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- Transformation Abounds

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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Transformation Abounds 

Professor PPLI and the Caterpillar

Section 1, Part 5

Professor PPLI, we know the many issues that PPLI can solve for wealthy families today, but how did this begin? What are the origins of PPLI?

PPLI began in the 1980s in the United States. It was principally used to structure benefits for senior executives at major corporations. It allowed these executives to customize their investments and provide greater benefits than with the standard plans available.

In the early 1990s, PPLI was adopted by wealthy individuals. Attorneys and other advisors saw that PPLI could be a valuable tool in planning for wealthy clients given all the advantages of life insurance. PPLI allows planners to incorporate all of the key elements of Expanded Worldwide Planning (EWP) into one coherent structure: privacy, asset protection, tax shield, succession planning, compliance simplifier, and trust substitute.

In the mid-1990s, major companies entered the PPLI market. Insurance companies saw the marketing opportunities inherent in PPLI, and we see companies being formed in tax friendly jurisdictions like Bermuda and Barbados. Presently, PPLI is seen as a sophisticated asset structuring tool, and a potent planning technique in the hands of advisors throughout the world.

Professor PPLI, please tell us more about how PPLI transforms assets once they are in the policy structure.

Much like the transformation of a caterpillar into a butterfly, when assets are put into a properly structured policy, the insurance company becomes the beneficial owner of the assets. The owner of the policy, usually a trust, uses the assets for the benefit of the wealthowner, even though there are some restrictions due to the investor control regulations for those clients with a connection to the U.S. For clients who have a connection to the U.S., they must comply with the investor control and diversification regulations.

In today’s world of news leaks and fake news, clients worldwide are seeking legitimate privacy in their financial affairs. In recent years, this has been eroded. Interestingly enough, it is part of the Founding Fathers’ vision of the U.S., and is part of the EU’s founding documents. This legitimate privacy can be achieved by using a U.S. trust situated in certain jurisdictions coupled with a properly structured PPLI policy.

In the environment of global taxation that we have today, what gives PPLI a distinct advantage over other methods of asset structuring?

This advantage can be summarized in two words: life insurance. Life insurance is recognized the world over as a societal benefit, and in most jurisdictions has built-in tax advantages. Because of this we begin the structuring process for wealthy families with a conservative tool, not some new construct recently discovered in the tax code.

For advisors who only use life insurance as a method of introducing liquidity into an illiquid estate, for instance, one that holds mostly real estate, it is a learning process to recognize that a properly structured policy can hold almost any asset that a trust company can have in custody. Having the assets in a policy that is owned by a trust gives the wealthowner distinct advantages that cannot be achieved by a trust alone.

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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Q & A – The Rainmaker Cometh

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

 

The Rainmaker Cometh

Professor PPLI’s Tanned Face

 Part 3

 

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Professor PPLI, there is the phrase to ‘hide something in plain site.’ Isn’t this similar to PPLI asset structures?

 Yes, you hit upon a key point, both geopolitically and in reference to PPLI. Seeking to hide assets from tax authorities is a thing of the past. The desire to seek legitimate privacy, tax efficiency, and asset protection is accomplished through the medium of life insurance with PPLI. ‘In plain site’ because life insurance is such a conservative and widely accepted financial instrument.

With the correct structuring it can achieve the six principles of Expanded Worldwide Planning (EWP):  privacy, asset protection, tax shield, succession planning, trust substitute, and compliance simplifier.

In this part we quote an extended passage by Charles Dickens on the effects of the wind through an English village. Professor PPLI, how is this analogous to PPLI?

 In nature the wind can be a disruptive force, especially when it blows very hard. Indeed, in the Dickens’ passage that we quote, the wind is a very disruptive force, much like a violent winter storm. To quote a more modern depiction of an emotional storm, here are the opening lines of  a song by Bob Dylan, Shelter from the storm:

‘Twas in another lifetime, one of toil and blood

When blackness was a virtue and the road was full of mud

I came in from the wilderness, a creature void of form

“Come in,” she said, “I’ll give you shelter from the storm”

PPLI is just such “shelter from the storm.” In this section of the book, we also present an article by Simon Gorbutt from the STEP Journal. The article describes in detail how PPLI can assist wealthy international families in cross-border situations.

