Generation Legacy^®

Generation Legacy^® uses two contracts, a period certain single premium immediate annuity (SPIA) and a simplified issue whole life insurance policy. Payouts from the SPIA fund premium payments for the life insurance policy. The design of this product makes it ideal for transfer of non-qualified annuities and qualified funds.

The single premium is credited to a period certain single premium immediate annuity (SPIA) policy upon issue. Annual SPIA payouts begin immediately and are guaranteed for the full payout duration, subject to provisions of the contract. SPIA payouts are used to fund annual premiums for the life insurance policy. If the annuitant dies during the payout period, the named whole life and SPIA beneficiary will receive the life insurance policy proceeds plus the remaining annuity payouts until the payout duration ends.

The traditional non-participating whole life policy offers permanent protection with a guaranteed cash value and income tax-free death benefit.

There are two major living benefits under the policy riders – (1) Terminal Illness and (2) Qualified Nursing Facility and Extended Care. Riders may not be available in all states. For state availability, refer to the secure area of our website or the State Approval and Forms List, Form 8254.

Terminal Illness – Accelerated Death Benefit Rider (Form 8245)

• The owner may elect to accelerate a percentage of the death benefit if the insured is diagnosed as terminally ill with a life expectancy of up to 12 months.
• The owner may elect to accelerate up to 75% of the policy up to $250,000 (maximum percentage may vary by state).

Qualified Nursing Facility / Extended Care – Accelerated Death Benefit Rider (Form 8247) The qualified nursing facility and extended care rider allows the owner to accelerate up to 50% of the policy death benefit up to a maximum of $250,000 if the insured is:

1. Diagnosed chronically ill and confined to a Qualified Nursing Facility for at least 90 days with the expectation the confinement is expected to be permanent, or
2. Requires Extended Care. Extended Care means the insured is chronically ill, has received care continuously for at least 90 days and requires care provided by a licensed home health care agency or by a licensed or state-certified adult day care center.

Chronically ill means that the insured:

1. is unable to perform, without substantial assistance from another person, at least two out of six activities of daily living which are (a) eating; (b) toileting; (c) transferring (i.e., moving into or out of a bed, chair, or wheelchair); (d) bathing; (e) dressing; and (f) continence; or
2. suffers from a severe organic mental illness.

The following details relate to all accelerated death benefits:

• The accelerated death benefit will be considered a lien against the policy and will accrue interest up to an annual rate of 8%.
• A one-time service fee, not to exceed $100, will be added to the lien.
• The accelerated proceeds will be paid in a single lump sum.
• The benefit amount will be reduced by any outstanding policy loan prior to payment of the accelerated death benefit.
• There is no premium charge for the rider.
• The minimum acceleration amount is $5,000.
• The owner may repay all or part of the lien at any time
• The rider(s) will terminate if any of the following occur:
  • the base policy ends; the base policy will end if the lien with accrued interest equals or exceeds the death benefit,
  • death of the insured,
  • an accelerated death benefit is received under another rider attached to the policy,
  • the rider is five years or less from the policy expiry date.

Benefits under either rider may be taxable. The benefit received under these riders may adversely affect eligibility for Medicaid or other government benefits. Your client should seek advice from their personal tax advisor before making a claim. See rider disclosure statements for details.

WHOLE LIFE INSURANCE POLICY

Issue Ages

60-80 (age last birthday)

10-year Limited-Pay	7-year Limited-Pay
Ages: 60-74	Ages: 75-80

Minimum Face Amount
No specified minimum; premium is based on SPIA payout

Maximum Face Amount
$450,000

Maturity Age
This policy has no defined maturity age. For purposes of projecting values in the proposal software, the proposal is deemed to mature at age 100. The cash value is designed to equal the death benefit at age 100.

Cash Values
Cash values are guaranteed and based upon the 2017 CSO mortality table.

