Excellent Recognition – EWP

We have not achieved the recognition of the Strahov Library in Prague, but we invite you to do an internet search on expanded worldwide planning.” This concept that we have championed for years is finally receiving the attention it deserves. Wealthy families around the world are now receiving the six principles of Expanded Worldwide Planning (EWP) through properly designed Private Placement Life Insurance (PPLI) policies.

We welcome your comments and questions.  All the best to you and your families in these trying times. Yes, it is difficult, but, as always, new opportunities are created in the midst of uncertainty and hardship.

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

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Expanded Worldwide Planning-EWP & Privacy

Private Placement Life Insurance (PPLI) in Action

Part 1: Privacy

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The universality of Expanded Worldwide Planning (EWP) is not to be denied. This is objectified by Wikipedia. In the first sentence of their page on International Tax Planning, Expanded Worldwide Planning (EWP) is featured.
We are taking a cue from Wikipedia. Over the next few weeks, we will feature one of the six principles of Expanded Worldwide Planning (EWP). The six principles are: privacy, asset protection, tax shield, succession planning, compliance simplifier, and trust substitute.
Today we feature PRIVACY. Privacy 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 is a cat and mouse game that takes study and constant attention to detail. As you can see from our image, we don’t quite know who is winning.

“Behold, I set before you this day a blessing and a curse….” (Deuteronomy 11:26, King James Bible.) This is an apt phrase to describe the context of privacy today, where with a touch of a keystroke you can send megabytes of data around the world in an instant.
What was once private and personal becomes public and accessible to all. Computers and other electronic devices are part of our lives, whatever our opinion of them. These devices can add convenience and efficiency to our lives, but at a cost.

Electronic Privacy?
This thought is expressed by Andrew Grove, co-founder and former CEO of Intel Corporation. Mr. Grove’s thoughts on internet privacy appear on the Privacy page of Wikipedia:

“Privacy is one of the biggest problems in this new electronic age. At the heart of the Internet culture is a force that wants to find out everything about you. And once it has found out everything about you and two hundred million others, that’s a very valuable asset, and people will be tempted to trade and do commerce with that asset. This wasn’t the information that people were thinking of when they called this the information age.”

Expanded Worldwide Planning (EWP) has the six principles that matter most to wealthy families throughout the world today–no matter where they are located. They are the building blocks of any successful asset structure.

The ancient Greeks called man, “a political animal.” In today’s world almost all so-called facts are politicized. It is no different with privacy. Certain groups call the journalistic authors of the Panama Papers and the Paradise Papers heros of a free press. Others say that these same journalists were thieves, who unlawfully stold private financial data. Whatever your opinion, these events did happen, and the targets were most decidedly wealthy families throughout the world.

How does the privacy afforded by a properly structured PPLI policy protect the families whose financial information was published for the entire world to see?
The privacy principle of Expanded Worldwide Planning (EWP) accomplishes its objective in several key ways:

  • Upon transfer into the PPLI policy, the insurance company becomes the beneficial owner of all the assets in the policy;
  • If there is reporting to a tax authority for the asset structure, only one number is reported. This is the total cash value of all the assets in the PPLI policy. The individual assets are not reported;
  • The bank account that is usually opened in connection with a PPLI policy is opened in the name of the insurance company, not the policyowner. The policyowner has full access to the funds in the bank account in accordance with the assets inside the policy.

The Privacy Paradox
In connection to privacy, there is a concept called the privacy paradox that was first discussed by Bedrick, Lerner, and Whitehead, “The privacy paradox: Introduction, News Media and the Law.” We quote below from the Wikipedia Privacy page:

“The privacy paradox is a phenomenon in which online users state that they are concerned about their privacy but behave as if they were not. While this term was coined as early as 1998, it wasn’t used in its current popular sense until the year 2000.”

The authors go onto to explain this in more detail:

“Some researchers believe that decision making takes place on an irrational level, especially when it comes to mobile computing. Mobile applications are built up in a way that decision making is fast. Restricting one’s profile on social networks is the easiest way to protect against privacy threats and security intrusions. However, such protection measures are not easily accessible while downloading and installing apps.”