We quote from the Conclusion of the article: “As families and their wealth gradually disperse, and business and personal relationships evolve, even established planning tools can be rendered inefficient or, worse, obsolete. While no structure will weather all eventualities, the flexibility inherent in life insurance and the breadth of its recognition make it an attractive candidate for completing a modern wealth and succession plan.”

Professor PPLI, one can travel almost anywhere in the world in 24 hours. I think you can say our world is the most widely traveled in history. How does PPLI make successful asset structuring more possible in this environment?

PPLI is a true cross-border structuring tool. Many wealthy families are spread out over the globe. At Advanced Financial Solutions we carefully research all aspects of each country where a family member may reside. We also must look into the laws and regulations surrounding each asset in the PPLI structure to ensure that all reporting requirements are being met. In many cases PPLI greatly simplifies the reporting requirements, because the insurance company becomes the beneficial owner of the assets inside the policy.

 

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

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Q & A – Assets for a ‘Rainy Day’

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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Assets for a ‘Rainy Day’

PPLI Keeps You Dry

 Part 2

 Professor PPLI, the client in our dialogue is upset about the condition of his assets. How might PPLI assist him?

 A properly structured PPLI policy functions somewhat like a trust in that it can hold multiple asset classes. To name them individually, the policy can hold:

  • Real Estate/Physical assets;
  • Hedge Funds/Alternative Asset classes;
  • Private Equity;
  • Intellectual Property;
  • Art;
  • Yachts and Private Jets;
  • Alternative Currency denominations.

The insurance company becomes an excellent “home” for multiple asset classes in that:

  • The insurance company is beneficial owner of assets held in the policy;
  • The insurance company is listed as beneficial owner on bank accounts;
  • Transactions are done in the name of the insurance company;
  • There is no look through to policyholders (certain structures).

The discussion in this Part turns to how a client understands or fails to understand an explanation by an advisor. Professor PPLI, how would you explain PPLI to a client in simple, introductory terms?

 I usually begin by saying that PPLI an extension of the retail version of PPLI, Variable Universal Life Insurance, but it functions more like a trust. With proper structuring it can hold almost any asset class. The assets are not subject to taxation once inside the policy, and pass as a tax-free death benefit in most jurisdictions. Most policies are owned by a trust, and the insured life can be any family member or members who have an insurable interest in the policy.

The fees are very low, usually less than one percent of the assets inside the policy. The policy set up fee is usually around one percent of the assets value. The cost of the life insurance is priced institutionally.  The cost is only the wholesale reinsurance company charge with nothing added by the insurance company. These charges are a fraction of the cost of a retail insurance product. The policy also provides excellent asset protection coupled with a correctly written trust.

A paragraph in this Part mentions the function of life insurance in a PPLI policy. Professor PPLI, can you please elaborate on this?

 The life insurance component largely depends upon the family’s aims. If estate planning is paramount, we would use certain policy designs. If access to cash value is key, other policy designs would work better. We can even design a policy where the death benefit is only 5% of the total asset value inside the policy. The death benefit is very much a bespoke element of the policy.

 

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

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Q & A – PPLI and Understanding

Questions and Answers  from the book “The Wit and Wisdom of Professor PPLI”

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How do we achieve understanding?

 Section One, Part 1

Professor PPLI, please tell us more about how understanding Private Placement Life Insurance (PPLI) leads to a successful outcome for wealthy families?

 When most people think of life insurance, they think of a product. This understanding is much too restrictive for PPLI. Wealthy families are looking for new methods to structure their assets. FATCA and CRS have eliminated many structuring tools that gave these families legitimate privacy.

PPLI is a long-established, conservative tool that uses the six elements of Expanded Worldwide Planning (EWP) to not only produce a structure that gives legitimate privacy, but tax efficiency and asset protection as well. This is the correct understanding of PPLI.

Professor PPLI, why isn’t the understanding that you just explained more widely circulated among those who advise wealthy families?

