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 90,000 60,000 75,000 118,873 131,303 148,857 156,823 165,224 174,090 183,614 193,688 63,840 66,803 69,812 72,958 76,135 79,365 82,511 87,366 90,592

• 450

29,883 14,677 150,000 300,000 450,000 600,000 750,000 900,000 1,050,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,110,000 1,050,000 975,000 118,873 250,177 399,034 555,858 721,082 895,172 1,078,787 1,272,475 1,336,316 1,403,120 1,472,932 1,545,890 1,622,026 1,701,391 1,783,902 1,871,269 1,961,862 1,961,411 1,991,294 2,005,972 102,947 210,391 321,015 434,919 552,105 672,538 796,108 922,677 948,356 974,143 1,000,021 1,026,080 1,052,392 1,078,975 1,105,866 1,132,920 1,160,101 1,094,956 1,058,260 1,004,810 Initial Contract Premiums Annual

• Mo. ISA

The assumed additions surrenders and policy loans used to produce Base ..............

• Adj. Term Prot ......

1,978.20 38,369.10 # # 170.72 3,311.25 the outlays and benefits are shown on a separate page. Under present tax law, the illustrated additions surrenders, # Premium included throughout Underwriting amount is $2,248,640 Changes after issue are subject to underwriting. ##

• utlays and benefits could be income tax free.

Consult tax advisor. Assumed tax bracket 45%. Adjustable Term Protection, initial amount guaranteed 11 years. May be extended to age 70 by payment of appropriate premiums. TT15 Preferred NT UB2 Illustration No. KS3020-RNWDP-132409 1426570 *This illustration includes non-guaranteed dividends and values. Illustrated dividends assume no loans; loans may impact dividends. Illustrated dividends reflect current (2015 scale) claim, expense and investment experience and are not estimates or guarantees of future results. This illustration assumes that the current dividend scale will not change; however, it is likely that dividends actually paid will be larger or smaller than those illustrated. This illustration does not recognize that, because of interest, a dollar in the future has less value than a dollar today. 8% loan provision. 8/05/15 Submitted by Thomas G. Lipscomb III, CLU The Northwestern Mutual Life - Milwaukee See current Basic Illustration for guaranteed elements and other information. Page 2 of 9

$2,370,000 Adjustable CompLife For Valued Client Age 55 Male Base................................................ $60,000 Initial Adjustable Term Protection.. $2,310,000## Contract Premium $150,000.00 (Including $109,652.70 Addl. Premium, $0.00 outside) Policy changed to paid-up at the end of year 8 Non-Guaranteed Dividends used to purchase paid-up additions End 1 2 3 Annual 4 Annual Benefit 5 Cash Surrender 6 Total 7 8 Cash Surr. Values

• f

Year Insurance* Dividend* Outlay (Beg Yr) Received (Beg Yr)* Value Increase* Premium Outlay Total* Guaranteed 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 2,998,197 2,998,281 2,941,955 3,012,705 2,995,187 2,958,094 2,961,931 2,933,659 3,001,826 2,988,123 2,993,114 2,967,740 3,033,861 3,041,153 3,049,243 3,117,532 3,187,133 3,257,643 3,328,872 3,400,668 50,128 51,097 50,749 52,568 52,942 52,843 53,837 53,706 55,031 54,711 54,819 54,625 56,234 56,820 57,538 59,884 61,600 62,976 64,207 65,345 50,000 90,000 65,000 80,000 50,000 75,000 65,000 50,000 75,000 50,000 50,000 92,915 43,623 1,967 94,020 28,017 11,303 40,956 14,303 90,293 23,569 37,310 10,219 85,763 34,666 33,758 85,162 86,914 88,823 91,147 94,406 975,000 925,000 835,000 835,000 770,000 690,000 640,000 565,000 565,000 500,000 450,000 375,000 375,000 325,000 275,000 275,000 275,000 275,000 275,000 275,000 2,098,887 2,142,511 2,144,479 2,238,500 2,266,517 2,277,821 2,318,777 2,333,080 2,423,374 2,446,944 2,484,254 2,494,474 2,580,238 2,614,904 2,648,663 2,733,826 2,820,740 2,909,563 3,000,711 3,095,117 1,026,242 996,505 924,709 942,584 893,765 828,078 791,042 727,402 738,396 683,063 641,645 573,840 580,633 536,473 491,447 496,137 500,731 505,320 509,999 514,938 Initial Contract Premiums Annual

• Mo. ISA

The assumed additions surrenders and policy loans used to produce Base ..............

