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.

Download full PDF document

 

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

Michael Malloy Contact Info

 

 

 

 

Privacy with Expanded Worldwide Planning

 PPLI Offers the Following Advantages

  • Achieves privacy as well as compliance with tax authorities
  • Achieves protection from data breaches
  • Achieves increased family security

Life insurance is recognized worldwide as a simple and straightforward structure to transfer family wealth.  Private placement life insurance, (PPLI), is a bespoke variety that combines institutional pricing with assets in separately managed accounts.1 In certain jurisdictions, a properly structured PPLI policy can provide both compliance with tax authorities and privacy of the assets inside the policy.2

EWP allows for a tax compliant system that still respects basic rights of privacy . In Article 12 of The United Nations’ Universal Declaration of Human Rights, it states “No one shall be subjected to arbitrary interference with his privacy, family, home or correspondence, nor to attacks upon his honor and reputation. Everyone has the right to the protection of the law against such interference or attacks.”3

EWP assuages the quite significant objections many major law firms and international planners rightfully raise against certain aspects of the Common Reporting Standard (CRS).4  They are not seeking to hide client assets from tax authorities but do intend to protect their clients’ privacy, which is exactly what an EWP allows them to do.

With the Automatic Exchange of Information (AEol) under CRS beginning in 2017, serious questions are being raised by government bodies and stakeholders on the security of their clients’ financial information and violations of an individual’s fundamental right to privacy.5

In a number of countries throughout the world, kidnapping and extortion of wealthy families is a daily reality, and the planned AEol and proposed registers of beneficial owners can only be expected to increase this criminal activity.6  EWP greatly assists in protecting the privacy and well being of wealthy families by keeping the financial affairs of these families both private and in compliance with tax authorities.

 

Endnotes

  1. Internal Revenue Code Section 7702; See Kirk Loury, The PPLI Solution: Delivering Wealth Accumulation, Tax Efficiency, and Asset Protection Through Private Placement Life Insurance (2005); see also Lynnley Browning, “Tax-Free Life Insurance: An Untapped Investment for the Affluent,” The New York Times (Feb. 9, 2011).
  2. Wikipedia, Private Placement Life Insurance, https://en.wikipedia.org/wiki/Private_placement_life_insurance
  3. Also of interest is Section I, Article 8 of the EU Convention of Human rights: “1. Everyone has the right to respect for his private and family life, his home and his correspondence. 2. There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic wellbeing of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.”
  4. Andrew Knight and Anthony Markham, “Is there room for privacy planning in a tax–transparent world?” International Investment, 23 November 2016 http://www.internationalinvestment.net/opinion/room-privacy-planning-tax-transparent-world-maitland/ see also Caroline Garnham, “HNWIs, FATCA & CRS: Is Privacy Dead?” Private Client Hub,” 22 July 2016, http://theprivateclienthub.com/fatca-crs-privacy-dead/
  5. Filippo Noseda, “CRS and Beneficial Ownership,” Martindale.com, June 9, 2026, https://www.martindale.com/taxation-law/article_Withers-Bergman-LLP_2229788.htm
  6. Amy Bell, “A Guide To Kidnap & Ransom Insurance Coverage,” Investopedia, June 29, 2015, http://www.investopedia.com/articles/personal-finance/062915/guide-kidnap-ransom-insurance-coverage.asp see also United States Department of State, Bureau of Diplomatic Security, “OSDC Global Kidnapping Assessment, Oct. 31, 2013 http://purchasing.tamucc.edu/assets/Travel%20Forms/OSAC%20Kidnapping%20Report.pdf

 

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

Michael Malloy Contact Info