Q & A – Inside and Outside PPLI

Questions and Answers  from the book “The Wit and Wisdom of Professor PPLI: How to Achieve Exceptional Asset Structuring with Private Placement Life Insurance”

~ by Michael Malloy, CLU, TEP

Inside and Outside PPLI

Academics Teach Us a Lesson

Section 1, Part 4

 

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Professor PPLI, a key element in this discussion is magic. Give us more insight into how PPLI makes some things disappear and others appear.

This is a good way to view the topic. When we consider the six elements of Expanded Worldwide Planning (EWP), they can be grouped into these two categories. Elements that disappear and those that make things appear.

These categories are somewhat arbitrary, but allow you to collect certain thoughts around these six elements of EWP. We can place privacy, asset protection, and tax shield in the Disappearing Category.

Legitimate privacy allows wealthy families to conduct their affairs outside the prying eyes of those who do not have a rightful interest in their financial affairs. The tax shield in a properly structured policy eliminates taxes in most jurisdictions throughout the world. Asset protection keeps assets outside the reach of ex-spouses, and those seeking easy access to wealth without proper legal authority. This is accomplished using the correct asset protection trust in tandem with the PPLI policy, which adds another layer of protection to the trust.

In the Appear Category, we place trust substitute, compliance simplifier, and succession planning. In some civil law jurisdictions, trusts are not recognized or do not function as well as they do in common law jurisdictions. Using a PPLI policy in the structure can, in some cases, simplify and enhance the planning. PPLI is definitely a compliance simplifier. Since the insurance company becomes the beneficial owner of the assets inside the policy, reporting obligations are greatly simplified and in some cases eliminated. Since the life insurance death benefit passes directly to the designated beneficiaries, it can deliver the death benefit outside the forced heirship laws that exist in some jurisdictions.

One magical aspect of PPLI is that although it is classified as a life insurance product, it functions more like a trust. Since most policies are owned by trusts, you might say that PPLI and trusts join together and become a successful and secure asset structuring marriage. Professor PPLI, please tell us how this is possible. 

The PPLI policy provides elements which are not possible with a trust alone. A trust can accomplish many useful things such as putting into legal language the aims and goals of the wealth owners. A trust also creates an entity that can live beyond the lives of the wealth owners. The following comparison tells the story.

Trust and Insurance Comparison 

Insurance

  • Contractually based and used by millions
  • Tax deferral
  • Insurance company is beneficial owner
  • Simplified or limited reporting
  • Potentially tax free
  • No capital gains taxes
  • No trustee
  • Asset protection

Trust

  • Provides some asset protection
  • Sometimes seen as a tool for the rich
  • Requires “trustee” with full control
  • More stringent reporting requirements
  • Tax filings for trust and possibly beneficiaries required by some jurisdictions

Professor PPLI, you use two very different academic articles in this Section to illustrate a point. Please explain more fully how these two articles relate to PPLI.

Wealthy families are looking for simple and straightforward methods to structure their assets. In part, these two articles illustrate that the financial, political, and governmental aspects of our lives are in constant change. Laws are enacted which sometimes have the opposite effect than was intended by their creators, as one article proves.

Governments are seeking more ways to tax wealthy families, and this is seen by some as a societal good, and by others as governmental overreach. Once assets are properly structured inside a PPLI policy, they are somewhat isolated from these forces, and can pass to future generations according to the wishes of the wealth owners.

by Michael Malloy, CLU TEP, @ Advanced Financial Solutions, Inc

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Let PPLI Lead the Charge

The Highest Form of Zero

 Part 5

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 Our next few articles will comprise an in-depth look at the five main components of our PPLI Concept Map: Professor PPLI Defines Nothing. We also offer you the fifth part of, “She Was Good For Nothing,” by Hans Christian Andersen. This charming fairy tale supports our theme of nothing.

 The potential of Private Placement Life Insurance (PPLI) as an asset structuring tool for wealthy families has barely been explored. Particularly in a U.S. context, one sees PPLI’s unique traits expressed in numbers, mainly through the compounding of the tax-free growth of its cash value over time. Yes, this is most true and correct, but this is only the beginning of the story.

Just as “the cloud” has taken our data storage to a new level, this article will endeavor to raise your awareness of the myriad possibilities of PPLI for structuring the worldwide assets of wealthy families. This is expressed excellently in the Senior Consultant, The Voice of the Investment Management Consultant.

“Private Placement Life Insurance (PPLI) is much more than an insurance policy. PPLI represents one of the most powerful vehicles available to the high net worth investor in the marketplace today.

PPLI enhances both wealth creation and wealth preservation. Wealth creation is the result of the tax-free growth of the assets in the insurance contract. Wealth preservation is a result of the death benefit paid from the insurance contract.”

Here are a few examples where Advanced Financial Solutions was able to assist wealthy international families.

PPLI Solution A, by Advanced Financial Solutions Inc.

A Chinese client, who is a U.S. green card holder residing in Hong Kong, had pre-IPO stock valued at $10M. Upon going public, it was estimated that the stock will be worth many times this valuation. Through the use of careful planning, we were able to place the stock into a properly structured PPLI policy before the stock went public, thus saving the client $45M in U.S. capital gains tax. He was able to diversify his holdings inside the policy tax-free, and pass his estate tax-free to his heirs. The client accessed the funds inside the policy through low-cost policy loans.

PPLI Solution B

A Chinese family came to us for succession planning for offshore companies owned by the family. They wished to pass these offshore companies located in various parts of the world to their son, who is a green card holder residing in the U.S. Besides transferring the companies at the death of the wealth owner via a properly structured PPLI policy, the son wished to take the profits from the companies and invest them in real estate projects outside the U.S. We created a PPLI structure for the family that accomplished all of these aims. The PPLI structure also gave them tax-deferral on all the future revenue from the companies.

PPLI Solution C

An Israeli client who resides in Italy has a company where all the revenue is generated in Italy. He is also a U.S. green card holder, but spends very little time in the U.S. He had a Nevada company that did the processing of his customers’ orders which came from customers worldwide. The client wished to restructure to lessen his U.S. tax burden which we accomplished for him using a 953(d) offshore PPLI policy.

PPLI Solution D

A young entrepreneur with worldwide holdings in sports, natural resources, gaming, and content management wishes us to check his compliance with FATCA and CRS. He is a U.S. green card holder as well as a UK resident, and citizen of an African country. He had created a dozen companies with excellent potential. We brought him into compliance with tax authorities worldwide with a PPLI structure. We gave his revenues a boost, because in the PPLI structure all the profits become tax-deferred. We protected his family with the low-cost death benefit of the PPLI policy.

We conclude our theme of Nothing by defining it with a Dutch concept, niksen from Olga Mecking in the New York Times article, “The Case for Doing Nothing, Stop being so busy, and just do nothing. Trust us.”