• Adj. Term Prot ......

1,978.20 38,369.10 # # 170.72 3,311.25 the outlays and benefits are shown on a separate page. Under present tax law, the illustrated additions surrenders, # Premium included throughout Underwriting amount is $2,248,640 Changes after issue are subject to underwriting. ##

• utlays and benefits could be income tax free.

Consult tax advisor. Assumed tax bracket 45%. Adjustable Term Protection, initial amount guaranteed 11 years. May be extended to age 70 by payment of appropriate premiums. TT15 Preferred NT UB2 Illustration No. KS3020-RNWDP-132409 1426570 *This illustration includes non-guaranteed dividends and values. Illustrated dividends assume no loans; loans may impact dividends. Illustrated dividends reflect current (2015 scale) claim, expense and investment experience and are not estimates or guarantees of future results. This illustration assumes that the current dividend scale will not change; however, it is likely that dividends actually paid will be larger or smaller than those illustrated. This illustration does not recognize that, because of interest, a dollar in the future has less value than a dollar today. 8% loan provision. 8/05/15 Submitted by Thomas G. Lipscomb III, CLU The Northwestern Mutual Life - Milwaukee See current Basic Illustration for guaranteed elements and other information. Page 3 of 9

$2,370,000 Adjustable CompLife For Valued Client Age 55 Male Base................................................ $60,000 Initial Adjustable Term Protection.. $2,310,000## Contract Premium $150,000.00 (Including $109,652.70 Addl. Premium, $0.00 outside) Policy changed to paid-up at the end of year 8 Non-Guaranteed Dividends used to purchase paid-up additions End 1 2 3 Annual 4 Annual Benefit 5 Cash Surrender 6 Total 7 8 Cash Surr. Values

• f

Year Insurance* Dividend* Outlay (Beg Yr) Received (Beg Yr)* Value Increase* Premium Outlay Total* Guaranteed 41 42 43 44 45 3,472,540 3,543,032 3,610,880 3,673,697 3,727,006 66,109 65,666 64,237 60,809 53,308 98,993 106,399 118,197 137,576 170,720 275,000 275,000 275,000 275,000 275,000 3,194,111 3,300,511 3,418,708 3,556,285 3,727,006 520,409 527,045 535,662 547,690 565,773 Initial Contract Premiums Annual

• Mo. ISA

The assumed additions surrenders and policy loans used to produce Base ..............

• Adj. Term Prot ......

1,978.20 38,369.10 # # 170.72 3,311.25 the outlays and benefits are shown on a separate page. # Premium included throughout Underwriting amount is $2,248,640 Changes after issue are subject to underwriting. ## Under present tax law, the illustrated additions surrenders,

• utlays and benefits could be income tax free.

Consult tax advisor. Assumed tax bracket 45%. Adjustable Term Protection, initial amount guaranteed 11 years. May be extended to age 70 by payment of appropriate premiums. TT15 Preferred NT UB2 Illustration No. KS3020-RNWDP-132409 1426570 *This illustration includes non-guaranteed dividends and values. Illustrated dividends assume no loans; loans may impact dividends. Illustrated dividends reflect current (2015 scale) claim, expense and investment experience and are not estimates or guarantees of future results. This illustration assumes that the current dividend scale will not change; however, it is likely that dividends actually paid will be larger or smaller than those illustrated. This illustration does not recognize that, because of interest, a dollar in the future has less value than a dollar today. 8% loan provision. 8/05/15 Submitted by Thomas G. Lipscomb III, CLU The Northwestern Mutual Life - Milwaukee See current Basic Illustration for guaranteed elements and other information. Page 4 of 9