 We live in an era of specialization, and this is true among those who advise wealthy families:  attorneys, asset managers, accountants, financial planners, and trust officers.  All these disciplines have their own unique focus. Proper PPLI asset structuring incorporates all these disciplines, and blends them into a conservative and tax compliant structure that produces a multi-generational asset structure.

The broad vision of PPLI is sometimes difficult for those who practice these disciplines. One must leave the narrow and safe confines of a certain way of thinking to embrace the broader and more expansive vision of PPLI.

Professor PPLI, please tells us about the history of PPLI. Is it true that it dates back to the 1980s in the United States?

 Yes, this is true. PPLI began in the United States in the 1980s. It was principally used to structure benefits for senior executives at major corporations. It allowed these executives to customize their investments and provide greater benefits than with the standard plans available.

In the early 1990s, it  was adopted by wealth individuals. Attorneys and other advisors saw that PPLI could be a valuable tool in planning for wealthy clients given all the advantages of life insurance, as well as the special properties that we mentioned before. PPLI allows planners to incorporate all of the key elements of EWP into one coherent structure.

In the mid-1990s, major companies entered the market. Insurance companies saw the marketing opportunities inherent in PPLI, and we see companies being formed in tax friendly jurisdictions like Bermuda and Barbados.

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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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Ancient Wisdom and PPLI

Socrates and King Lear Teach Us a Lesson

 Part 4

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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 over the next five Parts, “She Was Good For Nothing,” by Hans Christian Andersen. This charming fairy tale supports our theme of nothing.

We introduce examples from ancient history and literature, ancient wisdom, to explain how PPLI can be a perfect fit for international families who seek privacy, tax efficiency, and asset protection. PPLI works excellently in multi-jurisdictional planning for those families seeking domiciles outside their home countries for political and economic reasons.

It is interesting to note that both Socrates and Shakespeare’s King Lear were in a sense exiled in their own kingdoms. Socrates put to death by state officials in Athens, and King Lear left to wander in his own country after political intrigue forced him out. These are highly charged dramatic events. It is sometimes equally so for wealthy international families. More about Socrates and King Lear later in our article.

An article in International Advisor, Who is advising Asia’s ultra wealthy?” by Kirsten Hastings focuses on the role of independent asset managers (IAMs). IAMs are key players in the team that we assemble to achieve a properly structured PPLI policy. Frequently there are multiple IAMs on our teams to accommodate the many asset classes that become part of the PPLI policy. Here are some highlights from this article.

“Wealth in Asia is rising faster than in any other part of the world, meaning that increasing numbers of incredibly rich people need expert advice.

These ultra-high net worth individuals can be beyond the reach of financial advisory and wealth management firms.

And rather than turn to private banks, many are seeking the services of independent asset managers (IAMs).

Also known as external asset managers (EAMs), they have a long history in Europe and the US but were a rarity across Asia as recently as 10 years ago.

The Association of Independent Asset Managers (AIAM) was founded in Singapore in 2011 and only opened in Hong Kong in 2015.

So, what do they do?

Independent asset management involves a client opening an account with a custodian bank, which may be a private bank, and placing assets in the account, according to a 2018 report from recruitment specialists Selby Jennings.

The client then gives the IAM authority and power of attorney as a third party to represent them in managing the investment portfolio and asset allocation.

The assets remain in an account in the client’s name at all times, but the IAM makes decisions on how the assets should be managed.

In addition to investment advice, IAMs also offer tax and succession planning along with a host of other, very bespoke services.

With the high net worth population of the region set to increase by over 40% every year over the next decade, the number of IAMs is also projected to increase – by 25% in Singapore and 50% in Hong Kong, Selby Jennings added.

Insurance and IAMs

“IAMs are starting to realise that the investment returns they generate for their clients could be wiped out by market volatility or different taxes when rebalancing the portfolio or realising the gains.”

He said they are increasingly exploring the functions of insurance to “supplement their client’s planning”.

“Due to the complex needs of the high net worths and global tax frameworks, we see a lot of IAMs are considering different wealth structures like PPLI (private placement life insurance) and are exploring insurance as an asset class.””

