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 RFC
PPLI for Wealthy International Families
– Including Wealthy U.S. Families
PPLI’s Beautiful Architecture
Professor PPLI, in this Part we have a discussion of light and dark from different perspectives. How can this be relevant to PPLI asset structuring?
Imagine a typical flowchart that is used to depict a PPLI asset structure. On most flowcharts of this type, the PPLI policy box is located in the middle. Usually the owner, most often a trust, is above the PPLI policy box, and below are the various assets and holding companies necessary to complete the structure.
Let us now hear from physicist, Julian Scudder,
“Stars form light as a byproduct of the incredible pressures at their centers…. New stars only unveil themselves to our eyes by using the light they give off to burn away the dust and gas that hid them in darkness.”
Now back to our flowchart. Think of the PPLI policy box as a star at the center of the asset structure. The pressure in our analogy is the well-established insurance laws and regulations throughout the world which make these structures possible.
This PPLI policy box, now a newly formed star, gives off light to the other elements of the structure like the trust, assets, and beneficiaries so they can shine forth. All the elements then have the light they need to make the entire structure successful. This brings to mind the subtitle of our Part, PPLI’s Beautiful Architecture.
Professor PPLI, why did you include U.S. families in the title along with international families? Aren’t there domestic U.S. policies that can serve their needs?
If all a family’s assets are located in the U.S., they might consider using a U.S. product, but most often this would not work if they had unusual asset classes. Domestic U.S. PPLI companies structure their products as extensions of the standard retail Variable Universal Life products.
In most cases, a family is much better off using an offshore insurance company with a 953(d) election. Not only are fees lower, but the entire structure will put most families closer to their ultimate goal–to achieve the six elements of Expanded Worldwide Planning (EWP): privacy, asset protection, tax shield, succession planning, compliance simplifier, and trust substitute.
In our first answer we made an analogy between PPLI and the physical aspects of a star as it relates to light. Many advisors would find this analogy far fetch as most international tax advisors have little or no knowledge of the asset structuring possibilities of PPLI. Professor PPLI, please expand on this fact for us.
Quite true indeed. Attorneys, trust officers, and accountants are not offered any courses in PPLI asset structuring in their formal education, so they must encounter this outstanding tool later in their practices. Even when they do, they frequently reject it, because they are unaware of this variety of life insurance and equate PPLI with retail products.
This is not helped in the U.S. where a few major insurance companies do offer PPLI, but it is more of an extension of their retail products, as we mentioned in the second answer.
It takes a creative partnership between the various disciplines involved in a PPLI structure to accomplish the magic. When attorneys, asset managers, trust officers, accountants, and insurance advisors truly understand the dynamic asset structuring elements of PPLI, they can ride the exciting wave of what we call in the book the Unifying Factor.
Currently, when the very concept of wealth seems under attack from political parties, governments hungry for tax dollars, and worldwide governing bodies like the OECD, why not embrace the Unifying Factor. Families then can avail themselves of the six principles of Expanded Worldwide Planning (EWP) that we mentioned earlier. At Advanced Financial Solutions Inc., we endeavor to secure the Unifying Factor for each of our clients.
by Michael Malloy, CLU TEP RFC, @ Advanced Financial Solutions, Inc
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