PPLI for Wealthy Chinese Families

Works for Assets in Both East and West

Wealthy Chinese are not different from wealthy citizens in other parts of the globe in that they all seek to maximize tax efficiency and privacy wherever their assets are located.  Many wealthy Chinese lead dual lives in that they are subject to different laws for their assets inside China and those outside of China.

The concept of Expanded Worldwide Planning (EWP) coupled with a properly structured Private Placement Life Insurance (PPLI) can give these wealthy Chinese a vehicle to achieve tax efficiency and privacy, as well as complying with the dictates of the tax authorities in the different countries involved in their structures.

The beneficial owner of the assets in a properly structured PPLI policy is the insurance company. This greatly simplifies any reporting obligations to tax authorizes, because the assets inside the policy are held in segregated accounts, and frequently spread out over multiple jurisdictions worldwide.  The PPLI insurance company becomes the administrator of the assets and their beneficial owner. Because they are held in segregated accounts, they are not part of the insurance company’s balance sheet and are often placed in the hands of a custodian bank.

Most PPLI companies will accept any qualified institution to act as custodian, and any qualified asset manager to direct the investments in the segregated accounts.  This relationship between the owner of the policy, the insurance company, and the segregated accounts is codified in the laws of the various jurisdictions where PPLI insurance companies are located, and therefore lends viable commercial substance to such a structure.

Depending on the needs of the client, the PPLI policy can be joined to a trust or offshore foundation to achieve the families aims. In addition to tax benefits, trusts also allow beneficiaries to protect assets from creditors as the trust may be bankruptcy remote. For example, under a discretionary trust, settlor could be the protector and one of the beneficiaries. Therefore, the settlor may be able to be protected from creditors and benefit from the trust assets without owning them.

Using a private foundation is not only tax-wise but also helps in preserving and protecting assets and net wealth of a family. What is more is that a foundation opens up ways to avoid problems concerning formalities of a will, claims of spouses or other family members when dealing with an inheritance. One of the major benefits is that the death of a foundation founder does not have any impact on the situation of the foundation on both tax and other issues.

EWP can use trusts and foundations to own PPLI policies that can solve issues not possible with other planning tools.  We welcome your inquiries on how we can achieve for you tax compliance, tax efficiency, and privacy.


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

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