International Tax Planning & Trust Substitute-Part 2

International Tax Planning and Trust Substitute

Part 2

EWP (Expanded Worldwide Planning) and Trust Substitute

Private Placement Life Insurance (PPLI) in Action

A Stradivarius Violin Plays the EWP Super Trust

 

In Part 1 we spoke about how a beginner’s violin knows nothing of the deep, rich, and more pleasing tone of the Stradivarius violin. We equated the Stradivarius violin with the more sophisticated uses of asset structures that employ PPLI to its full effect. In Part 2 we will learn about the EWP Super Trust, which indeed uses the deep, rich, and more pleasing tone of the Stradivarius violin.

Ironically, the most simple PPLI structure, a Frozen Cash Value (FCV) policy, offers wealthy families the most advanced structuring possibilities available in the world today. A family can place almost any asset class that is located almost anywhere in the world into a FCV policy, and still have it compliant with tax authorities worldwide.

The FCV PPLI structure almost eliminates the concept of cash value in the traditional sense. The growth element of the assets in the policy is paid out as a tax-free death benefit at the death of the insured person(s) in the contract. The amount of the death benefit to qualify as life insurance is just a percent or two of the total assets contributed to the policy, as there must be a risk shifting element to qualify as life insurance under the laws of the jurisdictions who issue the policies.

The maximum the owner of the policy can withdraw is the total value of the premium contributed to the policy. This includes in-kind premiums. The structures that we create for the world’s wealthiest families have sizable premium contributions, frequently in the hundreds of millions and multiple billions. Therefore, if withdrawals from the policy are wished, there is plenty to withdraw. More frequently there are no withdrawals, as these families can accomplish what they wish inside the existing FCV PPLI structure.

Read full article in our Partner Site

Download PDF

 

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

Michael Malloy-CLU-TEP

 

 

 

 

 

 

 

 

 

 

International Tax Planning & Compliance Simplifier

Part 1

EWP (Expanded Worldwide Planning) and Compliance Simplifier

PPLI Keeps You Out of a Spider Web Structure

Download PDF

For most people a spider’s web is not a positive image. For this reason Expanded Worldwide Planning (EWP) uses a spider’s web as a symbol of an overly complicated asset structure with multiple entities and a confusing array of boxes and arrows. In its complexity, what we call a Spider Web Structure might look impressive to some, but the end result is summarized in three words: overcomplication, confusion, and uncertainty. Later on we will give you a detailed description of a Spider Web Structure.

We propose an alternative asset structure that we call an EWP Structure.

At the heart of an EWP Structure is a Private Placement Life Insurance (PPLI) policy which was born out of the necessity to achieve greater tax efficiency, privacy, and asset protection in one low cost structure with institutional pricing. A PPLI structure is made possible through the laws and regulations of life insurance. A much more stable and straightforward body of law than the more politicized tax laws and regulations worldwide.

READ FULL ARTICLE

DOWNLOAD PDF

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

Michael Malloy-CLU-TEP

 

 

 

#michaelmalloy #PPLI #privateplacement #lifeinsurance #advancedfinancialsolutions

 

 

 

 

International Tax Planning & Succession Planning-Part 2

EWP, (Expanded Worldwide Planning) and Succession Planning

Part 2

Private Placement Life Insurance (PPLI) in Action

PPLI: The Best Tool for the Job—Part 2

Download PDF

A PPLI policy is not a uniquely civil-or common-law creation. Its treatment in law is more uniform than planning solely with entities like trust, foundations, and LLCs. The unique design of a PPLI policy can greatly assist in a move between civil-and common-law jurisdictions.

This can be done without the requirement of a will or trust. Upon death of the insured person(s), the value of the PPLI policy plus any death benefit is paid directly to the beneficiaries listed in the policy, and separate from probate.

If a PPLI policy is held by an entity, such as a trust, that is compliant in the beneficiary’s country of residence, tax deferral and investment flexibility can still be preserved, even if the trust is disregarded as a foreign entity.

Gift and estate planning for life policies frequently involves establishment of a specially structured insurance trust for the benefit of a spouse and/or children and descendants. The trust acquires the policy with the premiums being contributed to the trust by the settlor/insured. In this manner, the death benefit would be paid to the trust free of estate taxes rather than going outright to the surviving family members after the payment of estate taxes.

PPLI policies also could invest in PFICs without creating adverse tax consequences. From a US perspective, US persons should generally be aware that most non-US collective investment vehicles will be classified as PFICs for US purposes and subject to adverse tax charges upon generating income and gains.