$2,370,000 Adjustable CompLife For Valued Client Age 55 Male Base................................................ $60,000 Initial Adjustable Term Protection.. $2,310,000## Contract Premium $150,000.00 (Including $109,652.70 Addl. Premium, $0.00 outside) Policy changed to paid-up at the end of year 8 Non-Guaranteed Dividends used to purchase paid-up additions End 1 2 Annual 3 Total 4 5 6 Cash Value

• f Additions

7 Annual Income Cash Surr. Values

• f

Year Insurance* A/T Outlay (Beg Yr) Premium Outlay Total* Guaranteed Surrendered (Beg Yr)* Tax (Beg Yr) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 2,370,000 2,370,000 2,370,000 2,370,000 2,370,000 2,370,000 2,370,000 2,536,525 2,549,930 2,606,528 2,665,410 2,726,391 2,789,143 2,853,535 2,919,167 2,989,009 3,060,293 2,990,139 2,968,847 2,926,590 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 90,000 60,000 75,000 CR CR CR 150,000 300,000 450,000 600,000 750,000 900,000 1,050,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,110,000 1,050,000 975,000 118,873 250,177 399,034 555,858 721,082 895,172 1,078,787 1,272,475 1,336,316 1,403,120 1,472,932 1,545,890 1,622,026 1,701,391 1,783,902 1,871,269 1,961,862 1,961,411 1,991,294 2,005,972 102,947 210,391 321,015 434,919 552,105 672,538 796,108 922,677 948,356 974,143 1,000,021 1,026,080 1,052,392 1,078,975 1,105,866 1,132,920 1,160,101 1,094,956 1,058,260 1,004,810 90,000 60,000 75,000 Initial Contract Premiums Annual

• Mo. ISA

Under present tax law, the illustrated additions surrenders, Base ..............

• Adj. Term Prot ......

1,978.20 38,369.10 # # 170.72 3,311.25

• utlays and benefits could be income tax free.

Consult tax advisor. # Premium included throughout Underwriting amount is $2,248,640 Changes after issue are subject to underwriting. ## Assumed tax bracket 45%. Adjustable Term Protection, initial amount guaranteed 11 years. May be extended to age 70 by payment of appropriate premiums. TT15 Preferred NT UB2 Illustration No. KS3020-RNWDP-132409 1426570 *This illustration includes non-guaranteed dividends and values. Illustrated dividends assume no loans; loans may impact dividends. Illustrated dividends reflect current (2015 scale) claim, expense and investment experience and are not estimates or guarantees of future results. This illustration assumes that the current dividend scale will not change; however, it is likely that dividends actually paid will be larger or smaller than those illustrated. This illustration does not recognize that, because of interest, a dollar in the future has less value than a dollar today. 8% loan provision. 8/05/15 Submitted by Thomas G. Lipscomb III, CLU The Northwestern Mutual Life - Milwaukee See current Basic Illustration for guaranteed elements and other information. Page 5 of 9

$2,370,000 Adjustable CompLife For Valued Client Age 55 Male Base................................................ $60,000 Initial Adjustable Term Protection.. $2,310,000## Contract Premium $150,000.00 (Including $109,652.70 Addl. Premium, $0.00 outside) Policy changed to paid-up at the end of year 8 Non-Guaranteed Dividends used to purchase paid-up additions End 1 2 Annual 3 Total 4 5 6 Cash Value