“Running from place to place and laboring over long to-do lists have increasingly become ways to communicate status: I’m so busy because I’m just so important, the thinking goes.

Perhaps it’s time to stop all this busyness. Being busy — if we even are busy — is rarely the status indicator we’ve come to believe it is. Nonetheless, the impact is real, and instances of burnout, anxiety disorders and stress-related diseases are on the rise, not to mention millennial burnout.

There’s a way out of that madness, and it’s not more mindfulness, exercise or a healthy diet (though these things are all still important). What we’re talking about is … doing nothing. Or, as the Dutch call it, niksen.

What is niksen?

 It’s difficult to define what doing nothing is, because we are always doing something, even when we’re asleep.

Doreen Dodgen-Magee, a psychologist who studies boredom and wrote the book “Deviced! Balancing Life and Technology in a Digital World,” likens niksen to a car whose engine is running but isn’t going anywhere.

“The way I think about boredom is coming to a moment with no plan other than just to be,” she said.

Sandi Mann, a psychologist at the University of Central Lancashire in Britain, added that niksen can be “when we’re not doing the things we should be doing. Because perhaps we don’t want to, we’re not motivated. Instead, we’re not doing very much.”

More practically, the idea of niksen is to take conscious, considered time and energy to do activities like gazing out of a window or sitting motionless. The less-enlightened might call such activities “lazy” or “wasteful.” Again: nonsense.”

Part 5 of “She Was Good For Nothing” by Hans Christian Andersen:

“It was just then that my darling boy, who lies sleeping there, was born. Then his father had a long and severe illness, and for nine months I even had to dress and undress him every day. We kept on going backward. We had to borrow more and more; one by one all our possessions were sold; and at last Erik died. Since then I have worked and slaved for the boy’s sake, have gone out scrubbing floors and washing linen, done coarse work or fine, whatever I could get. But I was not to be better off; it is the Lord’s will! He will take me away and find better provisions for my child.” Then she fell asleep.

In the morning she seemed better and decided she was strong enough to return to her work. But the moment she felt the cold water a shivering seized her; she grasped about convulsively with her hands, took one step forward, and fell. Her head lay on the dry bank, but her feet were in the water of the river; her wooden shoes, in each of which there was a handful of straw, were carried away by the current.

And here she was found by Maren, when she came to bring her some coffee.

A message had come to her lodging that the Mayor wanted to see her, for he had something to say to her. It was too late. A doctor was summoned; the poor washerwoman was dead.

“She has drunk herself to death,” said the Mayor.

The letter that had brought the Mayor the news of his brother’s death also gave a summary of his will, and among other bequests he had left six hundred dollars to the glovemaker’s widow, who had formerly served his parents! The money was to be paid at discretion in large or small sums to her and her child.

“There was some nonsense about love between my brother and her,” said the Mayor. “It’s just as well she’s out of the way. Now it will all come to the boy, and I’ll place him with some honest people who will make him a good workman.” And on these words our Lord laid his blessings.

And the Mayor sent for the boy, promised to take care of him, and told him it was a lucky thing his mother was dead; she was good for nothing.

They carried her to the churchyard, to a pauper’s grave. Maren planted a little rose tree on her grave, while the boy stood beside her.

“My darling mother,” he said as the tears started from his eyes. “Is it true that she was good for nothing?”

“No, it is not true!” said the old woman, looking up to heaven. “I have known it for many years and especially since the night before she died. I tell you she was a good and fine woman, and our Lord in heaven will say so, too, so let the world say: ‘She was good for nothing!’ “

 

We wish to take you to the highest level of Expanded Worldwide Planning through careful research of your unique family situation. Please let us begin the process by contacting our office today for a gratis initial consultation to find out if our advanced PPLI structuring methods align with your financial goals.

 

by Michael Malloy, CLU TEP, @ Advanced Financial Solutions, Inc

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Frozen Cash Value Unfrozen

A PPLI Policy For Today’s World

 Part 5

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 Our next few articles will comprise an in-depth look at the five main components of our PPLI Concept Map: Professor PPLI meets Leonardo da Vinci.

 Like few profound thinkers Leonardo da Vinci was able to cross-fertilize many disciplines. To name a few art, science, aviation, engineering, music, and elaborate pageants at Italian courts. Many advisors lack knowledge of the outstanding properties of Private Placement Life Insurance (PPLI), because it is a combination of several disciplines: investing, life insurance, asset protection, and estate planning.  This inability to grasp the many planning possibilities of PPLI brings to mind this thought of Leonardo:

“Iron rusts from disuse, stagnant water loses its purity, and in cold weather becomes frozen; even so does inaction sap the vigors of the mind.”

“Cold weather becomes frozen” prefigures one of our main topics, Frozen Cash Value life insurance. Much more on this topic later.

We are also led to the overarching planning concept that informs our PPLI planning, Expanded Worldwide Planning (EWP) which embodies these six characteristics: privacy, asset protection, succession planning, tax shield, compliance simplifier, and trust substitute.

In this series, our earlier articles spoke about the advantages of using PPLI companies domiciled in locations such as Barbados, Bermuda, and other jurisdictions with insurance codes that enhance the possibilities of structuring assets with PPLI. For those with a connection to the U.S., we stressed the importance of using PPLI companies that have made a 953(d) election. We now will add a powerful third element, a PPLI policy that is termed Frozen Cash Value. This is a policy that fails to meet the IRS’s various cash value tests for code section 7702, and qualifies as life insurance under 7702(g).

Here we have a flowchart courtesy of  John Adney, Esq. Davis & Harman LLP  Brian G. King, FSA, MAAA Ernst & Young LLP  Craig R. Springfield Davis & Harman LLP, Esq. This flowchart was part of their “Life Insurance Boot Camp” presentation

History of the Frozen Cash Value Policy

 Let us start at the beginning. To my knowledge the first person to recognize the outstanding potential of using a Frozen Cash Value policy for wealthy clients was Prof. Craig D. Hampton. He called his concept The Hampton Freeze, and wrote an article by the same name in Offshore Investment, in October 1994. Here is Prof. Hampton’s account of his first client presentation using the Frozen Cash Value concept.

“I was visiting a gentleman at his home in the Piccadilly district of London. It was explained to me that his net worth exceeded US$100 million by a substantial margin. I noticed the presence of a computer terminal on a large desk in his den. It was surrounded by reams of paper dealing with offshore investing.

It soon became apparent that his affluence was due to his own efforts when he said to me: “You’re a bright young man who obviously knows his craft. But what can you tell me that I don’t already know about finances?”

I leaned forward and made this simple statement: “Through the creative use of international life insurance, your financial affairs can be arranged so that you will never have to pay income taxes for the rest of your life!” The gentleman took serious notice, and thus was born The Hampton Freeze.”