International Life Insurance

In keeping with our cross-border and international theme, we quote from International Life Insurance edited by David D Whelehan, JD in the chapter, “International Life Insurance An Overview.”

“This product is for the wealthy, “accredited” investor. They are usually very large single premium structures. It is classified more as an institutional product, as the charges and fees are quite low in comparison to retail products described above. Another advantage is investment flexibility as they generally can be invested in things not permitted in a general account retail product, like hedge funds and private equity.

Premiums and benefits can also be paid in “kind,” as opposed to in cash. In addition, the policyowner can select his, or her, own Investment Manager for just the single policy to invest according to the policyowner’s general directions. The Custodian of the underlying assets in the fund can also be selected by the policyowner. Private placement products are tailored to meet specific objectives of the client, but are carefully designed to be compliant with local tax laws, so as to enjoy the tax treatment desired.”

Socrates Ignorance

 Garth Kemerling’s insightful commentary in the Great Philosophers series gives us an excellent interpretation of what Socrates means by one of his most famous quotes, “I only know that I know nothing.”

It is important to note that Socrates himself did not claim to know better than others. He frequently emphases that he is ignorant of the answer. The importance of this helps to draw the line between dogma and genuine philosophy. 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.

When he finds that the experts are just as ignorant about what things really are, he reasons: “I do not suppose that either of us knows anything really beautiful and good, I am better off then he is – for he knows nothing, and thinks that he knows. I neither know nor think that I know.” Socrates concludes that it is better to have ones ignorance tan self-deceptive ignorance. Socrates may not know the ultimate answers to the questions he raises, but he knows himself. It is this self-knowledge and integrity that constitutes the wisdom of Socrates. The open invitation is for all of us to ask ourselves how much we truly know of what we claim.”

Part 4 of “She Was Good For Nothing” by Hans Christian Andersen:

“After he had gone my mistress called me in to speak to me; she looked so grave and yet so kind, and spoke as wisely as an angel indeed. She pointed out to me the gulf of difference, both mentally and materially, that lay between her son and me. ‘Now he is attracted by your good looks, but that will fade in time. You haven’t received his education; intellectually you can never rise to his level. I honor the poor,’ she continued, ‘ and I know that there is many a poor man who will sit in a higher seat in the kingdom of heaven than many a rich man; but that is no reason for crossing the barrier in this world. Left to yourselves, you two would drive your carriage full tilt against obstacles, until it toppled over with you both. Now I know that Erik, the glovemaker, a good, honest craftsman, wants to marry you; he is a well-to-do widower with no children. Think it over!’

“Every word my mistress spoke went through my heart like a knife, but I knew she was right, and that weighed heavily upon me. I kissed her hand, and my bitter tears fell upon it. But still bitterer tears fell when I lay upon my bed in my own room. Oh, the long, dreary night that followed-our Lord alone knows how I suffered!

“Not until I went to church on Sunday did peace of mind come after my pain. It seemed the working of Providence that as I left the church I met Erik himself. There were no doubts in my mind now; we were suited to each other, both in rank and in means; he was even a well-to-do man. So I went straight up to him, took his hand, and asked, ‘Do you still think of me?’

” ‘Yes, always and forever,’ he said.

” ‘Do you want to marry a girl who likes and respects you, but does not love you?’

” ‘I believe love will come,’ he said, and then we joined hands.

“I went home to my mistress. The gold ring that her son had given me I had been wearing every day next to my heart, and every night on my finger in bed, but now I drew it out. I kissed it until my lips bled, then gave it to my mistress and told her that next week the banns would be read for me and the glovemaker.

“My mistress took me in her arms and kissed me; she didn’t say I was good for nothing, but at that time I was perhaps better than I am now, for I had not yet known the misfortunes of the world. The wedding was at Candlemas, and for our first year we were quite happy. My husband had a workman and an apprentice with him, and you, Maren, were our servant.”

“Oh, and such a good mistress you were!” said Maren. “I shall never forget how kind you and your husband were to me!”

