Michael Malloy in Motion

Michael’s CLU, TEP and RFC designations

Travel Defined

Since our founder and chief advisor, Michael Malloy, CLU, TEP, RFC is traveling, we will feature him this week, and a little about his trip to Singapore and Shanghai. First, let us explore the concept of travel. What are the different forms of travel that we experience in our lives?

The obvious one is going from A to B, but there are other forms of travel. Intellectual travel is paramount to working with wealthy international families. Researching and studying the different structuring options that make themselves available when the tax laws of different countries change is an ongoing form of intellectual travel for Advanced Financial Solutions, Inc

Michael’s CLU, TEP and RFC designations are another form of intellectual travel.

According to Investopedia,

“A Chartered Life Underwriter (CLU) is a professional designation for individuals who wish to specialize in life insurance and estate planning. Individuals must complete five core courses and three elective courses, in addition to successfully passing either 100-question, two-hour examinations in order to receive the designation.”

Wikipedia says,

“The Society of Trust and Estate Practitioners (STEP) was founded by George Tasker in 1991 and is the international professional body for advisors who specialize in inheritance and succession.”

The TEP Designation is awarded to advisors who have significant involvement at a specialist level with one or more of the following: planning, creation, management of and accounting for trusts and estates, executorship administration and related taxes.

The Registered Financial Consultant (RFC) is a professional designation awarded by the International Association of Registered Financial Consultants (IARFC) to financial consultants who meet the high standards of education, experience, and ethics.  The financial consultant must have a sound record of business integrity with no suspension or revocation of any professional designations or licenses. Must be in good standing with all licensing bodies and organizations. The financial consultant must subscribe and adhere to the IARFC Code of Ethics.

Now onto Singapore and Shanghai with Michael Malloy, CLU TEP. Michael’s time in Singapore by taken up with meetings with advisors exploring ways to use Private Placement Life Insurance (PPLI) structures for Far Eastern clients. The key six elements of Expanded Worldwide Planning (EWP) resonate well in these jurisdictions. Singapore is a truly international financial center for Indonesia, Malaysia, and the PRC.

With the implementation of The Common Reporting Standard (CRS) in the People’s Republic of China (PRC) clients are looking for ways to keep their financial affairs private and still be compliant with tax authorities. Using PPLI is seen as an excellent way to achieve this aim.  In 2019 there will also be new tax laws implemented in the PRC that impact client structures in BVI, the Cayman Islands, and other popular offshore destinations for PRC clients. In discussions with advisors in the PRC, advisors agreed that PPLI can be a valuable tool to assist clients in this area.

Intellectual travel and worldwide travel are both parts of Michael Malloy, CLU TEP’s world. Both are in service to our clients in keeping their affairs as private as possible and be compliant with the world’s tax authorities.

We invite you to explore how PPLI and EWP can greatly enhance the value of your assets. Please contact us for a free consultation to find out for yourself.

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

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Positive and Beneficial Influence

PPLI Achieves Both

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

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

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

 

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

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The Art of War in Action

Achieve Stealth Victory with PPLI

Private Placement Life Insurance (PPLI) allows you to achieve levels of legitimate privacy not possible with solely planning with trusts. The PPLI policy works in harmony with a trust to create an environment of enhanced privacy. So what war are we talking about? This war is being played out worldwide almost daily between governments and individuals on what constitutes privacy.

This war is not so simple. California just passed a landmark privacy bill, and after the bill’s passage, one aspect that remains ambiguous is what constitutes the data that can be made private at the individual’s choice. We have an excerpt below, courtesy of The Wall Street Journal, by Marc Vartabedian, Georgia Wells, and Lara O’Reilly.

“One of the points of contention is likely to fall around the legislation’s definition of “personal data,” which includes broad categories such as biometric data, psychometric information, browsing and search history and geolocation data. The act’s current version states that personal information doesn’t include information that is publicly available or general enough to not identify an individual, a broad definition technology companies may lean on heavily to argue their collection of such data is justified.”

Thankfully, things are somewhat simpler in our field of planning for wealthy international families. By combining a trust and a properly structured PPLI policy, we can transfer beneficial ownership to the insurance company which creates a much welcomed benefit for families.

This is particularly true for those that reside in countries where the government is unstable or corrupt, or sometimes unfortunately both.  This issue raises real concern for the personal data of wealthy international families in the massive exchange of data now taking place under CRS.