• f Additions

7 Annual Income Cash Surr. Values

• f

Year Insurance* A/T Outlay (Beg Yr) Premium Outlay Total* Guaranteed Surrendered (Beg Yr)* Tax (Beg Yr) 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 2,998,197 2,998,281 2,941,955 3,012,705 2,995,187 2,958,094 2,961,931 2,933,659 3,001,826 2,988,123 2,993,114 2,967,740 3,033,861 3,041,153 3,049,243 3,117,532 3,187,133 3,257,643 3,328,872 3,400,668 50,000 90,000 65,000 80,000 50,000 75,000 65,000 50,000 75,000 50,000 50,000 CR CR CR CR CR CR CR CR CR CR CR 975,000 925,000 835,000 835,000 770,000 690,000 640,000 565,000 565,000 500,000 450,000 375,000 375,000 325,000 275,000 275,000 275,000 275,000 275,000 275,000 2,098,887 2,142,511 2,144,479 2,238,500 2,266,517 2,277,821 2,318,777 2,333,080 2,423,374 2,446,944 2,484,254 2,494,474 2,580,238 2,614,904 2,648,663 2,733,826 2,820,740 2,909,563 3,000,711 3,095,117 1,026,242 996,505 924,709 942,584 893,765 828,078 791,042 727,402 738,396 683,063 641,645 573,840 580,633 536,473 491,447 496,137 500,731 505,320 509,999 514,938 50,000 90,000 65,000 80,000 50,000 75,000 65,000 50,000 75,000 50,000 50,000 Initial Contract Premiums Annual

• Mo. ISA

Under present tax law, the illustrated additions surrenders, Base ..............

• Adj. Term Prot ......

1,978.20 38,369.10 # # 170.72 3,311.25

• utlays and benefits could be income tax free.

Consult tax advisor. # Premium included throughout Underwriting amount is $2,248,640 Changes after issue are subject to underwriting. ## Assumed tax bracket 45%. Adjustable Term Protection, initial amount guaranteed 11 years. May be extended to age 70 by payment of appropriate premiums. TT15 Preferred NT UB2 Illustration No. KS3020-RNWDP-132409 1426570 *This illustration includes non-guaranteed dividends and values. Illustrated dividends assume no loans; loans may impact dividends. Illustrated dividends reflect current (2015 scale) claim, expense and investment experience and are not estimates or guarantees of future results. This illustration assumes that the current dividend scale will not change; however, it is likely that dividends actually paid will be larger or smaller than those illustrated. This illustration does not recognize that, because of interest, a dollar in the future has less value than a dollar today. 8% loan provision. 8/05/15 Submitted by Thomas G. Lipscomb III, CLU The Northwestern Mutual Life - Milwaukee See current Basic Illustration for guaranteed elements and other information. Page 6 of 9

$2,370,000 Adjustable CompLife For Valued Client Age 55 Male Base................................................ $60,000 Initial Adjustable Term Protection.. $2,310,000## Contract Premium $150,000.00 (Including $109,652.70 Addl. Premium, $0.00 outside) Policy changed to paid-up at the end of year 8 Non-Guaranteed Dividends used to purchase paid-up additions End 1 2 Annual 3 Total 4 5 6 Cash Value

• f Additions

7 Annual Income Cash Surr. Values

• f

Year Insurance* A/T Outlay (Beg Yr) Premium Outlay Total* Guaranteed Surrendered (Beg Yr)* Tax (Beg Yr) 41 42 43 44 45 3,472,540 3,543,032 3,610,880 3,673,697 3,727,006 275,000 275,000 275,000 275,000 275,000 3,194,111 3,300,511 3,418,708 3,556,285 3,727,006 520,409 527,045 535,662 547,690 565,773 Initial Contract Premiums Annual

• Mo. ISA

Under present tax law, the illustrated additions surrenders, Base ..............

• Adj. Term Prot ......

1,978.20 38,369.10 # # 170.72 3,311.25

• utlays and benefits could be income tax free.

Consult tax advisor. # Premium included throughout Underwriting amount is $2,248,640 Changes after issue are subject to underwriting. ## Assumed tax bracket 45%. Adjustable Term Protection, initial amount guaranteed 11 years. May be extended to age 70 by payment of appropriate premiums. TT15 Preferred NT UB2 Illustration No. KS3020-RNWDP-132409 1426570 *This illustration includes non-guaranteed dividends and values. Illustrated dividends assume no loans; loans may impact dividends. Illustrated dividends reflect current (2015 scale) claim, expense and investment experience and are not estimates or guarantees of future results. This illustration assumes that the current dividend scale will not change; however, it is likely that dividends actually paid will be larger or smaller than those illustrated. This illustration does not recognize that, because of interest, a dollar in the future has less value than a dollar today. 8% loan provision. 8/05/15 Submitted by Thomas G. Lipscomb III, CLU The Northwestern Mutual Life - Milwaukee See current Basic Illustration for guaranteed elements and other information. Page 7 of 9