“Ah, but you were with us during our good times! We had no children then. I never saw the student again. Oh, yes, I saw him once, but he didn’t see me. He came to his mother’s funeral, and I saw him standing by her grave, looking so sad and pale-but that was all for his mother’s sake. When his father died later he was abroad and didn’t come to that funeral. He didn’t come here again; he became a lawyer, and he never married, I know. But he thought no more of me, and if he had seen me he would certainly have never recognized me, ugly as I am now. And it is all for the best!”

Then she went on to tell of the bitter days of hardship, when misfortune had fallen upon them. They had saved five hundred dollars, and since in their neighborhood a house could be bought for two hundred, they considered it a good investment to buy one, tear it down, and build again. So the house was bought, and the bricklayers and carpenters estimated that the new house would cost a thousand and twenty dollars. Erik had credit and borrowed that sum in Copenhagen, but the captain who was to have brought the money was shipwrecked and the money lost.”

Both Socrates and King Lear ended their lives tragically, yet were both noble in spirit. Socrates accepted his death in an herotic fashion. Lear was reunited with his daughter, Cordelia, yet they died in the confusion of battle between the warring parties at the end of the play. How is this related to PPLI?

Great art strives to ennoble us. This is why it is great, and rises above mere entertainment. At Advanced Financial Solutions our aim is to rise to the highest level of structuring for wealthy international families, giving both maximum privacy, and compliance with tax authorities worldwide.

Our quest is not outwardly considered art, but inwardly its goal is the same–uncompromising excellence. We invite you to partake of this excellence by contacting us today to find out if PPLI structuring is right for you.

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

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#michaelmalloy #PPLI #privateplacement #lifeinsurance #advancedfinancialsolutions

 

 

 

Nothing Is Impossible with PPLI

PPLI: Under Higher Laws

 Part 3

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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 over the next five Parts, “She Was Good For Nothing,” by Hans Christian Andersen. This charming fairy tale supports our theme of nothing.

Winnie-the-Pooh gives us one of his most often quoted and enjoyable quotes that reveals new insight into our theme of nothing:

“People say nothing is impossbile, but I do nothing everyday.”

One thing it brings to mind is how we sometimes come to an understanding through both effort and relaxation. We give you examples of this phenomenon from several authors below.

Private Placement Life Insurance (PPLI) was born out of the necessity to achieve greater tax efficiency, privacy, and asset protection in one low cost structure with institutional pricing. This PPLI structure is made possible through the laws and regulations of life insurance. A much more stable and straightforward body of law than the more politicized tax laws and regulations worldwide. Our goal at Advanced Financial Solutions, Inc. is to make possible what is impossible with most asset structuring techniques available to wealthy families today.

In a Wealthmanagement.com article, “Private Placement Life Insurance Primer, Recent tax law changes make for a particularly interesting time to explore PPLI,”  Brian Gartner and Matthew Phillips explain why trustees are particularly attracted to PPLI.

“Trustees are attracted to PPLI in the context of multi-generational trust planning for three main reasons: (1) assets within a trust allocated through PPLI grow on an income tax-deferred basis; (2) the trustee can make income tax-free distributions to trust beneficiaries from PPLI without having to consider the income tax consequences of liquidating assets; and (3) the trust will eventually receive an income tax-free insurance benefit, which will serve to effectively step-up the basis of the assets within the trust that are allocated through PPLI.”

Relax and Create with PPLI

Author, Jonah Lehrer, gives us an explanation of why relaxation is a key ingredient to creativity in an article by Leo Widrich, “Why We Have Our Best Ideas in the Shower: The Science of Creativity.”

“Why is a relaxed state of mind so important for creative insights? When our minds are at ease–when those alpha waves are rippling through the brain–we’re more likely to direct the spotlight of attention inward, toward that stream of remote associations emanating from the right hemisphere.

In contrast, when we are diligently focused, our attention tends to be directed outward, toward the details of the problems we’re trying to solve. While this pattern of attention is necessary when solving problems analytically, it actually prevents us from detecting the connections that lead to insights.

