RIC-E Trust® - The Investment

Grandfather with grandchildren

Let’s talk about the investment that will be used for the money you place into the Trust.

The Polaris Platinum III Variable Annuity, issued by the American General Life Insurance Company2, will be the investment vehicle for the RIC-E Trust®. Like all annuities, Polaris is an insurance contract.

Since the Trust is being established for a child’s retirement, a variable annuity offers the features needed for this long-term investment. Under current tax law, money placed in an annuity grows tax-deferred, meaning taxes are not paid on earnings until money is withdrawn. Thus, there are no income taxes during the life of the Trust, except for limited circumstances as previously discussed. By postponing taxes on earnings, money grows faster than a comparable investment that is taxed annually.

Please note that changes in tax rates, or the tax treatment on investment earnings or annuities may impact results.

Investment Features

Variable annuities can be purchased with a single payment or multiple payments. Most variable annuities let you choose from, and move money among, a variety of “sub-accounts” without paying sales charges or taxes. The sub-accounts invest in stocks, bonds, money market accounts or a combination of the three. The variable annuity prospectus provides detailed information on all the sub-account investment choices offered.

Sub-account values and returns fluctuate with the performance of the underlying investments — hence the word variable in the product’s name. Therefore, when you make a withdrawal, the value of the account might be worth more or less than the original investment. Amounts allocated to the sub-accounts are subject to market risk, including the possible loss of principal. Future payments are based on the performance of the investment portfolio.

Tax Features

Under current tax law, profits earned from variable annuities are not taxed until withdrawn.

This means money can be transferred from one investment option to another within a variable annuity without any tax implication.

Withdrawals are subject to taxes at ordinary income tax rates. Also, withdrawals prior to age 59½ are subject to a 10% IRS penalty. (To avoid the risk of incurring this penalty, the Trust does not permit withdrawals prior to age 59½ except in the event of death, disability or the payment of trustee fees.)

Please note that changes in tax rates, or the tax treatment on investment earnings or annuities may impact results.

Insurance Features

Because variable annuities are issued by insurance companies, these products often have insurance features. The annuity used by the trust includes a “Guaranteed Death Benefit” which states that, if the child dies, the child’s estate will receive the greater of: (a) value of the account or (b) the amount that was invested (minus withdrawals). This guarantee is based on the claims-paying ability of the insurance company.

Expenses of the Variable Annuity

Investing in a variable annuity incurs several expenses, such as:

Contingent Deferred Sales Charge:

After eight years, the Polaris annuity permits withdrawals without restriction. During the first eight years, free withdrawals are permitted only up to 10% of the account’s value each year. This restriction is irrelevant for the RIC-E Trust® because the withdrawals are prohibited until the child reaches the age of distribution. If a withdrawal were to occur during the first seven years, the fee on amounts beyond 10% per year (called a Contingent Deferred Sales Charge) would be as shown below:

Insurance Separate Account Expense:

The annuity charges a maximum annual fee of 1.55%, debited on a pro-rata basis daily, for the insurance benefits offered by the variable annuity.

Annual Contract Fee

None. Although the Polaris annuity normally charges an annual contract fee of $50, this fee is waived for all RIC-E Trusts®.

Sub-Account Expense:

The sub-accounts offered by the Polaris annuity are managed by mutual fund companies. Each fund charges an annual fee, called the expense ratio, which is debited daily just like the separate account fee. The total sub-account expense will vary based on the funds selected. The minimum annual sub account expense is .72% and the maximum annual sub-account fee is 1.48%. Complete details for each fund can be found in the prospectus.


Your Financial Advisor receives initial compensation of 1% based on the value of the investment, and.25% quarterly based on the value of the investment beginning in month 15. This is paid to your Financial Advisor from the invested assets.

Investment Prospectus
Important Note

Not FDIC Insured • May Lose Value • No Bank or Credit Union Guarantee Not a Deposit • Not Insured by any Federal Government Agency

Variable annuities are subject to risk, including the loss of principal. The contract, when redeemed, may be worth more or less than the total amount invested.

Variable annuities are offered by prospectus only. The prospectus contains complete details on features, benefits, risks, fees and expenses. You should consider the investment objectives, risks, charges and expenses of the annuity before investing. Please contact us or consult your Financial Advisor for a copy of the product prospectus for this and other information. You should read the prospectus carefully prior to investing or sending money.