ILLUSTRATION ASSUMPTIONS AND TRANSACTIONS For Valued Client POLICY $2,370,000 Adjustable CompLife, age 55, Male, Preferred NT UNSCHEDULED POLICY CHANGES# Year 8 Changed to paid-up at end of policy year CONTRACT PREMIUMS - MANNER OF PAYMENT#* Years 1 - 8 Paid in cash by policyowner DIVIDEND USAGE#* Years 1 - 66 Dividends purchase paid-up additions* ANNUAL BENEFIT#* Years 18 22 25 30 34

• 20

23 28 32 35 Surrender of additions* Surrender of additions* Surrender of additions* Surrender of additions* Surrender of additions* TAXES#* Years 1 - 66 Cash flows and benefits could be income tax free. The illustrated (not guaranteed) surrenders and/or loan availability are based on using accrued dividend values. Since dividends are not guaranteed, the actual amount available for surrender and/or loans may differ from that illustrated. #The preceding illustration is based on the above assumptions and transactions occurring and the continuance of the dividend scale illustrated; however, it is likely that the dividend scale will

• change. Review your policy and insurance program annually with your agent.

*Illustrated dividends reflect current (2015 scale) claim, expense and investment experience and are not estimates or guarantees of future results. This illustration assumes that the current dividend scale will not change; however, it is likely that dividends actually paid will be larger or smaller than those illustrated. 8/05/15 Submitted by Thomas G. Lipscomb III, CLU

Illustration No. KS3020-RNWDP-132409 The Northwestern Mutual Life - Milwaukee See current Basic Illustration for guaranteed elements and other information. Page 8 of 9

Living Benefits of Life Insurance

Under current tax laws, the cash value in a life insurance policy accumulates on a tax-deferred basis, and the death benefit is received income tax free. You may want to talk to your Financial Representative about the different ways to remove cash from your policy, while keeping your policy inforce. These alternatives include surrendering paid-up additions, receiving dividends in cash or taking policy loans. Tax Consequences of Removing Cash Value. Each method of receiving cash value from your policy is subject to different tax consequences and the following discussion only addresses general rules. They are subject to exceptions, such as those for modified endowment contracts, which are discussed below. You should consider consulting a qualified tax advisor on how the tax laws may apply to your individual circumstances. Surrendering Paid-Up Additions. Most Northwestern Mutual policyowners use their dividends to purchase "paid-up additions", which increase the death benefit and cash value of the policy. You can remove cash by surrendering paid-up additions. This will decrease the policy's death benefit and cash value. As a general rule, the proceeds of these surrenders are not taxed until after you have taken out an amount equal to the premiums paid into the policy. If you continue to surrender paid-up additions past this point, the proceeds will be taxed as ordinary income in the year the surrenders are made. Receiving Dividends in Cash. If you have your annual dividends paid to you in cash, your death benefit will remain level and your guaranteed cash value will grow as specified in your contract. Dividends received in cash are taxed in the same way as surrenders of paid-up additions. Cash through Policy Loans. Your policy allows you to borrow money from the Company, using the policy's cash value as collateral. Policy loan interest accrues on a daily basis. Unpaid interest is added to the loan. Cumulative loan principal and interest, still outstanding at the time of death, are paid out of the policy's death

• benefit. Policy loan proceeds are not taxed as long as the policy stays in force until the insured's death. If the policy

terminates prior to the insured's death, the amount of the loan principal, the loan interest and the remaining unborrowed cash value is taxed as ordinary income to the extent it exceeds the amount of premiums paid. It is possible that there will not be enough surrender value remaining in the policy to pay the tax. If the accumulated policy loan principal and interest can no longer be supported by the cash value, a required minimum out of pocket payment will be necessary, or the policy will terminate and trigger potentially significant taxable income. These "surrender squeeze" situations can be avoided by limiting the amount of money you remove through surrenders and loans. Modified Endowment Contracts (MEC). Under IRS rules, certain life insurance policies may be classified as Modified Endowment Contracts (MECs). MECs do not enjoy the same tax advantages as other life insurance