‘That’s why so many insights happen during warm showers,’ Bhattacharya says. ‘For many people, it’s the most relaxing part of the day.’ It’s not until we’re being massaged by warm water, unable to check our e-mail, that we’re finally able to hear the quiet voices in the backs of our heads telling us about the insight. The answers have been their all along–we just weren’t listening.”

PPLI on Vacation

 One definition of vacation is “to vacate to leave empty.” This definition is in keeping with the above description of how we can have our best thoughts when we are relaxed. Amanda Foreman in “The Ancient Origins of the Vacation” gives us a brief history of the concept of vacation.

 “Finally, Americans are giving themselves a break. For years, according to the U.S. Travel Association, more than half of American workers didn’t use all their paid vacation days. But in a survey released in May by Discover, 71% of respondents said they were planning a summer vacation this year, up from 58% last year—meaning a real getaway, not just a day or two to catch up on chores or take the family to an amusement park.

The importance of vacations for health and happiness has been accepted for thousands of years. The ancient Greeks probably didn’t invent the vacation, but they perfected the idea of the tourist destination by providing quality amenities at festivals, religious sites and thermal springs. A cultured person went places. According to the “Crito,” one of Plato’s dialogues, Socrates’ stay-at-home mentality made him an exception: “You never made any other journey, as other people do, and you had no wish to know any other city.”

The Romans took a different approach. Instead of touring foreign cities, the wealthy preferred to vacation together in resort towns such as Pompeii, where they built ostentatious villas featuring grand areas for entertaining. The Emperor Nero was relaxing at his beach palace at Antium, modern Anzio, when the Great Fire of Rome broke out in the year 64.

The closest thing to a vacation that medieval Europeans could enjoy was undertaking pilgrimages to holy sites. Santiago de Compostela in northern Spain, where St. James was believed to be buried, was a favorite destination, second only to Rome in popularity. As Geoffrey Chaucer’s bawdy “Canterbury Tales” shows, a pilgrimage provided all sorts of opportunities for mingling and carousing, not unlike a modern cruise ship.”

Part 3 of  “She Was Good For Nothing” by Hans Christian Andersen:

“The boy cried too, as he sat alone beside the river, guarding the wet linen. The two women made their way slowly, the washerwoman dragging her shaky limbs up the little alley and through the street where the Mayor lived. Just as she reached the front of his house, she sank down on the cobblestones. A crowd gathered around her.

Limping Maren ran into his yard for help. The Mayor and his guests came to the windows.

“It’s the washerwoman!” he said. “She’s had a bit too much to drink; she’s no good! It’s a pity for that handsome boy of hers, I really like that child, but his mother is good for nothing.”

And the washerwoman was brought to her own humble room, where she was put to bed. Kindly Maren hastened to prepare a cup of warm ale with butter and sugar-she could think of no better medicine in such a case-and then returned to the river, where, although she meant well, she did a very poor job with the washing; she only pulled the wet clothes out of the water and put them into a basket.

That evening she appeared again in the washerwoman’s miserable room. She had begged from the Mayor’s cook a couple of roasted potatoes and a fine fat piece of ham for the sick woman. Maren and the boy feasted on these, but the patient was satisfied with the smell, “For that was very nourishing,” she said.

The boy was put to bed, in the same one in which his mother slept, lying crosswise at his mother’s feet, with a blanket of old blue and red carpet ends sewed together.

The laundress felt a little better now; the warm ale had given her strength, and the smell of the good food had been nourishing.

“Thank you, my kind friend,” she said to Maren, “I’ll tell you all about it, while the boy is asleep. He’s sleeping already; see how sweet he looks with his eyes closed. He doesn’t think of his mother’s sufferings; may our Lord never let him feel their equal! Well, I was in service at the Councilor’s, the Mayor’ parents, when their youngest son came home from his studies. I was a carefree young girl then, but honest-I must say that before heaven. And the student was so pleasant and jolly; every drop of blood in his veins was honest and true; a better young man never lived. He was a son of the house, and I was only a servant, but we became sweethearts-all honorably; a kiss is no sin, after all, if people really love each other. And he told his mother that he loved me. She was an angel in his eyes, wise and kind and loving. And when he went away again he put his gold ring on my finger.”