In a recent letter to The Financial Times, Filippo Noseda, a partner at Mishcon de Reya LLP, gives us a startling example:

“In Argentina seven members of the Argentine tax authorities were arrested on February 2 for allegedly selling taxpayers’ information, showing the risks faced by citizens living in high-risk jurisdictions who for one reason or another have bank accounts abroad (Argentine police also seized $5m in cash, which gives a measure of the scale of data trafficking). Dissidents with foreign accounts will be particularly vulnerable to reprisals from their governments.”

Hiding in Plain Sight

What are the steps that allow an insurance company to become the beneficial owner of the assets inside a PPLI policy, and give clients a level of legitimate privacy not possible with other techniques?  Here they are:

  • The policyholder contributes the assets that he or she wants to protect as a premium payment, in cash or in kind, to a bespoke investment fund created by the life insurer. The life insurer opens a dedicated account at a custodian bank for the underlying assets of the policy.
  • The policyholder selects an investment strategy and nominates an investment manager. The life company formally appoints the investment manager.
  • This internal investment fund is exclusively linked to the policyholder’s life policy. The value of the PPLI policy is equal at all times to that of the underlying internal investment fund.
  • The life insurer has now become the Ultimate Beneficial Owner (UBO) of the underlying assets. In return for the premium payment, the policyholder has a “claim” on the life insurer for the value of the underlying investment fund.

This planning technique of using the insurance company as the beneficial owner of the assets in a PPLI policy is akin to what we learn in a 5th century text by Sun Tzu, The Art of War. This famous text teaches ostensibly about war, but its basic message is–avoid open conflict unless it is absolutely necessary.  A few key quotes from the book demonstrate this:

“The supreme art of war is to subdue the enemy without fighting.”

“If you know the enemy and know yourself, you need not fear the results of a hundred battles.”

“A good commander is benevolent and unconcerned with fame.”

This is precisely what we do in marrying a trust with a properly structured PPLI policy.  The result is what we call Expanded Worldwide Planning (EWP). By finding the best of what a trust and an a PPLI policy have to offer, we create this legitimate environment of enhanced privacy without a conflict with tax authorities in any jurisdiction worldwide. This is stealth that achieves a victory by study and superior knowledge.

Please bring us your privacy concerns, so we can construct a bespoke structure that fits the aims and goals of your family.

 

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

 

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PPLI Hits the Mainstream with Bloomberg

EWP: A Giant Structuring Tool

Since we work with wealthy international families, we are expert in using Private Placement Life Insurance (PPLI) as a structuring tool. Our approach is called Expanded Worldwide Planning (EWP). A few weeks ago Bloomberg ran an article on PPLI, “How to invest in Hedge Funds and Pay No Taxes.” We offer quotes and a video about the article below.

First some basics on EWP, and how a properly structured policy can excellently serve the needs of wealthy international families.

  • All assets inside the PPLI policy receive tax deferral, not only investments, but business income too.
  • The assets pass tax-free to the beneficiaries named in the policy. In a properly structured policy one creates a tax-free environment for these assets. Assets can be located anywhere in the world.
  • Because life insurance is used, FATCA and CRS reporting is greatly simplified, and in some cases, is eliminated.
  • Families receive enhanced privacy, because the insurance company becomes the beneficial owner of the assets inside the PPLI policy.
  • The EWP structure provides excellent asset protection.
  • The EWP structure is low cost with fees averaging 1% of assets.
  • The EWP structure is fully compliant with the tax authorities of all tax jurisdictions.
  • Should an untimely death of the wealth creator occur, his family is protected with a tax-free death benefit.

More on Product vs. Structure

The Bloomberg article mentioned above speaks about PPLI as a product, which of course it is, but most importantly it is an EWP structuring tool. One quote from the article is of note:

“When I would talk about it years ago, people looked at you funny,” said Edward Gordon, founder of Preservation Capital Partners. Lawyers for the wealthy hadn’t heard of PPLIs and often dissuaded their clients from trying a product that “sounded too good to be true,” he said. Now, “it’s reaching somewhat of a tipping point.”

Unfortunately, the ignorance of PPLI’s planning possibilities even goes beyond lack of knowledge.  Many asset managers naively sell against insurance structuring, and do not realize that the unique tax advantages of PPLI will give the assets they manage a significant boost in performance.  This is especially true for long-term investments, and those intended for future generations.

Here are some other key quotes from the Bloomberg article by Heather Perlberg and Ben Steverman.