“The Freeze” Works If You’re Too Rich, Too Old, or Not in Good Health.

Frank Suess’s article, “Never again pay income taxes for the rest of your life,” in The Daily Coin, speaks further about the FCV policy.

“PPLI to this day, is an important tool in our offering. Over the years, many of our clients have employed this tool, which beyond the tax benefits, effectively integrates the benefits of legal asset protection, global investment flexibility, privacy and generational planning features.

While I am not aware of any insurance carrier, today, offering a PPLI policy called the Hampton Freeze, Prof. Hampton’s concept has certainly lived on. Since his article in 1994, a series of products has been created by the industry. These policies are generally referred to as limited cash value policies. The most commonly used product is called a Frozen Cash Value policy. So, the “Freeze” has lived on at least partially.

And, what’s most intriguing about it: It’s valid to this day! While most other effective offshore income tax planning tools have gone to the wayside over the past years, the Freeze, and the concept presented in Prof. Hampton’s article, still works.

You may now wonder how the Freeze works. I recommend you read the article. In brief, it is based on the US tax code (‘the Code’) and its articles relating to life insurance, primarily in section 7702. While ordinary PPLI policies will have their limitations when it comes to insured persons that are too old or in bad health, and no common products will be available for very large premiums, the Hampton Freeze does not know such limitations.

Let me explain in brief, without boring you with technicalities. The Code defines a number of actuarial rules regarding the cash value and the face amount of life insurance policies. They must meet certain minimum risk coverage (death benefit) levels in order to be tax-compliant.

Therefore, based on actuarial best practices and the limitations of reinsurance levels available internationally, you will not have access to the tax freedom offered if you’re too rich. In other words, the limitations of reinsurance are, internationally, at a level of roughly US$40 to US$50 million of life risk. If you’re premium is too high, you will not be able get a policy. In order to keep within the actuarial tests defined by the Code, there will not be enough re-insurance available. Thus, no policy. Equally, you will not have access to the tax freedom of PPLI if you’re in bad health. You will fail at the medical. And, you are locked out of the world of PPLI if you are too old.

The Hampton Freeze removed those limitations. Thus, the largest policies written today frequently make use of the limited cash value concept born in 1994. We too regularly make use of this planning tool. My utmost respect and gratitude to you Prof. Hampton! Good work indeed!”

To complete our history of the FCV policy, Gerald Nowotny, an excellent commentator on many aspects of PPLI, gives us this note from his article, “Frozen Cash Value Life Insurance – A sophisticated tax planning solution for ultra-high-net-worth taxpayers.”

“My experience with FCV policies goes back to 1999, when Scottish Life and Annuity offered a FCV policy. The life insurer secured a favorable opinion from a large law firm. In fact, I’ve reviewed at least four favorable opinions on FCV from large law firms over the course of the last 10 years.”

Leonardo and FCV Both Solve Important Issues

Just as a FCV policy will solve many issues facing wealthy clients today, Leonardo solved many issues during his lifetime, even before his contemporaries thought of them as issues! Here is an excerpt from Fritjof Capra’s book, Learning from Leonardo: Decoding the Notebooks of a Genius.

“Leonardo da Vinci, the great genius of the Renaissance, developed and practiced a unique synthesis of art, science, and technology, which is not only extremely interesting in its conception but also very relevant to our time.

As we recognize that our sciences and technologies have become increasingly narrow in their focus, unable to understand our multi-faceted problems from an interdisciplinary perspective, we urgently need a science and technology that honor and respect the unity of all life, recognize the fundamental interdependence of all natural phenomena, and reconnect us with the living Earth. What we need today is exactly the kind of synthesis Leonardo outlined 500 years ago.”

Commentators of tax issues frequently site 7702(g) as a catchall section of the tax code whereby policies that do not qualify under other sections of 7702 can still have the tax benefits of life insurance.

Michael Kitces’s article, “The Tax-Preferenced Treatment of Life Insurance Policies,” gives us this about 7702(g). His comments echo these commentators, but it is framed in a positive light.

“To further encourage the use of life insurance, Congress has also provided under IRC Section 7702(g) that any growth/gains on the cash value within a life insurance policy are not taxable each year (as long as the policy is a proper life insurance policy in the first place). As a result, if a permanent insurance policy is held until death, the taxation of any gains are ultimately avoided altogether; they’re not taxable under IRC Section 7702(g) during life, and neither the cash value growth nor the additional increase in the value of the policy due to death itself are taxable at death under IRC Section 101(a).”

PPLI gives wealthy families many benefits that cannot be achieved by any other type of planning. Please give us the opportunity to structure your assets to achieve these exceptional benefits. Each family situation is unique. Let us help you explore the PPLI potential of your unique situation, so you can achieve these exceptional benefits. Contact Us!

 

by Michael Malloy, CLU TEP, @ Advanced Financial Solutions, Inc

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Fence = Privacy–Well Sort of

Let PPLI Be Your First Defense

Part 1

Our next five articles will comprise an in-depth look at the five main components of our PPLI Concept Map: Professor PPLI meets Leonardo da Vinci.

These two neighbors are discussing a new tax law in their fenced backyard. Private Placement Life Insurance (PPLI) is a well-established, yet conservation ring fence for your assets. Once assets are structured properly in a PPLI policy, the insurance company becomes the beneficial owner of the assets.

According to Investopedia, “a ring fence is a protection-based transfer of assets from one destination to another, usually through the use of offshore accounting. A ring fence is meant to protect the assets from inclusion in an investor’s calculable net worth or to lower tax consequences.”

This definition reveals the etymology of the word fence. The Online Etymology Dictionary tells us that in the 14th century the word fence was used as an “action of defending, resistance; means of protection, fortification.”

The advantage of an insurance ring fence is that life insurance is a common structuring tool and is used by millions around the world to provide financial security.

Now back to our two neighbors. In our scene the barbecue is pouring out smoke, and smoke can mean trouble. Indeed, it is black smoke which reminds us of a passage at the beginning of Charles Dickens’s Bleak House. We will visit Charles Dickens’s London later on, where Dickens uses fog as a metaphor for the decrepitude of polluted London in the mid-19th century. Indeed, Dickens’s London was a mixture of both fog and smoke during much of the year.

In the context of our story, smoke, whether foul or benign, can easily escape a fenced backyard. Smoke is subject to wind currents, and other atmospheric elements. PPLI structures use a “smoke free” strategy. One that is not subject to the vagaries of the weather.

A properly structured PPLI policy is a ring fence that gives wealthy clients’ assets an airtight chamber. Inside this chamber the six principles Expanded Worldwide Planning (EWP) breathe clean air with no pollutants. The six principles of EWP are: Privacy, Asset Protection, Succession Planning, Tax Shield, Compliance Simplifier, Trust Substitute.