Unwelcomed Complexities by Country

The laws of succession and inheritance vary widely by country. By reviewing the laws of France, China, Russia, and Saudi Arabia, we give you a sampling of the complications faced by wealthy international families throughout the world. Image a family that might have family members and assets in several of these countries, and the daunting task of settling their estate.

France

Before the Napoleonic Code, France did not have a single set of laws; law consisted mainly of local customs, which had sometimes been officially compiled in “custumals” (coutumes), notably the Custom of Paris. There were also exemptions, privileges, and special charters granted by the kings or other feudal lords. During the Revolution, the last vestiges of feudalism were abolished.

France’s Napoleonic code dictates how your assets must be distributed on your death. The key points are:

  • For French residents, succession law applies to worldwide assets (excluding real estate outside France).
  • For non-residents, French real estate is subject to the succession law rules.
  • Assets do not automatically pass in accordance with your will.
  • Children are protected heirs, inheriting up to 75% of your estate.
  • Spouses are not automatically protected.
  • You can use the EU succession regulations, termed Brussels IV, to opt for the succession law of your nationality instead of French law.

Brussels IV has been in place since August 17, 2015. Its intention was to simplify issues relating to succession across the EU. The objective of Brussels IV is to ensure that only one country’s laws apply to the deceased’s estate. The laws of the country in which a person is habitually resident at their death will apply to them unless they have made a declaration during their lifetime.

Brussels IV gives residents in EU countries (with the exception of the UK, Denmark and Ireland) a single set of rules which govern the jurisdiction and applicable law in succession law matters. The new rules look primarily to the deceased’s place of habitual residence, but an individual may elect that his succession should be governed by the law of his nationality (whether or not he is a national of an EU member state). The new rules also introduced a European Certificate of Succession, aimed at facilitating the administration of cross-border estates.

China

Unlike common law countries, China possesses few legal instruments for processing a solid estate plan. But because China does not levy estate or inheritance tax, nor does it collect a gift tax, there is less demand for estate planning, which tends to focus on tax savings. However, family business succession is looming large in China, with many first generation entrepreneurs approaching retirement.

Under Chinese inheritance law, when a valid will is made, it is generally respected. So these estates pass to the beneficiaries designated in the will. When a person dies without having a valid will in place, the estate passes to heirs under the statutory succession rules.

China has a limited forced heirship regime under which dependents of the deceased are entitled to succession to the extent that they otherwise cannot support themselves, for example, those who are unable to work and have no source of income. As such, a family trust may be liable to forced heirship claims against trust assets.

Under the Chinese statutory succession rules, the first half of the estate is distributed to the spouse of the deceased as community property. The rest is distributed to the spouse, the parents and the children of the deceased in equal shares. The limited forced heirship regime cannot be avoided. All the assets, including those received by beneficiaries in other jurisdictions, are taken into account for the forced heirship regime.

For statutory succession purposes, the succession rules of the habitual residence of the deceased at the time of their death will apply, unless the asset is a real estate located in China where the Chinese succession rules will automatically apply. This can be avoided by making a will by the foreign national.

In the absence of a will, Chinese statuary succession rules apply to the deceased’s real estate in China even if the deceased is a foreign national. Chinese laws do not recognize the doctrine of renvoi. By invoking renvoi, the court could rule that the law of another country would be the most appropriate law to apply in this case.

There are no other taxes on death or lifetime gifts unless the gifts would be deemed as a transfer of assets, for example, gifts of shares or real estate between non-family members, in which case the individual income tax on deemed gains will be imposed on the transferor.

Russia

Russian inheritance laws cover everyone who is domiciled (i.e., has his or her usual place of living, but not necessarily his or her nationality) in the Russian Federation, and also covers everyone including foreigners who own property in the Russian Federation.

Minor and disabled children of any deceased person domiciled in Russia, disabled spouse and parents, and any disabled dependants of the deceased must inherit at least one-half of the share each of them is entitled to inherit by law, irrespective of any testamentary provisions.

There are two types of inheritance: testamentary inheritance (when there is a will of a deceased) and intestate inheritance (in the absence of a will of a deceased and in other statutory cases). The deceased’s estate incorporates the items and other property the deceased owned as of the date of the opening of the inheritance, including property rights and liabilities. Rights and liabilities inseparable from the personality of the deceased (e.g., rights to alimony), personal incorporeal rights and other intangible assets are not included in the estate.

