Q & A – PPLI Combines Beauty and Utility

Questions and Answers from the book “The Wit and Wisdom of Professor PPLI: How to Achieve Exceptional Asset Structuring with Private Placement Life Insurance”

~ by Michael Malloy, CLU, TEP

 

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PPLI Combines Beauty and Utility

 Let Us Learn from a Master Thinker

 Section 2, Part 4

 

Professor PPLI, in this Part the influential 20th century thinker, George Santayana, gives us his famous definition of beauty, and concludes:  “Beauty is therefore a positive value that is intrinsic; it is a pleasure.” How is this related to a PPLI asset structure?

His use of “intrinsic” reminds me of the nature of life insurance in a PPLI asset structure. Life insurance is the intrinsic element that makes this possible. Life insurance is a basic financial planning tool that is used in almost all countries throughout the world. PPLI is one variety of this well- recognized and accepted financial instrument. PPLI can become the intrinsic instrument to organize a families worldwide assets into a conservative and easy to understand structure.

At Advanced Financial Solutions, Inc. we are proud to be mentioned in the Wikipedia page for “Private Placement Life Insurance.” This is in the section entitled “Expanded Worldwide Planning.”

“There exist a number of structures that provide clients’ security from data breaches, erroneous government reporting, and the “blanket and indiscriminate nature of automatic exchange under CRS”. Among these structures, Expanded Worldwide Planning (EWP) is a concept that has emerged. It offers international families a framework that enhances privacy and asset protection within a flexible, open architecture platform.

For example, Advanced Financial Solutions, Inc. is one proponent of EWP. It is an element of international taxation created to implement directives from several tax authorities following the 2008 worldwide recession.

EWP gives privacy and compliance with tax laws. It also enhances protection from data breaches and strengthens family security. It 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.”

Advanced Financial Solutions Inc-Wikipedia

The 953(d) election is a major topic in this Part of the book. What are the essentials of this section of the U.S. tax code, and why is it significant for wealthy international families today?

The 953(d) election refers to Section 953(d) of the U.S. Internal Revenue Code (IRC). This is the section that allows a non-U.S. Insurance Company to make the election to be treated as a U.S. taxpayer. This election provides some very material benefits to both the insurance company and policyholders.

For the policyholder and beneficiaries, the insurance structure itself can be used to optimize income, capital gains and estate tax planning. Additionally, there is no withholding tax on U.S. investments as the company is U.S. person with a completed W-9 form.

The “953(d)” insurance company is treated as a domestic corporation by the U.S. government for tax purposes. The insurance company (not the policyholder) completes and submits the W-9 form to the bank, facilitating compliance with U.S. domestic custodians and paying agents. This makes the 35% withholding tax under FATCA a non-issue. The company is not subject to state or federal insurance law being an offshore provider. Finally, there is no requirement to file and maintain form 720.

Professor PPLI, we begin this Part with a famous line from Leonardo da Vinci, “Can’t beauty and utility be combined?” How does this relate to PPLI? 

Probably at least a few of you have taken the back off your laptop computer. At first sight, it is a confusing array of wires and computer chips that confounds the mind of one who knows nothing about computer hardware. This inside look into the device is in sharp contrast to the outside which is a sleek looking case of plastic with a keyboard.

To the uneducated advisor a PPLI asset structure might look like the inside of the laptop in our analogy. To the experienced advisor the finished asset structure is every bit as clean and well-order as the outside of the laptop, because all the various components in the structure function like a computer that is operating at peak performance.

For advisors to take a trust and marry it with many asset classes and beneficiaries, both of which may be spread out over many tax jurisdictions throughout the world, is a daunting task. Much like the inside of our laptop to the untrained eye. For those willing to learn, the benefits to wealthy international families are outstanding in comparison to the learning curve of international PPLI asset structuring.

Returning to Leonardo da Vinci, Yes, beauty and utility can be combined with PPLI into a single well-working structure that is compliant with all the tax jurisdictions that the policy supports. At Advanced Financial Solutions, Inc. this is our specialty.

 

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

Michael Malloy-CLU-TEP

 

 

 

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