There is also another type of Privacy Paradox pertinent to Expanded Worldwide Planning (EWP) in the reporting of data breaches and news reporting on wealthy families. This is aptly put by Filippo Noseda of the Mischon de Reya law firm in London:

“It is somewhat curious that serious newspapers who have been covering both the private banking scandals and the erosion of privacy seem unable to make the connection between data protection on the one hand, and the Common Reporting Standard (CRS) and beneficial ownership registers on the other.”

Mr. Noseda also draws our attention to published material by The European Data Protection Supervisor (EDPS) where he questions the OECD’s goal of total financial transparency.
Mr. Noseda writes:

“As if they were living on planet Europa rather than in Europe, the European Parliament, the Organization for Economic Co-Operation and Development (OECD), and politicians show complete disregard for the warnings raised by their own data protection bodies and instead appear hell-bent on introducing a system of total transparency.”

We have grown accustomed to the idea that transparency is a good thing, something that supports the common good. Like many concepts, if taken to an extreme, it becomes its opposite. A weapon in the hands of governments hungry for wealthy citizens’ tax dollars. As proponents of Expanded Worldwide Planning (EWP), we must question this overzealous approach to tax collection.

The History of Privacy
Let us end with some general historical information on privacy, and how Expanded Worldwide Planning (EWP) and PPLI can further the aims of wealthy families seeking increased privacy, asset protection, and tax efficiency.
We quote two eye-opening passages by Greg Ferenstein’s “The Birth and Death of Privacy: 3,000 Years of History…,” courtesy of Medium:

“Privacy, as it is conventionally understood, is only 150 years old. Most humans living throughout history had little concept of privacy in their tiny communities. Sex, breastfeeding, and bathings were shamelessly performed in front of friends and families.”
“Privacy-conscious citizens did find more traction with what would become perhaps America’s first privacy law, the 1710 Post Office Act, which banned sorting through the mail by postal employees.”

This last quote seems quaint in light of the large-scale, present-day concerns of unauthorized data sharing by social media sites.

Expanded Worldwide Planning (EWP) and PPLI are employed by our firm Advanced Financial Solutions, Inc. to not only give you enhanced privacy, we also keep you compliant with tax authorities worldwide. Our firm can be confident of our success, because PPLI and Expanded Worldwide Planning (EWP) asset structuring greatly simplifies the process, and in addition, gives you the privacy that you seek.
We invite you to take advantage of our services, and would enjoy hearing your comments and questions about the topic of privacy. Please contact us today for a no-obligation, introductory consultation.

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

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Q & A – Ancient Wisdom and 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

 

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Socrates and King Lear Teach Us a Lesson

Ancient Wisdom and PPLI

Section 3, Part 4

In this Part of the book, Socrates and Shakespeare’s King Lear are mentioned. Professor PPLI, please tell us more about how they pertain to PPLI?

In this Part of the book, we used the death of Socrates and the wanderings of King Lear late in his life as examples of highly charged types of exile. Socrates was put to death by state officials in Athens. King Lear was left to wander in his own country after political intrigue forced him out.

Wealthy families are not immune to dramatic forms of exile, sometimes being forced to flee their own country for political and economic reasons. At Advanced Financial Solutions, Inc., our goal is to structure your assets into a well-organized arrangement that gives you the stability to withstand disruptive cross border changes.

This is accomplished through the conservative vehicle of life insurance that is recognized in almost all jurisdictions throughout the world as a standard financial planning vehicle. Privacy, asset protection, and tax efficiency are the hallmarks of the structures that we provide for wealthy families throughout the world.

Profession PPLI, how does Socrates’s philosophy teach you to construct better PPLI international asset structures?

Achieving the ideal international asset structure requires us to be careful listeners. We zealously guard against presenting you with a preconceived plan of our own making. In the end, the plan must be a combination of your aims and desires and our knowledge of the laws and regulations that are pertinent to the plan. What worked for one family may not be a fit for you, even though the outward facts are similar.