Imagine the scene in our panel taking place anywhere in the world. A government passes a new tax law and its citizens must compile with it, or face certain penalties. Tax laws change frequently and how you must compile–how much tax you must pay under the new law–does not always translate into a simple answer or number on your tax return. This is why we thoroughly research our PPLI structures, and make sure they compile with all the tax authorities involved in the locations of a client’s assets.

Let us back up briefly and visit an excellent basic description of PPLI.

Al W. King III, left, and Pierce McDowell III, are co-founders of the South Dakota Trust Company, LLC in Sioux Falls, S.D. We give you the opening paragraphs from their Trusts & Estates article, “Powerful Private Placement Life Insurance Strategies With Trusts.”

“What is PPLI?

PPLI is essentially a flexible premium variable universal life (VUL) insurance transaction that occurs within a private placement offering. The private placement component adds extensive flexibility to the VUL product pricing and asset management offerings. Because PPLI is sold through a private placement memorandum, every situation can be individually negotiated and custom designed for the client. PPLI can be for single life or survivorship and is offered only to an accredited investor.

PPLI has both a death benefit and a cash value (that is, investment account) and is generally designed to maximize cash value and minimize death benefits. Consequently, PPLI is usually designed as a non-modified endowment contract (non-MEC) policy, with four to five premiums versus a single premium policy (that is, a MEC). In this way, cash values can be accessed tax-free during an insured’s lifetime.

The PPLI cash value is generally invested among a variety of available registered and non-registered fund options (that is, hedge funds, private equity (PE) and other alternative investments).”

From Cole Porter we give you a different aspect of a fence: one that constricts and prevents the innovative structuring techniques that are possible with PPLI. The mystique of the American cowboy roaming the vast open spaces of the western U.S. comes alive in this popular song from the 1930s, Don’t Fence Me In,” courtesy of Warner/Chappell Music, Inc..

“Oh, give me land, lots of land under starry skies above

Don’t fence me in

Let me ride through the wide open country that I love

Don’t fence me in

Let me be by myself in the evenin’ breeze

And listen to the murmur of the cottonwood trees

Send me off forever but I ask you please

Don’t fence me in

Just turn me loose, let me straddle my old saddle

Underneath the western skies

On my Cayuse, let me wander over yonder

Till I see the mountains rise

I want to ride to the ridge where the west commences

And gaze at the moon till I lose my senses

And I can’t look at hovels and I can’t stand fences

Don’t fence me in

Oh, give me land, lots of land under starry skies

Don’t fence me in

Let me ride through the wide open country that I love

Don’t fence me in

Let me be by myself in the evenin’ breeze

And listen to the murmur of the cottonwood trees

Send me off forever but I ask you please

Don’t fence me in

Just turn me loose, let me straddle my old saddle

Underneath the western skies

On my Cayuse, let me wander over yonder

Till I see the mountains rise

Ba boo ba ba boo

I want to ride to the ridge where the west commences

And gaze at the moon till I lose my senses

And I can’t look at hobbles and I can’t stand fences

Don’t fence me in

No

Poppa, don’t you fence me in”

We now travel back to London for a discussion of privacy and data protection. This subject is key to the debate about tax that is taking place on the world’s stage. What our two neighbors are discussing in their backyard is an important topic for governments and those that advise wealthy clients. Caroline Garnham is a London attorney, who heads the firm of Garnham Family Office Services, and is one of our favorite writers on this subject.

First, we give you Dickens’s memorable depiction of foggy London.

“Fog everywhere. Fog up the river, where it flows among green aits and meadows; fog down the river, where it rolls defiled among the tiers of shipping and the waterside pollutions of a great (and dirty) city. Fog in the eyes and throats of ancient Greenwich pensioners, wheezing by the firesides of their skipper, down in his close cabin, fog cruelly pinching the toes and fingers of his shivering little ‘prentice boy on deck. Chance people on the bridges peeping over the parapets into a nether sky of fog, with fog all round them, as if they were up in a balloon and hanging in the misty clouds.”

Was Tony Blair right second time?

Is privacy and data protection a good thing or not?

Should there be a public register of what you own? Would you like your neighbours, friends, children and employees knowing precisely what you own; properties, businesses, pensions and bank accounts? Why not – if you have nothing to hide?

Tony Blair, is on record as saying that one of his greatest regrets had been his own Freedom of Information Act. Why because in his view ‘information is neither sought because the journalist is curious to know, nor given to bestow knowledge on ’the people’. ‘It is used as a weapon’.

To protect his privacy once he left office and started to make money, he erected barriers to prevent an accurate assessment of his wealth His income was channelled through a complicated legal structure. At the top was BDBCO No.819 Limited a company called either Windrush or Firerush. Windrush Ventures No.3 LP was part owned by Windrush Ventures No.2 LP which in turn controlled Windrush Ventures Ltd. The scheme’s advantage was that the LPs, or limited partnerships, were not obliged to publish accounts. Even without public registers and the protection of limited partnerships, Tom Bower, author of ‘Broken Vows’ managed to track down these details – so why do we need a public register?

Furthermore, the drive for a public register is for ownership of companies and properties, but  not of the beneficiaries of a trust – so for anyone wishing to disguise their ownerships they simply need to set up a trust – or take their assets outside the Overseas Territories and Crown Dependencies – in which case Britain plc is shooting itself in the foot. We will get nothing and business will flee from the territories we should be protecting.

This week a Government Bill designed to protect the City in the event of a no-deal Brexit was pulled in the face of almost certain defeat after MPs added an amendment that would have forced greater transparency on the Isle of Man, Guernsey and Jersey – the Crown Dependencies.

The idea of public registers of companies, was originally proposed by David Cameron and George Osborne in 2013 in the fight against the use of offshore financial centres to launder money using a myriad of offshore companies. It was dropped when May became Prime Minister, but resurrected by a bank benchers Hodge and Mitchell.

It is generally accepted that the UK cannot interfere in the affairs of another country even an ‘Overseas Territory’ such as the BVI or Cayman, or a ‘Crown Dependency’ such as Guernsey except in extreme circumstances.”

The UK has however intervened in the affairs of the Overseas Territories, such as in the repeal of the Death Penalty in 1991 and decriminalising homosexuality in 2,000, but has made no such intervention in the Crown Dependencies, which is why the bill had to be pulled to give time for a more detailed debate.

Hodge takes the view that a public register of ownership to stamp out the ‘traffic of corrupt money and illicit finance’ across the world’ justified such intervention! The Paradise Papers according to the campaign group Global Witness estimates that £68bn flowed out of Russia via the British-overseas territories between 2007 and 2016, – but what of other countries? To date only three prosecutions have been made. Is this a good enough justification for undermining the privacy of many others?

