“Dancing Cheek to Cheek”
The films of Fred Astaire and Ginger Rogers in the 1930’s and 1940s had some sensational dance routines. The dance couple of Expanded Worldwide Planning (EWP) and a Trust are poised for equally sensational steps in the realm of planning for wealthy international families.
Our firm specializes in just this brand of choreography: using a properly structured Private Placement Life Insurance (PPLI) in combination with an excellently drafted Trust. We capitalize Trust(s), because there is a large variety to choose from in international tax planning, and the selection depends on the nationality of the family members, their jurisdictions of domicile, the passports they carry, the location of their assets, and all the various countries’ laws that impact these items.
At the heart of EWP is a properly structured Private Placement Life Insurance (PPLI) policy. The assets inside this policy can be anything that can held by a trust company. These assets can also be located anywhere in the world. While these assets are inside this PPLI policy, all tax is deferred. At the death of the insured life/lives under the policy, these assets pass tax-free to the beneficiaries of the PPLI policy.
A trust can be used in connection with other planning to lessen taxes, but by itself does not automatically confer tax advantages. For example, a trust cannot pass assets as a tax-free death benefit to future generations, as a PPLI policy can do.
For those jurisdictions in the world that recognize trust, there are innumerable techniques used by wealthy international families that favor the use of a trust.
Many advisors who draft trusts miss the opportunity of “dancing cheek to cheek” by not incorporating PPLI policies in conjunction with their trust planning.
Trust and Insurance Comparison
| ● Contractually based and used by millions | ● Provides some asset protection |
| ● Tax deferral | ● Sometimes seen as tool for the rich |
| ● Insurance company is beneficial owner | ● Requires “trustee” with full control |
| ● Simplified or limited reporting | ● More stringent reporting requirements |
| ● Potentially tax free | ● Tax filings for trust and possibly beneficiaries required in some jurisdictions |
| ● No capital gains tax | ● Limited or not direct tax deferral on payouts |
| ● No trustee | |
| ● Asset protection |
In most civil law jurisdictions, trusts are poorly acknowledged and trust law is not well developed. This can create obstacles for those domiciled in these civil law jurisdictions that have created foreign trusts. However, in certain circumstances, a PPLI structure can circumvent these problems and achieve the planning aims one would more commonly be able to fulfill with a trust in a common law jurisdiction.
Our well-rehearsed team of advisors can truly teach you some new dance steps, that partner EWP with trusts, so “Let’s Dance.”
by Michael Malloy CLU TEP RFC, @ Advanced Financial Solutions, Inc