• policies. Any loans (including premium loans), surrenders or other removal of cash value from the policy are taxed

in the year received, and may be subject to a 10% IRS penalty. The headings in your Basic Illustration will show whether your policy is a MEC or might become a MEC in the future. Changes made to the premiums or insurance benefit can produce MEC status other than as illustrated here. If you plan to take cash out of your policy, you should be sure to determine whether the policy is a MEC, and to discuss the tax consequences with a qualified tax advisor. Your Financial Representative can discuss ways to prevent your policy from ever becoming a MEC. Additional Illustrations. Your Northwestern Mutual Financial Representative can give you additional illustrations showing the impact that a lower dividend scale could have on illustrated dividends, loans, surrenders,

• utlays, cash value amounts and insurance benefits. After the policy is issued the Financial Representative can

provide you with updated policy illustrations so that you continue to have a current picture of your policy's performance, the cash values available in the policy, and the impact of loan principal and interest on the policy. For a more conservative picture, you can also ask that these "in-force" illustrations be produced at a lower dividend scale than that being paid at that time. A lower dividend scale will show reduced policy values available to support supplemental income needs. TT15 Preferred NT 8/05/15 Submitted by Thomas G. Lipscomb III, CLU Illustration No. KS3020-RNWDP-132409 The Northwestern Mutual Life - Milwaukee See current Basic Illustration for guaranteed elements and other information. Page 9 of 9

A Life Insurance Illustration

Prepared For

Valued Client

Presented By Thomas G. Lipscomb III, CLU, Agent 5251 W. 116th Pl. Ste 300 Leawood, KS 66211 (913) 362-5000 FAX (913) 338-0041 August 5, 2015

Assumes a policy date in 2015. Values may be different if the policy is in a different calendar year. Supplemental Life Insurance Illustration Whole Life - Adjustable Policy Form Number ICC15.TT.ACL.(0715) Northwestern Mutual Life - 720 E. Wisconsin Avenue - Milwaukee, Wisconsin 53202 Illustration No. KS3020-RNWDP-134554 ILLUS.ACL.(0608) Page 1 of 3

$2,370,000 Adjustable CompLife For Valued Client Age 55 Male Base................................................ $60,000 Initial Adjustable Term Protection.. $2,310,000## Contract Premium $150,000.00 (Including $109,652.70 Addl. Premium, $0.00 outside) Policy changed to paid-up at the end of year 8 Non-Guaranteed Dividends used to purchase paid-up additions End 1 2 3 Annual Premium 4 Cash Surrender 5 Total 6 7 Cash Surr. Values

• f

Year Insurance* Dividend* Outlay (Beg Yr) Value Increase* Premium Outlay Total* Guaranteed 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 @81 @84 @87 2,370,000 2,370,000 2,370,000 2,370,000 2,370,000 2,370,000 2,370,000 2,536,525 2,549,930 2,606,528 2,665,410 2,726,391 2,789,143 2,853,535 2,919,167 2,989,009 3,060,293 3,133,908 3,209,784 3,287,939 3,793,955 4,068,077 4,350,329 15,925 23,362 37,010 40,541 44,391 48,632 53,545 59,050 28,426 30,467 32,538 34,576 36,493 38,392 40,107 43,724 45,698 48,288 50,892 53,569 67,784 74,590 80,088 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 118,873 131,303 148,857 156,823 165,224 174,090 183,614 193,688 63,840 66,803 69,812 72,958 76,135 79,365 82,511 87,366 90,592 93,856 97,180 100,753 117,110 122,377 124,937 150,000 300,000 450,000 600,000 750,000 900,000 1,050,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 118,873 250,177 399,034 555,858 721,082 895,172 1,078,787 1,272,475 1,336,316 1,403,120 1,472,932 1,545,890 1,622,026 1,701,391 1,783,902 1,871,269 1,961,862 2,055,718 2,152,898 2,253,652 2,921,459 3,284,158 3,656,582 102,947 210,391 321,015 434,919 552,105 672,538 796,108 922,677 948,356 974,143 1,000,021 1,026,080 1,052,392 1,078,975 1,105,866 1,132,920 1,160,101 1,187,046 1,213,775 1,240,376 1,393,471 1,460,916 1,521,050 Initial Contract Premiums Annual

• Mo. ISA

Annual Income* @81 $245,577 @84 $301,058 @87 $345,071 Base ..............