Andrew Mitchell takes it one stage further, ‘It is only by openness and scrutiny, by allowing charities, NGOs and the media to join up the dots, that we can expose this dirty money and those people standing behind it. Closed registers do not begin to allow us to do it’

That did not prevent Tom Bower finding out all he needed to know about Tony Blair!

The real debate needs to be on how far can we undermine the human right to privacy enshrined in many countries so that rich countries can pick out a few bad apples in a barrel of good ones?”

Find out today how an asset structuring technique–PPLI–can be both conservative and sophisticated. PPLI can give you both privacy and full compliance with the world’s tax authorities. We welcome your call or email. Contact Us right now!

 

by Michael Malloy, CLU TEP, @ Advanced Financial Solutions, Inc

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#michaelmalloy #PPLI #privateplacement #lifeinsurance #advancedfinancialsolutions

 

 

 

 

 

PPLI Changes an Asset’s Location

Moving Mount Everest

One goal of Private Placement Life Insurance (#PPLI) is to change an asset’s location. Can PPLI move Mount Everest? Not literally, but it does an excellent job of moving the assets of wealthy international families. Moving these assets where? Into a PPLI policy that gives these assets tax-deferral, asset protection, and passes them to beneficiaries as a tax-free death benefit.

We share with you Part II of Our Journey Together video that introduces PPLI and presents the six principles of Expanded Worldwide Planning (EWP): privacy, asset protection, succession planning, tax planning, compliance simplifier, and trust substitute.

Depending on the aims of the PPLI structuring, different sets of laws must be adhered to. For families that have a connection to the U.S., the IRS rules related to diversification and investor control must be followed. For clients with no connection to the U.S., these rules do not apply, and we must look to the country of the families’ tax domicile and the domicile of the insurance company for guidance.

This allows, in many cases, for PPLI structuring options not available to those families with a connection to the U.S. We have for you below the provisions of Barbados law that pertain to variable insurance. As you can read, they are simple, straightforward, and have few restrictions as to the assets that can be placed in a PPLI policy.

Many of our PPLI policies are written through companies domiciled in Barbados. Gregory J. Dean and Michael A. Heimos wrote a chapter in International Life Insurance, edited by David D. Whelehan, entitled, “A Jurisdictional Survey of the Asset Protection Merits of International Life Insurance and Annuities.” We quote from the section on Barbados.

“Barbados has sophisticated insurance laws rivaling any in the world, and a mature insurance industry, governed by the Insurance Act, 1996 (referred to in this section as the “Act”).  There are detailed provisions addressing generally defined long term business, group life, “industrial life insurance,” etc. The entirely of Barbadian insurance law is present in public legislation.

On August 17, 2001 the Governor-General of Barbados assented to several pieces of legislation that amend Barbados’ laws governing key aspects of banking, insurance and investment in the island. They are: the Companies (Amendment) Act, 2001-30; the International Business (Miscellaneous Provisions) Act, 2001-29; the Insurance (Amendment) Act, 2001-25; and the Exempt Insurance (Amendment) Act, 2001-27.

The acts allow for structures that are often seen as beneficial, if not necessary, for institutions in the offshore mutual funds, banking and trusts, captive insurance and commercial insurance industries to operate, in Barbados and elsewhere. As pointed out below, there also are aspects of the amendments regarding insurance that apply to the interests of local citizens and residents as well. The new acts are, largely, quite praiseworthy.”

Movable assets can be legally contested, especially in matrimonial disputes. We give you an article later on that is focused on just such a dispute.

Here is the section on Variable Insurance Business of the Barbados insurance code.

CHAPTER 310 INSURANCE

An Act to revise the law regulating the carrying on of insurance business in Barbados in order to strengthen the protection given to policyholders; to increase the capital and solvency requirements of insurance companies; to expand the existing regulatory framework to include the regulating of all insurance intermediaries; and to give effect to matters related thereto.

 

PROVISIONS RELATING TO VARIABLE INSURANCE BUSINESS

(5) The Supervisor may attach such further conditions to the issue of approval under subsection (1) as are relevant to the nature and class of the variable insurance business that the insurer intends to carry on including

(a) requiring the insurer to disclose to any applicant for a policy any one or more of the following:

(i) a statement of the investment policy of any separate account maintained in respect of such variable insurance policy including a description of the investment objectives intended for the separate account and the principal types of investments intended to be made, and any restrictions or limitations on the manner in which the operations of the separate account are intended to be conducted;

(ii) any restrictions or limitations on the manner in which the operations of such variable insurance policy are intended to be conducted;

(iii) a statement of the charges and expenses in respect of such variable insurance policy;

(iv) a summary of the method to be used in valuing assets in respect of which benefits under such variable insurance policy are to be determined; and

(v) illustrations of benefits payable under the variable insurance contract;

(b) requiring that any material contract between an insurer and suppliers of consulting, investment, administrative, sales, marketing, custodial or other services with respect to variable life insurance operations shall be in writing and provide that the supplier of such services shall furnish the Supervisor with any information or reports in connection with the services which the Supervisor may request in order to ascertain whether the variable life insurance operations of the insurer are being conducted in a manner consistent with this Act, and any other applicable law or regulation;

(c) requiring the insurer to furnish, in such manner and at such times or intervals as may be prescribed, such information relating to the value of benefits under the policies as may be prescribed, whether by sending notices to the policy-holders or depositing statements with the Supervisor;

(d) requiring that the variable insurance policy be in a specific form or contain such mandatory provisions as may be prescribed in any regulations;

(e) requiring that the insurer maintain reserves in addition to any reserves which the insurer is required to maintain under this Act;

(f) restricting the descriptions of property or indices of value of property by reference to which benefits under the policy will be determined in accordance with the regulations prescribed for such purpose; or

(g) regulating the manner in which and frequency with which property of any description is to be valued, for the purpose of determining the benefits, and the times at which reference is to be made for that purpose to any index of value of property in accordance with the regulations prescribed for such purpose.”

The disputed matrimonial asset that we mentioned earlier is a yacht, Dubai Court Overrules English Possession Order for Superyacht, and comes to us from the Society of Trust & Estate Practitioners (STEP) Industry News publication.

“Tatiana Akhmedova’s English court order against her Russian ex-husband Farkhad Akhmedov, vesting her with possession of his GBP350 million yacht, has been rejected by a Shari’a court in Dubai, where the vessel is currently detained.

The yacht, the MV Luna, is part of the GBP453 million financial remedy awarded granted to Mrs Akhmedova on their divorce in 2015. Ever since, her former husband, an oil tycoon, has been trying to put his assets beyond her reach. According to her lawyers, Withers, he hid assets in a Bermuda trust with the intention of evading his legal obligations to his wife, and launched a counter-claim that they had already divorced in Russia. This claim was only recently dismissed in a Russian court.

