The Zen of PPLI
Part 2
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 RFC, @ Advanced Financial Solutions, Inc
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