“This is a sexy product that people get excited about owning and tell their friends about,” said Aaron Hodari, a managing director at the advisory firm Schechter Wealth. “It’s an alternative investment that allows you to invest in hedge funds and defer or eliminate taxes.”

“Athletes, celebrities, and family offices are embracing private placement life insurance, or PPLI, as a way to preserve wealth for their heirs. It’s a strategy that’s perfectly legal and has existed for decades. While insurance funds are typically a way to protect assets from lawsuits, the main appeal of PPLIs is that they can help investors avoid taxes on capital gains, ordinary income and high-net-worth estates.”

Bloomberg’s Peggy Collins now offers us a short video about the Bloomberg article:

We invite you to explore with us the structuring possibilities of PPLI and EWP. As always, your comments and questions are indeed welcomed and appreciated.

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

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Privacy Flows with EWP and PPLI

GO WITH THE FLOW

“Go with the flow” can have several meanings, and oddly enough, in the context of Expanded Worldwide Planning (EWP) it can pertain to privacy.  As our firm specializes in structuring for international clients using Private Placement Life Insurance (PPLI), we will discuss two recent news articles and how they relate to securing privacy, as well as full compliance, for families involved in international tax planning. The articles are interesting in themselves, and we have used them to make a few points related to our topic.

Because PPLI is issued under a variable universal life insurance contract, the insurance company becomes the beneficial owner of the assets inside the policy.  When reporting to the tax authorities of the jurisdictions involved with the policy, the insurance company becomes the owner of the assets inside the policy, even though the assets are held in separate accounts for the benefit of the owner of the assets.  It is the goal of EWP to secure as much privacy for clients that is allowable under law, and still be fully compliant with tax authorities worldwide.

Now back to our new articles and “going with the flow.” In a certain sense, the flow of information and the flow of wealth is akin to plumbing.  As long as things flow, in the direction intended there is not a problem.  When things begin to backup or flow in the wrong direction, we encounter problems.

Our first news article discusses the movement of families within the U.S. to states with no or little state income tax, and how the states that have high state income taxes like New York and California are unprepared for the loss of these tax dollars. The point is also made in the article that the states like Florida and Texas that are receiving the migrating families are also unprepared for the influx of new people in their states. In our analogy, we have a situation here where things are flowing in a direction that is not intended.

Here are a few of the salient points courtesy  of the Wall Street Journal by Arthur B. Laffer and Stephen Moore, “So Long, California. Sayonara, New York.” 

“Since 2007 Texas and Florida (with no income tax) have gained 1.4 million and 850,000 residents, respectively, from other states. California and New York have jointly lost more than 2.2 million.”

 

“As the migration speeds up, it will raise real-estate values in low-tax states and hurt them in high-tax states.”

 

“Despite its shrinking tax base, New York spends nearly twice as much on state and local government per person ($16,000) as does economically booming Tennessee ($9,000).”

Our second news article is about the flow of information, and a possible unintended consequence of regulating it. Perhaps the pipes have been put at the wrong angles, or in the wrong place?

Again, from the Wall Street Journal by Steve Rosenbush, “The Morning Download: Europe’s New Privacy Rule, in Unexpected Twist, Helps Facebook, Google.”

The main point of the article is contained in these two quotes:

“The EU will begin enforcing the General Data Protection Regulation, “which in many cases require companies to obtain affirmative consent to use European residents’ personal information,” the Journal’s Sam Schechner and Nick Kostov report

 

“Google and Facebook, using their scale and sophistication, “are applying a relatively strict interpretation of the new law, competitors say—setting an industry standard that is hard for smaller firms to meet,” the Journal reports.”

How does our discussion of “go with the flow” pertain to the benefits of using EWP and a properly constructed PPLI policy to provide privacy?  In the first article, the families were moving to save significant tax dollars.  Inside the privacy protection of PPLI, there is a similar movement, as the assets inside the policy, if structured correctly, are in a tax-free environment.  Like the families in question, they have gone from a high tax situation to a no tax situation–if they moved to Florida and Texas where there is no state income tax.

The new privacy regulations in the second article that favor companies like Google and Facebook show how laws change over time, and when the laws change, it affects the companies subject to the regulation.  One favorable element of using PPLI for structuring is that it is subject to the insurance regulations of the tax authorities involved in the policy structure.  Insurance regulation tends to be much more simple and straightforward than tax codes, and this greatly favors families in their planning.

The insurance codes in most countries are also less subject to change than the tax codes. Insurance is also considered a vehicle that benefits the whole society. EWP structures enjoy the simplicity that insurance affords.