In December 2017, Haddon-Cave J in the England and Wales High Court set aside Mr Akhmedov’s dispositions of assets and money into the trust, in an unusual example of a court judgment that pierced the corporate veil. His bank accounts and other assets were frozen under worldwide freezing orders obtained in England, Liechtenstein and the Isle of Man. Haddon-Cave ordered him, and a Liechtenstein Anstalt that he controlled, to vest the yacht in his wife’s name to be sold on her behalf (Akhmedova v Akhmedov, 2018 EWFC 23 Fam).

By this time, Mr Akhmedova had sailed the Luna from its usual home in Turkey to Dubai, hoping to find some recourse through the Dubai legal system. Mrs Akhmedova thus applied to the Dubai International Finance Centre (DIFC) court for a freezing order against both Mr Akhmedov and the Liechtenstein Anstalt, in the hope that the DIFC would issue a court order recognised by the Dubai courts themselves. This order was granted, and later supported by the DIFC Court of Appeal, and Mrs Akhmedova applied to the Dubai courts for a precautionary attachment of Luna. This too was granted, enforcing the boat’s detention in Dubai.

However, Mr Akhmedov then filed a claim in Dubai that his dispute with his ex-wife was a matrimonial rather than one of commercial debt, and so should have been determined by the Dubai courts in accordance with Shari’a law.

In the latest development, the Dubai’s Court of First Instance has dismissed Mrs Akhmedova’s application for possession, and ordered her to pay expenses and legal fees. The vessel, meanwhile, remains in dock at Prince Rashid Harbour in Dubai.

A spokesman for Mrs Akhmedova said the significance and the substance of the Dubai court’s ruling are not yet clear, as all that has been handed down at this stage is the decision. An appeal will be considered once the full judgment together with reasons is available, the spokesperson said.”

PPLI structuring allows us to move an asset, not physically, but into a structure that allows all of the six principles of Expanded Worldwide Planning (EWP)to function. This gives wealthy international families enhanced privacy and tax benefits, and makes them fully compliant with the world’s tax authorities.

We welcome your thoughts and comments on how we can make this happen for you. You can share them at the bottom of this article or you can Contact Us for more information.

 

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by Michael Malloy, CLU, TEP, @ Advanced Financial Solutions, Inc

 

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How to Climb the Mountain of Happiness

PPLI Provides Steps Up the Mountain

Private Placement Life Insurance (PPLI) offers a structure that produces tax efficiency, enhanced privacy, and asset protection. In our opening quote, it can be likened to stepping up the mountain. PPLI is not a goal, but a financial structure that gives wealthy international families key elements of financial happiness.

“PPLI functions more like a trust, than a financial product.”

It is appropriate that this quote is from Confucius. For those unfamiliar with Confucius we will have a biographical sketch later on. What is also connected is Part I of a video that re-creates a presentation that I gave at The 4th FOA Family Think Tank Forum in Shanghai, China, which was held on the campus of Fu Dan University.  I was invited to speak by Ann Lee of the Wintel Law Firm in Shanghai.

The presentation is an introduction to Private Placement Life Insurance (PPLI), and the international tax planning concept of Expanded Worldwide Planning (EWP). The two-day conference was attended by attorneys, accountants, financial planners, insurance brokers, and other professionals who work with high net worth clients in China and the Far East.

First, we have a quote about PPLI from Senior Consultant, The Voice of the Investment Management Consultant.

“Private Placement Life Insurance (PPLI) is much more than an insurance policy. PPLI represents one of the most powerful vehicles available to the high net worth investor in the marketplace today.

PPLI enhances both wealth creation and wealth preservation. Wealth creation is the result of the tax-free growth of the assets in the insurance contract. Wealth preservation is a result of the death benefit paid from the insurance contract.”

Much is written about tax transparency. Many of those who champion tax transparency say that it will result in a system that is more equitable and fair. Will it result in greater happiness? The conclusion of this New York Times article, Happy ‘National Jealousy Day’! Finland Bares Its Citizens’ Taxes offers a different perspective.

“Shortly after 6 a.m. on Thursday, people began lining up outside the central office of the Finnish tax administration. It was chilly and dark, but they claimed their places, eager to be the first to tap into a mother lode of data.

Pamplona can boast of the running of the bulls, Rio de Janeiro has Carnival, but Helsinki is alone in observing “National Jealousy Day,” when every Finnish citizen’s taxable income is made public at 8 a.m. sharp.

The annual Nov. 1 data dump is the starting gun for a countrywide game of who’s up and who’s down. Which tousled tech entrepreneur has sold his company? Which Instagram celebrity is, in fact, broke? Which retired executive is weaseling out of his tax liabilities?

Esa Saarinen, a professor of philosophy at Aalto University in Helsinki, described it as “a fairly positive form of gossip.”

Finland is unusual, even among the Nordic states, in turning its release of personal tax data — to comply with government transparency laws — into a public ritual of comparison. Though some complain that the tradition is an invasion of privacy, most say it has helped the country resist the trend toward growing inequality that has crept across of the rest of Europe.

“We’re looking at the gap between normal people and those rich, rich people — is it getting too wide?” said Tuomo Pietilainen, an investigative reporter at Helsingin Sanomat, the country’s largest daily newspaper. …

Roman Schatz, 58, a German-born author, rolled his eyes, a little, at Finland’s annual celebration of its own honesty. “It’s a psychological exercise,” he said. “It creates an illusion of transparency so we all feel good about ourselves: ‘The Americans could never do it. The Germans could never do it. We are honest guys, good guys.’ It’s sort of a Lutheran purgatory.” …

Economists in the United States have shown great interest in salary disclosure in recent years, in part as a way of reducing gender or racial disparities in pay.

Transparency may or may not reduce inequality, but does tend to make people less satisfied, several concluded. A study of faculty members at the University of California, where pay was made accessible online in 2008, found that lower-earning workers, after learning how their pay stacked up, were less happy in their job and more likely to look for a new one.

A study of Norway, which made its tax data easily accessible to anonymous online searches in 2001, reached a similar conclusion: When people could easily learn the incomes of co-workers and neighbors, self-reported happiness began to track more closely with income, with low earners reporting lower happiness. In 2014, Norway banned anonymous searches, and the number of searches dropped dramatically.

“More information may not be something which improves overall well-being,” said Alexandre Mas, one of the authors of the University of California report. …

One of the great sports of National Jealousy Day is to publicly shame tax dodgers.

In 2015, Mr. Pietilainen found that executives from several of Finland’s largest firms had relocated to Portugal so that they could receive their pensions tax free. His reporting caused such a stir that the Finnish Parliament terminated its tax agreement with Portugal, negotiating a new one that closed the loophole.”