How can we be certain that we adhere to careful listening? One method is to follow Socrates’s famous quote: “I only know that I know nothing.” Garth Kemerling’s insightful commentary in the Great Philosophers series is helpful here:

“It is one thing to state one’s opinion of how things are and should be. Powerful institutions such as religions and political systems are built upon such dogmas and the demands that others abide by them. Socrates, on the other hand, started from a position of ignorance and sought the truth. In the end. He has no dogmatic program for us to follow, just a method for seeking the truth for ourselves, without any guarantee that we will find it. Philosophy as practiced by Socrates is an open system.”

Professor PPLI, why would a citizen of a country wish to purchase a life insurance policy from a company outside the borders of their country?

The majority of jurisdictions in the world allow their citizens to purchase life insurance from companies outside their borders. PPLI serves this need very well.

For reasons to purchase a foreign life insurance policy, you need look no further than the six principles of Expanded Worldwide Planning (EWP):

  • Privacy
  • Asset protection
  • Succession Planning
  • Tax Shield
  • Compliance simplifier
  • Trust substitute

Usually several, if not the majority of these six principles, are not available in your own country. Why restrict your international asset planning to just the meager offerings that are available. Expand your vision to include the full palette of EWP. We quote the definitions of the six principles from the Wikipedia page, “International Tax Planning:”

Privacy

EWP gives privacy and compliance with tax laws. It also enhances protection from data breach and strengthens family security. EWP allows for a tax compliant system that still respects 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 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.

Please let us know how we can put these six principles of EWP to work for you. Contact us for a no-charge initial consultation that will be tailored to your own individual aims and desires.

 

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

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Q & A – PPLI for Wealthy International Families

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

 

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PPLI for Wealthy International Families

– Including Wealthy U.S. Families

PPLI’s Beautiful Architecture

 Part 3

Professor PPLI, in this Part we have a discussion of light and dark from different perspectives. How can this be relevant to PPLI asset structuring?

Imagine a typical flowchart that is used to depict a PPLI asset structure. On most flowcharts of this type, the PPLI policy box is located in the middle.  Usually the owner, most often a trust, is above the PPLI policy box, and below are the various assets and holding companies necessary to complete the structure.

Let us now hear from physicist, Julian Scudder

“Stars form light as a byproduct of the incredible pressures at their centers…. New stars only unveil themselves to our eyes by using the light they give off to burn away the dust and gas that hid them in darkness.”

Now back to our flowchart. Think of the PPLI policy box as a star at the center of the asset structure. The pressure in our analogy is the well-established insurance laws and regulations throughout the world which make these structures possible.

 This PPLI policy box, now a newly formed star, gives off light to the other elements of the structure like the trust, assets, and beneficiaries so they can shine forth. All the elements then have the light they need to make the entire structure successful. This brings to mind the subtitle of our Part, PPLI’s Beautiful Architecture.

Professor PPLI, why did you include U.S. families in the title along with international families? Aren’t there domestic U.S. policies that can serve their needs?

If all a family’s assets are located in the U.S., they might consider using a U.S. product, but most often this would not work if they had unusual asset classes. Domestic U.S. PPLI companies structure their products as extensions of the standard retail Variable Universal Life products.

In most cases, a family is much better off using an offshore insurance company with a 953(d) election. Not only are fees lower, but the entire structure will put most families closer to their ultimate goal–to achieve the six elements of Expanded Worldwide Planning (EWP): privacy, asset protection, tax shield, succession planning, compliance simplifier, and trust substitute.

In our first answer we made an analogy between PPLI and the physical aspects of a star as it relates to light. Many advisors would find this analogy far fetch as most international tax advisors have little or no knowledge of the asset structuring possibilities of PPLI. Professor PPLI, please expand on this fact for us.

Quite true indeed. Attorneys, trust officers, and accountants are not offered any courses in PPLI asset structuring in their formal education, so they must encounter this outstanding tool later in their practices. Even when they do, they frequently reject it, because they are unaware of this variety of life insurance and equate PPLI with retail products.