SINGLE PREMIUM IMMEDIATE ANNUITY

SPIA Type
Period Certain

Issue Ages
60-80 (age last birthday)

10-year Payout	7-year Payout
Ages: 60-74	Ages: 75-80

Minimum SPIA Premium
$5,000

Maximum SPIA Premium
Life premium that purchases up to a $450,000 face

How Generation Legacy^® Works
SPIA payouts are guaranteed and payable annually for the full period certain duration. Payouts are made at the beginning of each contract year and vary by SPIA duration. On the application, the owner will designate Baltimore Life as the payee of the first and future SPIA payouts which will be used to fund a whole life insurance policy. The owner may change the payee of SPIA payouts. However, naming a payee other than the company may lead to insufficient premiums for the life policy and eventual policy lapse.

Generation Legacy^® – One Person
The SPIA’s annuitant and the life policy’s insured are the same person. If the annuitant dies during the SPIA payout period, the whole life and SPIA beneficiary will receive scheduled unpaid SPIA payouts until the SPIA duration ends, in addition to the Generation Legacy^® whole life insurance immediate death benefit. However, the beneficiary may elect to receive the commuted value of future unpaid SPIA payouts in a lump sum. SPIA payouts to the beneficiary will be all or partially taxable to the beneficiary depending on whether the SPIA is an IRA or non-qualified. If death occurs after the SPIA payout period has ended, the beneficiary will receive the whole life insurance death benefit.

Generation Legacy^® – Spouse Option
This option is ideal for situations when one spouse cannot qualify for life insurance. One spouse is the annuitant, the other is the life policy insured. If the annuitant dies during the SPIA payout period, the SPIA beneficiary may continue to have SPIA payouts made a premium toward the life insurance policy or to elect to receive scheduled future SPIA payouts. The beneficiary may not elect a commuted value of future SPIA payouts.

The annuity payout period and life policy premium period are based on the life insured’s age 60-80. The annuitant’s age for this spouse option may be 60+.

Life Insured

Ages 60-74	Ages 75-80
10-year Limited-Pay Life	7-year Limited-Pay Life
10-year Annuity Payout	7-year Annuity Payout

Annuitant
Ages 60+

Fund Transfers
Non-qualified annuities and qualified funds are ideal funding sources for the SPIA. When traditional IRAs or other types of qualified funds are transferred, the funds will be placed into a SPIA IRA. Any non-taxable transfers of traditional IRAs and other qualified funds must qualify as acceptable direct transfers or rollovers to an IRA as provided by the Internal Revenue Code.

Death of Annuitant
If the annuitant dies during the SPIA payout period, the whole life and SPIA beneficiary will receive scheduled unpaid SPIA payouts until the SPIA duration ends, in addition to the Generation Legacy^® whole life insurance immediate death benefit. However, the beneficiary may elect to receive the commuted value of future unpaid SPIA payouts in a lump sum. SPIA payouts to the beneficiary will be all or partially taxable to the beneficiary depending on whether the SPIA is an IRA or non-qualified. If death occurs after the SPIA payout period has ended, the beneficiary will receive the whole life insurance death benefit.

SPIA Taxation*
In almost every case, your client, the SPIA contract owner, will be taxed on a portion of each payout from the SPIA. Non-qualified annuities: When NQ annuities are 1035 exchanged to the SPIA, part of each SPIA payout will be a non-taxable return of your client’s cost basis. The remaining portion of the payout represents gain which is taxable. For each SPIA payout, your client will receive a 1099 from the company stating the taxable portion. The company will also report the taxable amount to the IRS. Qualified funds: The SPIA payout will be fully taxable as ordinary income. Your client will receive a 1099 for each year’s taxable amount and the company will report the taxable amount to the IRS.

IRA contracts are subject to a requirement called Required Minimum Distributions (RMD) when your client reaches age 70½. A minimum amount must be withdrawn from the IRA each year to satisfy the RMD requirement. The annual payout from your client’s Generation Legacy^® SPIA will satisfy the RMD requirement for the SPIA IRA, but may not satisfy distributions from your client’s other IRAs or qualified plans.