Now a little about the extraordinary life of Confucius from the Simple English Wikipedia. We found this section on Confucius suited our article better than the longer Wikipedia article.

“Confucius (born 551 BC, died 478 BC) was an important Chinese educator and philosopher. His original name was Kong Qiu or Zhong Ni. As a child, he was eager to learn about everything, and was very interested in rituals. Once he grew up, he worked as a state official who handled farms and cattle. Then he became a teacher.

Confucius lived in a time when many states were fighting wars in China. This period was called the Spring and Autumn period of the Zhou Dynasty. Confucius did not like this and wanted to bring order back to society.

Like Socrates, Confucius sometimes did not answer philosophical questions himself. Instead he wanted people to think hard about problems and to learn from others, especially from history. Confucius also thought that people should get power because they were good and skilled, and not just because they came from powerful families.

Confucius wanted people to think about other people more than about money or what they owned. However he also felt that there should be strong rules in society and that people needed to obey them. Confucius thought that there were five relationships people could have, and that they all had their own rules. Two people could be

  • Prince and Subject
  • Father and Son
  • Husband and Wife
  • Elder and Child
  • or Friends

These were traditional relationships called the ‘five prototypes’. Confucius said that in all these relationships, both people must obey rules. For example, a subject must obey a prince, but also a prince must listen to a subject and must rule him well and fairly.

Confucius said that people should only do things to other people if they would be okay with other people doing those things to themselves. This is sometimes called the Golden Rule and was also taught by Jesus Christ.

His students wrote down small stories about him, and things that he said. These were put together to make a book called “The Analects.”

At Advanced Financial Solutions, Inc. the mountain that we climb is the creation of unique asset structures for wealthy international families using PPLI. We welcome you to climb this mountain with us, and achieve a structure that can give you financial happiness. Please contact us today.

 

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by Michael Malloy, CLU, TEP, @ Advanced Financial Solutions, Inc

 

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Educational Opposition

PPLI Enhanced Value

Private Placement Life Insurance (PPLI) greatly enhances the value of the assets of wealthy international families. This is accomplished through the six elements of Expanded Worldwide Planning (EWP) which we will present you.

First, let us explore enhanced value. One way to understand something is through understanding what is the opposite of a concept. So what is the opposite of what we call, PPLI Enhanced Value? A candidate might be a fraudulent financial scheme. One has come to light this week in a New York Times article, Where In The World Is Denmark’s $2 Billion? by Paul Caron.

From the Wikipedia page, International tax planning, we give you the six elements of EWP. As you read them, reflect on how they all assist in creating PPLI Enhanced Value.

Privacy

EWP gives privacy and compliance with tax laws. It also enhances protection from data breaches and strengthens family security. EWP allows for a tax compliant system that still respects the basic rights of privacy. EWP addresses the concerns of law firms and international planners about some aspects of CRS related to their clients’ privacy. EWP assists with the privacy and welfare of families by protecting their financial records and keeping them in compliance with tax regulations.

Asset protection

EWP protects assets with segregated account legislation by using the benefits of life insurance. This structure uses asset protection laws in the jurisdictions of residence to shield these assets from creditors’ claims. A trust with its own asset protection provisions can still receive additional protection with the policy.

Succession planning

EWP includes transfers of assets without forced heirship rules directly to beneficiaries using a controlled and orderly plan. This element of EWP provides a wealth holder a method to enact an estate plan according to his/her wishes without complying with forced heirship rules in the home country. This plan must be coordinated with all the aspects of a properly structured PPLI policy together with other elements of a wealth owner’s financial and legal planning.

Tax shield

EWP adds tax deferral, income, estate tax benefits and dynasty tax planning opportunities. Assets held in a life insurance contract are considered tax-deferred in most jurisdictions throughout the world. Likewise, PPLI policies that are properly constructed shield the assets from all taxes. In most cases, upon the death of the insured, benefits are paid as a tax free death benefit.

Compliance simplifier

EWP adds ease of reporting to tax authorities and administration of assets, commercial substance to structures. In addition, the insurance company is considered the beneficial owner of the assets. This approach greatly simplifies reporting obligations to tax authorizes because assets in the policy are held in segregated accounts and can be spread over multiple jurisdictions worldwide.

Trust substitute

EWP creates a viable structure under specific insurance regulations for civil law jurisdictions. It also creates a new role for commercial trust companies. In most civil law jurisdictions, trusts are poorly acknowledged and trust law is not well developed.  As a result, companies with foreign trusts in these civil law jurisdictions, face obstacles.

Now some excerpts from Paul Caron’s article describing what the Danish authorities call one of the greatest financial crimes in the country’s history. Denmark was defrauded $2 billion, which is the equivalent of a $110 billion dollar loss in the far larger U.S. economy.

“The country had fallen victim to a dubious financial maneuver at the intersection of the tax system and capital markets, a dizzyingly complex transaction known as a “cum-ex” trade.

The trade is focused on one of the dullest, most overlooked acts in any financial system — the request for refunds on taxes withheld on dividends. Under Danish law, the government automatically collects taxes on dividends paid out by companies to their shareholders. If the shareholders live in the United States, they are eligible for a refund on some or all of those taxes.

A tiny department in SKAT (the Danish IRS), run by one man, approved thousands of applications for refunds. Most of the applications were filed by self-directed pension plans in the United States, a type of retirement account for individuals.

But experts and lawyers familiar with the scheme say those people were fronts for cum-ex trades. Deploying a kind of financial sleight of hand, the trades made it appear as if the pension plans had purchased shares of Danish companies and paid taxes on the dividends. Neither was true.

To the Danes, it was a fraud, one executed and conceived by Sanjay Shah, a 48-year-old, London-born financier. With an assist from employees, he found the Americans, helped facilitate the applications and ended up with much of the money.

Mr. Shah denies any wrongdoing and through a publicist says he merely took advantage of a loophole. He now lives in Dubai, where he owns a $1.3 million yacht and a 10,000-square-foot villa with access to the beach. He has become Denmark’s national villain.

“You have this guy, living off fraud, it’s infuriating,” said Joachim B. Olsen, a member of the Danish Parliament and chairman of its Finance Committee. “The expectation of the Danish people is that we will go after him, no matter the cost.”

How is PPLI Enhanced Value the opposite of this deceitful fraud scheme? 

At the heart of PPLI structuring is a life insurance policy. A financial instrument common throughout the world, and familiar to most people. PPLI uses this common financial instrument to achieve the six elements of EWP, and this is done with full reporting and compliance throughout the world. This is achieved by respecting the laws and regulations of all jurisdictions involved in the transaction.

PPLI Enhanced Value achieves outstanding benefits by respecting the law and not abusing it as in the Danish fraud scheme.

Please let us know how we can give you PPLI Enhanced Value for your assets, and make the six elements of EWP work for you. We welcome your questions and comments. You can write you inquires at the bottom of this page or you can contact me directly.

