#PPLI & #EWP FUNDAMENTALS
Did you know this about Private Placement Life Insurance and Expanded Worldwide Planning?
Private Placement Life Insurance (PPLI) In Action
EWP and PPLI: A Unity of Assets and Life Insurance
To truly appreciate what Private Placement Life Insurance (PPLI) can accomplish, you first must forget everything you currently know about life insurance. Yes, it is life insurance, but so radically different in cost and benefits, it has its own Wikipedia page, International Tax Planning.
On this page, you will read about the six principles of Expanded Worldwide Planning (EWP). We give you a short description of these six principles from the Wikipedia page later in this article.
First, let us list the key benefits of PPLI, so you can appreciate why Bloomberg said in a recent article:
“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.”
This is why Bloomberg is so excited about PPLI. In a properly structured policy:
- All cash value growth grows tax-deferred, and is paid out as a tax-free death benefit;
- No income taxes, and this includes capital gains tax;
- Ability to access the cash value through tax free loans;
- Adds asset protection and privacy;
- Limited reporting;
- Ability to avoid estate taxes;
- No surrender charges.
An outstanding singular feature that catapults PPLI above any other life insurance policy is that all asset classes can be placed in a policy:
- Real Estate/Physical assets
- Hedge Funds/Alternative Asset classes
- Private Equity
- Intellectual Property
- Art
- Yachts and Private Jets
- Alternative Currency denominations
Now let’s discuss the low-cost of this unique wealth structure tool. Depending upon the assets inside the policy, the total fees for a PPLI are 1-2% of the asset value in the policy. The cost of insurance charges are institutionally priced at the wholesale reinsurance company rates.
The death benefit is insured with these same reinsurance companies, the largest insurance companies in the world like Swiss Re and Munich Re with trillions of dollars in assets.
“To be eligible for a PPLI policy one must generally be what the SEC terms a Qualified Purchaser, having not less than $5M of investments. Most companies’ minimum premiums are also $5M.”
From the Wikipedia page, International Tax Planning, we give you the six principles which are making PPLI such a sought after wealth structuring technique.
Privacy
EWP gives privacy and compliance with tax laws. It also enhances protection from data breach and strengthens family security. EWP allows for a tax compliant system that still respects basic rights of privacy. EWP addresses the concerns of law firms and international planners about some aspects of CRS related to their clients’ privacy. EWP assists with the privacy and welfare of families by protecting their financial records and keeping them in compliance with tax regulations.
Asset protection
EWP protects assets with segregated account legislation by using the benefits of life insurance. This structure uses asset protection laws in the jurisdictions of residence to shield these assets from creditors’ claims. A trust with its own asset protection provisions can still receive additional protection with the policy.
Succession planning
EWP includes transfers of assets without forced heirship rules directly to beneficiaries using a controlled and orderly plan. This element of EWP provides a wealth holder a method to enact an estate plan according to his/her wishes without complying with forced heirship rules in the home country. This plan must be coordinated with all the aspects of a properly structured PPLI policy together with other elements of a wealth owner’s financial and legal planning.
Tax shield
EWP adds tax deferral, income, estate tax benefits and dynasty tax planning opportunities. Assets held in a life insurance contract are considered tax-deferred in most jurisdictions throughout the world. Likewise, PPLI policies that are properly constructed shield the assets from all taxes. In most cases, upon the death of the insured, benefits are paid as a tax free death benefit.
Compliance simplifier
EWP adds ease of reporting to tax authorities and administration of assets, commercial substance to structures. In addition, the insurance company is considered the beneficial owner of the assets. This approach greatly simplifies reporting obligations to tax authorities because assets in the policy are held in segregated accounts and can be spread over multiple jurisdictions worldwide.
Trust substitute
EWP creates a viable structure under specific insurance regulations for civil law jurisdictions. It also creates a new role for commercial trust companies. In most civil law jurisdictions, trusts are poorly acknowledged and trust law is not well developed. As a result, companies with foreign trusts in these civil law jurisdictions, face obstacles.
Conclusion
A PPLI asset structure is arguably the most efficient structure available today for wealthy families who wish a conservative and efficient structure to integrate tax-free investment growth, wealth transfer, and asset protection.
by Michael Malloy, CLU TEP RFC.
CEO, Founder @EWP Financial
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