Using a conservative PPLI asset structuring plan can help you relax in relation to worldwide tax authorities. In a properly structured PPLI policy, you will be in full compliance, yet your assets will be in a tax-free environment, and will pass as a tax-free to the heirs of your choice. We welcome you to take a vacation from more complicated and aggressive strategies, and call us today for a no obligation initial consultation. One Worldwide Toll-Free Number to Serve You: +1 877-811-5846

 

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

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#michaelmalloy #PPLI #privateplacement #lifeinsurance #advancedfinancialsolutions

 

 

 

 

How Can Nothing Exist?

The Zen of PPLI

Part 2

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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 over the next five Parts, “She Was Good For Nothing,” by Hans Christian Andersen. This charming fairy tale supports our theme of nothing.

One definition of the word nothing is “something that does not exist.” If something does not exist, what is this something? The word nothing, in a sense, contradicts itself. We liken it to our favorite topic, Private Placement Life Insurance (PPLI). How can a mere life insurance policy accomplish so much for the assets of wealthy families? How does PPLI incorporate the six principles of Expanded Worldwide Planning (EWP) to give wealth families so many benefits?

When someone truly understands the power and versatility of planning with PPLI, they frequently ask me “what if tax authorities disallow PPLI?” My reply focuses on the role of life insurance in society throughout the world.

Below are two articles that reflect this role. Harold D. Skipper Jr.’s article,  “The Taxation of Life Insurance Policies in OECD Countries: Implications for Tax Policy and Planning” would not even have been written, if life insurance did not occupy such an important role in the fabric of society.

As Mr. Skipper Jr. states in the Summary and Conclusion of the article below, this unique role adds economic stability and partially relieves governments in their role of providing this stability.

 “VI. SUMMARY AND CONCLUSIONS The purpose of this study has been to examine life insurance product taxation in OECD countries and thereby to provide insight for countries as they develop or revise life insurance tax policies. Life insurance plays important economic and social roles for both individuals and societies. Life insurance affords individuals, families, and businesses the opportunity to hedge against the adverse financial consequences of death and to save in a convenient, perhaps quasi-compulsory manner.

As important financial intermediaries, life insurance companies help mobilize national saving to support greater national investment. Enhanced investment is a prerequisite to stronger, long-term economic growth. Additionally, individually purchased life insurance undoubtedly relieves pressure on social welfare systems, thus minimizing taxes.

The financial sector – including the life insurance industry – is believed to have a special role to play in the transformation and development of economies. This is because of the need for a more efficient allocation of savings, for strong stabilization policies and structural reforms, for overall confidence building, and for particularly strong sources of external finance for non-financial businesses.”

 This important and vital role of life insurance is further expressed in this Economist article, “The life-insurance industry is in need of new vigour,” about the current state of the life insurance industry throughout the world.

“LIFE insurance is among the oldest financial products. The Amicable Society, founded in London in 1706, charged members a set contribution and paid out annually to widows and children of those who had died in the previous 12 months. Today it is a vast industry: life and health insurers employ over 800,000 people in America alone. It protects hundreds of millions against the risk of dying early, through death benefits, or the risk of living longer than expected, for example through annuities. According to Allianz, a German insurer, total life-insurance premiums are above 5% of GDP in many rich countries, including Britain, France, Italy and Japan. In America, the world’s biggest market, annual premiums total more than $550bn.”

The article goes on to state how there are fewer life insurance companies today and they must hold greater amounts of assets in reserve to pay claims, so as a business it is somewhat less profitable than in years past. Its significance in the world of finance is still large and undisputed. The large premium deposits of PPLI policies only add to this financial significance.

Zen and PPLI

Zen is known in part for its simplicity. In art this is well expressed in the art form of rock gardens. We liken this to PPLI, because at the heart of this unique asset structuring tool is a life insurance policy. This is a contradiction to many who consider themselves to be financially astute. How can a simple life insurance policy accomplish so much? How can a large expanse of white sand with a few rocks be so artistically satisfying?

Mihoyo Fuji  gives us a little history about one of Zen’s most famous rock gardens on her website Zero=Abundance.