 

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by Michael Malloy, CLU, TEP, @ Advanced Financial Solutions, Inc

 

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Positive and Beneficial Influence

PPLI Achieves Both

A Private Placement Life Insurance (PPLI) structure exerts a positive and beneficial interest on the assets which it holds. Let us examine how this is accomplished, and also what it means to exert influence. Babies and small children learn very soon how to exert influence on their parents.

I was having dinner with a five year old and his parents recently, and when the five year old ceased to be the center of the conversation, he would emphatically say, “I have something very important to tell you.” Of course, our conversation would cease and the five year old was very pleased!

PPLI achieves this benign influence over assets by employing the six key elements of Expanded Worldwide Planning (EWP). I would say that this influence is much greater than benign–it is transformative. Let us briefly state the importance of these six elements in creating a transformative PPLI policy structure.

Privacy  This is a key element. With FATCA, CRS, and Registers of Beneficial Ownership our clients are looking for ways to keep their affairs private, and still be compliant with tax authorities worldwide. But as you know, it takes study and constant attention to detail to create a proper structure.

Tax Shield  In high tax jurisdictions, a tax shield is important. Why pay more tax than is necessary? If there is a PPLI structure than can give you a tax-free environment wouldn’t it be desired by our clients?

Asset Protection  Asset protection is an element that almost all clients seek. Making their assets inaccessible to former spouses, creditors, and those seeking to claim them without legal authority. An excellently crafted PPLI structure can also accomplish this for them.

Succession Planning  Especially in jurisdictions that have forced heirship rules, succession planning is vital to clients. Most clients wish to distribute their assets according to their wishes and not according to a plan that they don’t agree with.

Compliance Simplifier  In today’s world attempting to hide assets only draws more attention to them. Most clients wish to be compliant with the world’s tax authorities, and at the same time keep as much privacy as possible. Finding our way in this maze of regulations is an important element.

Trust Substitute  In some jurisdictions, in particular, those that use civil law as opposed to common law, a trust substitute would be useful. Why create an entity that in the end will just be ignored by tax and legal authorities? Why not have a PPLI structure that works both in civil and common law jurisdictions?

In the realm of politics, lobbying government officials is a method of attempting to exert influence. There is an outcry of concern when this influence is considered undue influence, and this is defined differently throughout the world. What is lobbying in one country might be considered bribery in another country.

This article by Julie Bykowicz caught our eye this week in one of our favorite publications, The Wall Street Journal,

“The New Lobbying: Qatar Targeted 250 Trump ‘Influencers’ to Change U.S. Policy. Blockaded by Mideast neighbors, the emirate employed an unconventional lobbying campaign to win over an unconventional U.S. president.”

 

“Longtime New York restaurateur Joey Allaham visited Manhattan’s Park East Synagogue late last year with an offer for lawyer Alan Dershowitz. Come visit Doha, the capital of Qatar, by invitation of the emir.

Mr. Dershowitz says he hadn’t met Mr. Allaham before and initially demurred before agreeing to go. The professor also didn’t know he was on a list of 250 people Mr. Allaham says he and his lobbying-business partner, Nick Muzin, identified as influential in President Trump’s orbit.

The list was part of a new type of lobbying campaign Qatar adopted after Mr. Trump sided with its Persian Gulf neighbors who had imposed a blockade on the tiny nation. Qatar wanted to restore good relations with the U.S., Mr. Allaham says. Win over Mr. Trump’s influencers, the thinking went, and the president would follow.”

We look forward to lobbying on your behalf to create a PPLI structure that employs all six of the key elements of EWP.

Please let us know how we can serve you to this end. Place your comments at the end of this post and sign up to get updates.

 

by Michael Malloy, CLU, TEP, @ Advanced Financial Solutions, Inc

 

 

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Overcoming Obstacles Gracefully

Let PPLI Show the Way

Private Placement Life Insurance (PPLI) is a vehicle to overcome obstacles for structuring assets for wealthy international families. This is greatly aided by the concept of Expanded Worldwide Planning (EWP). Sometimes inspiration is necessary to overcome obstacles. To find this inspiration look no further than the remarkable life of Helen Keller. We will learn more about her amazing life later on, but first, let us focus on EWP.

We find the definition of EWP in the Wikipedia page International tax planning. Here is the opening paragraph:

International tax planning also known as international tax structures or expanded worldwide planning (EWP), is an element of international taxation created to implement directives from several tax authorities following the 2008 worldwide recession.

Further explanation is given in the Principles section:

EWP allows a tax paying entity to simplify its existing structures and minimize reporting obligations under the Foreign Account Tax Compliance Act (FATCA) and CRS. At the heart of EWP is a properly constructed Private placement life insurance (PPLI) policy that allows taxpayers to use the regulatory framework of life insurance to structure assets along the client’s planning needs.

These international assets can also comply with tax authorities worldwide. EWP also brings asset protection and privacy benefits that are set forward in the six principles of EWP below. The other elements in the EWP structure may include the client’s citizenship, country of origin, actual residence, insurance regulations of all concerned jurisdictions, tax report requirements, and client’s objectives.

Planning with trust and foundations frequently offer only limited tax planning opportunities, whereas EWP provides a tax shield. Adding a PPLI policy held by the correct entity in the proper jurisdiction creates a notable planning opportunity.

The Six Principles of EWP

To address the obstacles in structuring assets for wealthy international families, these six principles are incorporated in the solution to produce the best possible planning outcome for the family.

Privacy

Asset Protection

Succession Planning

Tax Shield

Compliance Simplifier

Trust Substitute 

The Life of Helen Keller

We return to Wikipedia for this summary of the remarkable life of Helen Keller:

Helen Adams Keller (June 27, 1880 – June 1, 1968) was an American author, political activist, and lecturer. She was the first deaf-blind person to earn a bachelor of arts degree. The dramatic depictions of the play and film The Miracle Worker made widely known the story of how Keller’s teacher, Anne Sullivan, broke through the isolation imposed by a near complete lack of language, allowing the girl to blossom as she learned to communicate. Her birthplace in West Tuscumbia, Alabama, is now a museum and sponsors an annual “Helen Keller Day”. Her birthday on June 27 is commemorated as Helen Keller Day in the U.S. state of Pennsylvania and was authorized at the federal level by presidential proclamation by President Jimmy Carter in 1980, the 100th anniversary of her birth.

Thankfully in our EWP and PPLI structuring we do not face the tremendous challenges faced and overcome so gracefully by Helen Keller. She can serve as a model for all of us for what is possible in the face of extreme difficulty. As always, we welcome your comments and questions.

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by Michael Malloy, CLU TEP, @ Advanced Financial Solutions, Inc

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Michael Malloy, CLU, TEP