Our firm is here to assist you in “going with the flow” in the right direction, so please let us know your needs, and so we can find out if your situation is right for EWP and PPLI.

 

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

 

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Expanded Worldwide Planning (EWP) in Pictures

PPLI + EWP = New Insights

As the saying goes, “A picture is worth a thousand words.” We have paired images with the main principles of Expanded Worldwide Planning (EWP) to hopefully give you some new insights on this planning tool for wealthy international families.  There are many possibilities for using Private Placement Life Insurance (PPLI) in connection with other entities like trusts and holding companies.

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

Privacy

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

EWP gives privacy and compliance with tax laws

Asset protection

Expanded Worldwide Planning  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 PPLI.

Asset protection

Succession planning

EWP includes transfers of assets without forced heirship rules directly to beneficiaries using a controlled and orderly plan. This element 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.

Succession 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.

Tax shield

Compliance simplifier

EWP adds ease of reporting to tax authorities and administration of assets, commercial substance to PPLI 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.

Compliance simplifier

Trust substitute

Expanded Worldwide Planning creates 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.

We appreciate your comments, suggestions, and questions. Please provide us with a brief fact pattern and we can tell you if our firm’s tools are right tool for you.

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

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Chinese + Investor Control + PPLI = Success

Part II: EWP Chinese Case Study

Expanded Worldwide Planning (EWP) with the right fact pattern can deliver a Private Placement Life Insurance Policy (PPLI) which gives clients the control they wish.  In the much discussed Webber v. Commissioner, U.S. Tax Court case, the policy issued by the offshore company had a 953(d) election, therefore, the issues of investor control and diversification were of paramount importance.  What if the PPLI policy had been a non-953(d) issued PPLI policy?

For international clients with no connection to the U.S., a non-953(d) policy suits their needs perfectly.  So where does that leave us on the investor control issue?  It eliminates it, along with the diversification requirement under the U.S. tax code.  Why?  Because, if the insurance company was domiciled in Barbados, we are using the Barbados tax and insurance code. For this jurisdiction there are no investor control and diversification requirements.

Let us use a Chinese family as a case study.  Mr. Lee’s wealth had been generated from steel manufacturing in China. Over the years he has used various offshore structures.  Mr. Lee is now concerned with CRS and the fact than these offshore structures will now be reported to Chinese tax authorities.  Using EWP and a properly structured PPLI policy, the insurance company will become the beneficial owner of the assets inside the PPLI policy.

If ties develop to the U.S. through Mr. Lee’s daughters, who are attending school in the U.S., we can also issue a 953(d) PPLI policy to benefit them and shield them from tax. By using an EWP structure, Mr. Lee and his family can keep their affairs private, tax efficient, and tax compliant.

Now back to the Webber case. The most comprehensive article on investor control, as it pertains to PPLI policies, that I have read is by Steven Horowitz. The article is impressive both in terms of the detailed analysis of investor control, and the conclusions that Mr. Horowitz reaches.  We quote one of his key points below, and invite you to read the full article,

“I truly believe that the Service should have lost the case on the issue of investor control, but not because of the fact that the investor/ Taxpayer did not exercise too much control. Rather, the case should have been decided based upon the one major point of law, namely: Jeffrey T. Webber did not own the policy. The body of case law and revenue rulings, right or wrong, provides that it is the “policyholder/ owner of the contract” (See, Rev. Rul. 82-54, 1982 C.B. 11), must be the one who has exercised the excessive control over the investments within the contract. The Code provisions and historical body of tax law which govern the tax treatment of life insurance policies and annuity contracts provides in pertinent part as follows in a very clear fashion, the relevant language is as follows: the Policy Holder and owner of the contract are the parties who may not exercise an overabundance of control over the investments within the contract. As Mr. Webber was not the owner of the policy or policyholder (without application of the grantor trust rules), then the Court could not reach the conclusion that it reached without first dealing with the issue of grantor trust status (which would have made Mr. Webber the “Owner” for all federal income tax purposes), (See Rev. Rul. 85-13, 1985-1 C.B. 184).”

Most wealth owners wish structures where they maintain control of their assets. They also wish to keep their affairs private, tax efficient, and tax compliant. Using EWP and a properly structured PPLI policy, it is possible to achieve all these aims.

Please let us know how we can assist you in using these structures.  Our experienced staff is here to serve you.