Ryoan-ji Sekitei (rock garden) is probably the most famous and mysterious kare-sansui. Although it’s believed that it was created around 1500, it is not known who designed this garden and what the theme was. For more than 500 years, people have been trying to solve the mysteries. There are many theories.

There are only 15 rocks installed in a small space of about 800 square feet (74 square meters). The 15 rocks form three groups of 7 (5+2), 5 (3+2) and 3 pieces, the three odd numbers. The combination of those numbers have stirred so many theories, involving everything from ancient Chinese Yin-and-Yang philosophy to the European “golden ratio.”

One of the most famous theories is that the rocks tell the story of a tiger and its three cubs crossing the river, based on ancient Chinese folklore. But how do four tigers translate into 15 rocks? No one has come up with a reasonable explanation.  Some other people believe that the garden is supposed to express “imperfection” to remind us that we are all imperfect.  While the number 15 was considered to constitute the perfect universe, this garden was designed so that you can never see all of them at once: the view of at least one rock is always blocked no matter where you are. Other theories suggest that the rocks represent five major Zen temples, or five major mountains in China.

There are no longer any rocks that replicate real objects in a way we can tell what they are. Everything is elevated to a conceptual, abstract level.”

Part 2 of “She Was Good For Nothing” by Hans Christian Andersen:

“Just then came an elderly woman, poorly clad, lame in one leg, and with an enormously large, false curl hanging down over one of her eyes, which was blind. This curl was supposed to hide the eye, but it only made the defect the more conspicuous. The neighbors called her “limping Maren with the curl,” and she was an old friend of the washerwoman’s.

“You poor thing,” she cried, “slaving and toiling in the cold water! You certainly need something to warm you a little, and yet the gossips cry about the few drops you take!” And soon all that the Mayor had said to the boy was repeated to his mother, for Maren had overheard it, and it had angered her to hear him talk so to the child about his own mother and the few drops she took, because on that same day the Mayor was having a big dinner party with many bottles of wine.

“Good wine, strong wine! Many will drink more than they should, but they don’t call that drinking. They are all right, but you are good for nothing!”

“What! Did the Mayor really say that, child?” asked the laundress, her lips quivering. “So you have a mother who is good for nothing! Perhaps he’s right, though he shouldn’t say so to a child. But I mustn’t complain; good things have come to me from that house.”

“Why, yes, you were in service there, when the Mayor’s parents were alive. That was many years ago. Many bushels of salt have been eaten since then, so people may well be thirsty! laughed Maren. “The big dinner today at the Mayor’s would have been postponed if everything hadn’t been prepared. I heard the news from the porter. A letter came, an hour ago, telling them that the Mayor’s younger brother, in Copenhagen, is dead.”

“Dead!” cried the laundress, turning as white as a ghost.

“What does it matter to you” said Maren. “Of course, you must have known him, since you worked in the house.”

“Is he really dead? He was the best and kindest of men-indeed, there aren’t many like him!” Tears were rolling down her cheeks. “Oh, my God!

Everything is going around! That’s because I emptied the bottle. I couldn’t stand so much. I feel so ill!” And she leaned against the fence for support.

“Good heavens, you are ill, indeed!” said Maren. “Try to get over it! No, you really are sick! I’d better get you home!”

“But the washing there!”

“I’ll take care of that. Here, give me your arm. The boy can stay here and watch it till I come back and wash what’s left. It’s only a few pieces.”

The poor laundress’ legs were trembling under her. “I’ve stood too long in the cold water, with no food since yesterday! I have a burning fever. Oh, dear Lord Jesus, help me to get home! Oh, my poor child!”

And she wept.”

Please find out for yourself how a properly constructed PPLI policy can catapult you to the highest level of asset structuring, giving you enhanced tax benefits, privacy, and asset protection–all in one simple structure. Please call us today for a bespoke consultation. One Worldwide Toll-Free Number to Serve You: +1 877-811-5846.

 

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

Michael Malloy-CLU-TEP

 

 

 

 

 

 

 

#michaelmalloy #PPLI #privateplacement #lifeinsurance #advancedfinancialsolutions