• Adj. Term Prot ......

1,978.20 38,369.10 # # 170.72 3,311.25 ## Based on current (8/01/2015) Installment Refund rates and may change Adjustable Term Protection, initial amount guaranteed 11 years. # Premium included throughout May be extended to age 70 by payment of appropriate premiums. Underwriting amount is $2,248,640 Changes after issue are subject to underwriting. TT15 Preferred NT UB2 Illustration No. KS3020-RNWDP-134554 1426570 *This illustration includes non-guaranteed dividends and values. Illustrated dividends assume no loans; loans may impact dividends. Illustrated dividends reflect current (2015 scale) claim, expense and investment experience and are not estimates or guarantees of future results. This illustration assumes that the current dividend scale will not change; however, it is likely that dividends actually paid will be larger or smaller than those illustrated. This illustration does not recognize that, because of interest, a dollar in the future has less value than a dollar today. 8% loan provision. 8/05/15 Submitted by Thomas G. Lipscomb III, CLU The Northwestern Mutual Life - Milwaukee See current Basic Illustration for guaranteed elements and other information. Page 2 of 3

$2,370,000 Adjustable CompLife For Valued Client Age 55 Male Contract Premium $150,000.00 Policy changed to paid-up at the end of year 8 Death Benefit and Cash Value Rate of Return 1 Annual Premium Outlay 2 Total 3 4 5 Total Cash Surr. 6 7 Total Insurance ROR* Total Cash Surr. Value ROR* Year (Beg Yr) Insurance* (0% Tax Rate) (45% Tax Rate) Value* (0% Tax Rate) (45% Tax Rate) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 @81 @84 @87 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 2,370,000 2,370,000 2,370,000 2,370,000 2,370,000 2,370,000 2,370,000 2,536,525 2,549,930 2,606,528 2,665,410 2,726,391 2,789,143 2,853,535 2,919,167 2,989,009 3,060,293 3,133,908 3,209,784 3,287,939 3,793,955 4,068,077 4,350,329 12.09 6.24 5.22 4.88 4.60 21.98 11.34 9.49 8.87 8.37 118,873 250,177 399,034 555,858 721,082 895,172 1,078,787 1,272,475 1,336,316 1,403,120 1,472,932 1,545,890 1,622,026 1,701,391 1,783,902 1,871,269 1,961,862 2,055,718 2,152,898 2,253,652 2,921,459 3,284,158 3,656,582 2.41 3.87 4.01 4.01 3.97 4.38 7.04 7.30 7.29 7.22 Pre-tax Rate of Return required on cash flow (Col.1) to equal the Total Insurance (Col.2) and the Total Cash Surr. Value (Col.5), given the assumed tax bracket. The Rate of Return assumes the continuation of the plan. *This illustration includes non-guaranteed dividends and values. Illustrated dividends assume no loans; loans may impact

• dividends. Illustrated dividends reflect current (2015 scale) claim, expense and investment experience and are not

estimates or guarantees of future results. This illustration assumes that the current dividend scale will not change; however, it is likely that dividends actually paid will be larger or smaller than those illustrated. This illustration does not recognize that, because of interest, a dollar in the future has less value than a dollar today. 8% loan provision. Caution: This page must not be shown without previous pages which provide guarantees and other pertinent data. TT15 Preferred NT UB2 8/05/15 Submitted by Thomas G. Lipscomb III, CLU Illustration No. KS3020-RNWDP-134554 1426570 The Northwestern Mutual Life - Milwaukee See current Basic Illustration for guaranteed elements and other information. Page 3 of 3