 

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

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Privacy and the Paradise Papers

The “New Switzerland” Revisited

The right to privacy is enshrined in the formal pronouncements of government bodies throughout the world. The Paradise Papers, and previously the Panama Papers, demonstrate that in practice, this right to privacy receives very different interpretations. These two data hacks reveal the conflict between tax authorities’ right to tax and citizens’ fundamental right to privacy.

How one thinks about this conflict is of course dictated by how it is discussed. Most people receive their information from the various media outlets. Depending on whom you listen to, you will receive very different interpretations of the documents that have been put forward to the public.

As quoted in the New York Times this week, Ross Delston, a Washington D.C.-based anti-money-laundering expert, said, “What we learned confirms what we always suspected: That the use of offshore companies is more widespread than ever imagined. Offshore financial centers are useful not just for crooks, oligarchs and politically exposed persons but also to the largest global companies and highest net-worth individuals.”

Mateo Jarrin Cuvi in his October 27, 2017 post on Taxlinked, “Data Protection Takes Hit with Bermuda Hack,” quotes the Cayman Compass in reference to the Panama Papers, “In recent years we have witnessed the emergence of a different sort of “investigative journalism” that largely includes the public dumping of private information, oftentimes in the absence of analysis, context or verification. It is journalism most foul.”
Two opposing views indeed!

Privacy Moves to the United States?

Another practical demonstration of the conflict between government taxation and citizens’ fundamental right to privacy is what some have termed the “New Switzerland.” This is the movement of funds previously placed in locations like Switzerland and offshore jurisdictions to the United States.

To continue our theme of contrasting viewpoints, below are quotes on tax avoidance. The first is by the Tax Justice Network, and the second by Learned Hand, a U.S. Federal Judge from a 1934 case, Helvering v. Gregory. The attitude expressed by Learned Hand is prevalent in the U.S., while the OECD champions the attitude in the Tax Justice Network quote that is in reference to the Paradise Papers.

“Just because no one is put in jail, doesn’t mean no one has committed a crime. All that said, just because a prosecuting authority doesn’t bring charges, it doesn’t mean that no crime has taken place.”

“Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.”

No wonder the “New Switzerland” has come to pass!
One irony in this movement of funds to the U.S. is that the U.S. in effect began the movement of tax transparency with FATCA in 2008, which was closely followed-up with the OECD’s Common Reporting Standard (CRS). Some have brought their funds to the U.S. in structures that can be easily pierced by CRS.

There are structures that give privacy and significant tax benefits to international clients without moving family assets to the US merely to avoid CRS reporting. These structures also achieve tax compliance with tax authorities. Our firm specializes in these structures, and would be glad to discuss them with you in more detail.

We welcome your inquiries. Please Contact Us or write them at the bottom of the page.

Thank you!

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

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PPLI in Puerto Rico

A unique jurisdiction for enhanced privacy

With the increased pressure on privacy issues in international tax planning, advisors now frequently ask me to assist them with clients who wish to protect their privacy, but also wish to be compliant with The Common Reporting Standard (CRS), and the Financial Foreign Account Tax Compliance Act (FATCA)
.
Our firm now has such a structure which involves structuring Private Placement Life Insurance (PPLI) issued in Puerto Rico.

At  Advanced Financial Solutions Inc., we are now resolved to use this structure for clients who have a legitimate need for privacy while in all other respects are compliant in relation to FATCA and CRS, clients that would pass Anti money laundering (AML), Know your customer (KYC) and other forms of due diligence that are necessary to corroborate this fact.

This white paper is an attempt to give the basic elements of this structure, and why our firm thinks it is a useful tool in preserving a legitimate right to privacy. In Article 12 of The United Nations’ Universal Declaration of Human Ri ghts it states:

“No one shall besubjected to arbitrary interference with his privacy, family, home or correspondence, nor
to attacks upon his honour and reputation. Everyone has the right to the protection of
the law against such interference or attacks.”

Why Puerto Rico?

The Commonwealth of Puerto Rico is a territory of the United States. Under FATCA the Intergovernmental Agreements (IGA’s) definition of the United States excludes the territories. Therefore, US territories do not reciprocate the Automatic Exchange of  Information (AEI).

“Territory Financial Institutions” in the FACTA regulations also have a special status which exempts them from reporting.
The fact that Puerto Rico is statutorily excluded from existing and future IGAs is significant. This fact gives Puerto Rico a very marked advantage for structuring over no state tax jurisdictions in the US like Delaware, North Dakota, and Nevada.

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

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