Regardless of the source of funds transferred to the SPIA, qualified or non-qualified, once each SPIA payout is made and your client recognizes taxable portion of the payout, the life premium is considered “after tax” funds and the life policy is considered non-qualified.

Tax Withholding*
In the application, your client may elect whether or not to withhold tax from each SPIA payout. However, electing to withhold tax will negatively impact the performance of Generation Legacy^®. Baltimore Life will not accept applications where your client has elected to withhold tax. Withholding tax from each SPIA payout reduces the amount of premium funding the life insurance policy and decreases the face amount otherwise provided. The amount withheld can vary annually which would also cause a deviation in amounts between the SPIA payout and life premium. A deficiency in life premium may require additional premium payments from your client. If premium deficiencies are left unpaid, your client’s life policy could lapse.

Simply elect “I DO NOT want tax withheld from your annuity” by checking the box in Question 1 in the Notice of Withholding and Election section of the application. Do not complete Question 2; leave it blank.

Regardless of your client’s desired withholding election, the tax impact of the SPIA should always be disclosed. Advise your clients to consult with their personal tax advisor with questions regarding the taxation of a SPIA.

Loans
Loans are available on the whole life policy of the Generation Legacy^® product. The maximum loan is an amount that, with interest to the end of the current policy year, will not exceed the net cash value at the end of that current policy year. Loan interest will not exceed an annual rate of 8.00%. The minimum loan repayment is $25, unless the loan balance is being fully paid.

Full Surrender
The whole life policy can be surrendered at any time for its net cash value. The net cash value is the cash value of the policy less any policy debt. The policy will terminate at the time of a full surrender.

Partial Surrender
A partial surrender from the whole life policy can be exercised at any time after the premium payment period. The minimum partial surrender benefit is $500. The maximum partial surrender benefit is the available partial surrender amount, less $5,000.

The available partial surrender amount is equal to the net cash value of the policy less any loan interest to the end of the current policy year for each partial surrender. You can only make one partial surrender in any given policy year. There is a $25 fee.

Point-of-Sale Underwriting Decision Process
You will pre-qualify your client using the application, which has been designed to help you classify your client’s risk profile.

Once you have completed the pre-qualification, you’ll contact the call center for an underwriting interview. This point-of-sale interview generally lasts 12 minutes or less, so you spend less time on the phone. Any underwriting decision is communicated to you, the agent, NOT to your client. The professional call center representative will review the exact same health questions you used during the pre-qualification. During the call, an MIB search and a prescription drug database search will be run “in the background.” If there are discrepancies between those results and the answers provided in the interview, your client may be asked a question from the application again in an attempt to clarify the difference in information. This process reduces the need for an APS and allows Baltimore Life and our agents to keep point-of-sale decision rates high. After your client has completed the interview, the call center representative will provide you with an underwriting decision of either “approved” or “not approved.”

Fewer than 10 percent of the cases are referred to the home office for additional underwriting review.

Sample Rates for Generation Legacy^®

$50,000 Premium, Non-Tobacco

	Age 60	Age 65	Age 70	Age 75
Male	$86,605	76,979	69,279	61,209
Female	$98,963	86,605	78,055	66,675

Modified Endowment Contract (MEC)
By nature of the level of premium needed to pay the Generation Legacy^® whole life policy in seven years for ages 75-80, most of the policies at these ages will be classified as MECs. Once funds are received and the policy is issued, the MEC status will be determined. A MEC Information Form (Form 3994) must be completed with each application for ages 75-80. Policies issued for ages 60-74 will not be MECs. Thus, the MEC Information Form is not required to be submitted with the application for ages 60-74.

When a policy is classified as a MEC, withdrawals and loans are taxable to the extent there is a gain on the contract. In addition, when a policy is a MEC, taxable loans and withdrawals are subject to a 10% penalty if the policyowner is a corporation or if the individual policyowner is under age 59½ at the time of distribution. In either case, (MEC or non-MEC), gain in the contract is taxable upon full surrender of the policy. Note that tax laws are subject to interpretation and subject to change.