This is not helped in the U.S. where a few major insurance companies do offer PPLI, but it is more of an extension of their retail products, as we mentioned in the second answer.

It takes a creative partnership between the various disciplines involved in a PPLI structure to accomplish the magic. When attorneys, asset managers, trust officers, accountants, and insurance advisors truly understand the dynamic asset structuring elements of PPLI, they can ride the exciting wave of what we call in the book the Unifying Factor.

Currently, when the very concept of wealth seems under attack from political parties, governments hungry for tax dollars, and worldwide governing bodies like the OECD, why not embrace the Unifying Factor. Families then can avail themselves of the six principles of Expanded Worldwide Planning (EWP) that we mentioned earlier. At Advanced Financial Solutions Inc., we endeavor to secure the Unifying Factor for each of our clients.

 

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

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Q & A – Fence = Privacy…Well Sort of

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

 

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Fence = Privacy…Well Sort of

Let PPLI Be Your First Defense

Section 2, Part 1

When it comes to the six principles of Expanded Worldwide Planning (EWP), few asset structuring tools work as well as PPLI for wealthy families throughout the world. Professor PPLI, how did this come to be?

You might describe this occurrence as a happy accident. The six principles of EWP came into their own after FATCA and CRS. With these two important changes in the planning landscape, wealthy families wished a more conservative and stable method in which to organize their financial holdings. Why not use a financial tool that has been around in different forms since 100 B.C.? This is, of course, life insurance.

PPLI delivers to  wealthy families all six principles of EWP: privacy, asset protection, tax shield, succession planning, compliance simplifier, and trust substitute. All these outstanding benefits in one low-cost and simple structure.

Professor PPLI, please tell us how the U.S. tax system can benefit wealthy clients throughout the world?

The tax system in the U.S. gives the individual states much independence in structuring their tax laws. In some ways, it can be compared to the cantons in Switzerland that were able to structure their laws to attract corporations from around the world to locate headquarters there. In the U.S. several states compete by designing favorable trust and tax laws that encourage wealthy families from around the world to move their financial assets to these states.

These states are most notable: South Dakota, Nevada, Delaware, Wyoming, and recently New Hampshire. In general the U.S. gives families stability with a strong rule of law that protects personal property. Also, since the U.S. is not a party to CRS there is limited reporting. With the favorable laws in these states coupled with a PPLI policy, the family has an excellent home for its worldwide holdings.

At Advanced Financial Solutions almost all our PPLI policies involve some sort of cross border situation. Professor PPLI, please tell us how these cross border planning situations are best approached.

Throughout the world governments pass new tax laws daily and its citizens and those who come under its jurisdiction must comply with these laws, or face certain penalties. Also, tax laws change frequently and how you must comply does not always translate into a simple answer or number on your tax return.

This is why at Advanced Financial Solutions Inc., we thoroughly research our PPLI structures, and make sure they comply with all the tax authorities involved in the locations of a client’s assets. Because a properly structured PPLI policy can hold almost any asset, this thorough research must be specific to the laws pertaining to this asset class.

For instance, some clients might wish to invest in an Australian security, or others have a private jet registered in a specific jurisdiction. We undertake this research at the beginning of the policy design to insure that it is fully compliant. Even operating businesses can be placed inside a PPLI policy with the proper structuring. This is all part of our unique method of asset structuring for wealthy families throughout the world.

 

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

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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

Michael Malloy-CLU-TEP

 

 

 

 

 

 

 

#michaelmalloy #PPLI #privateplacement #lifeinsurance #advancedfinancialsolutions

 

 

 

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

Michael Malloy-CLU-TEP

 

 

 

 

 

 

 

#michaelmalloy #PPLI #privateplacement #lifeinsurance #advancedfinancialsolutions

 

 

 

 

 

 

 

 

 

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

Michael Malloy-CLU-TEP

 

 

 

 

 

 

 

#michaelmalloy #PPLI #privateplacement #lifeinsurance #advancedfinancialsolutions