If no provisions are made in prospect of death, a complex statutory order of intestate inheritance is applied to all persons covered by Russian inheritance law. The heirs-in-law (individuals only) include children of the deceased, his or her spouse and parents, brothers and sisters, other relatives and disabled dependants of the deceased.

The tax on the assets transferred through inheritance or donation that previously existed, was abolished effective January 2006. Alongside the abolishment of inheritance and gift tax, personal income tax applies in certain instances where individuals receive gifts.

In certain cases, individuals receiving income through inheritance may also be subject to personal income tax as a regular taxable income. There is no inheritance tax in Russia. There is no gift tax in Russia, although in certain cases personal income tax may be levied. There is no real estate transfer tax in Russia, although in certain cases personal income tax may be levied. There is no net wealth tax in Russia.

Russian tax residents are taxable in Russia on their worldwide income, generally, at a 13% tax rate (including, but not limited to, gifts in various forms and inheritance in special cases). For some types of income, such as dividends and material benefit, different tax rates are applied. Russian tax nonresidents are taxable only on their Russian source of income at a 30% tax rate on most types of taxable income (including, but not limited to, income earned in Russia).

There are currently no estate tax treaties between the Russian Federation and other countries.

Saudi Arabia

To understand the basis for Islamic inheritance law, you will need to be familiar with inheritance laws in Arabia pre-Islam. The sole inheritance was given to the asaba (male relatives) of the deceased. The surviving male relatives inherited in order of family position; the son superseded the father, the father superseded the uncles and so on.

Islam has kept the position of the male inheritance principals, but with slight modifications to give women more security. Pre-Islam men inherited, but were not required to care for the females in their families with the inheritance; Islam encourages the opposite. In Islamic Inheritance, the male inherits twice that of the female, but is encouraged to care for the single women in his family from it.

Inheritance between non-Muslims is governed by the will, which has to be registered with the Shariah Court, or witnessed by two adult Muslims. Non-Muslims cannot normally inherit from Muslims and vice versa, but if there is a will which applies to less than 30% of the estate, that portion of the estate can be transmitted across religious lines. There are no inheritance taxes in Saudi Arabia.

Saudi Arabia is governed by Shariah Law, which is a religious law that is based on the Quran and the teachings and practices of the Prophet Mohammed (the Sunna). It was borne out of the Islamic tradition governing all aspects of life. It regulates all of human activity, national and international, public and private, criminal and civil and is applied by courts.

Ultimately, Shariah Law has its own standards in resolving and enforcing sanctions on various cases. As such, in cases of estate settlement, inheritance and wills, certain rules apply. These cases take into consideration the allocation and distribution of shares/properties specified by the defendant or deceased to his family, company and others, following the rules of Shariah Law.

With regard to the law of inheritance, the Quran specifies that fixed portions of the deceased’s estate must be left to the so-called “Quranic heirs”. Generally, female heirs receive half the portion of male heirs. A Sunni Muslim can bequeath a maximum of a third of his property to non-Quranic heirs. The residue is divided between agnatic heirs.

Conclusion

Wealthy families frequently hold second passports, and have homes in foreign countries. Over time, family events like death, separation, and remarriage complicate estate plans. All of these factors can dissipate family assets.

Life insurance is recognized in almost every country worldwide as a safe, straightforward, and simple wealth transfer vehicle. The use of PPLI only adds to the benefits, since in a properly structured PPLI policy almost any asset can be held.

A PPLI policy passes assets directly to intended beneficiaries and keeps family wealth intact, giving families the maximum amount of privacy, asset protection, and tax efficiency. Contact us today to find out how your family can benefit from this unique blend of life insurance and asset structuring.

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

Michael Malloy-CLU-TEP

 

 

 

#michaelmalloy #PPLI #privateplacement #lifeinsurance #advancedfinancialsolutions

 

 

 

 

International Tax Planning & Succession Planning

Expanded Worldwide Planning, (EWP) & Succession Planning-Part 1

Private Placement Life Insurance (PPLI) in Action

PPLI Benefits International Family Wealth Transfer–Part 1

Background

Many countries, primarily in civil-law jurisdictions, require forced distribution of assets at death according to strict laws and regulations. This usually takes the form of percentage shares of assets that will be distributed to spouses, children, and other close relations of the deceased. A PPLI policy purchased outside the home country of the owner or policyholder is a method to mitigate these forced heirship rules.

The PPLI policy is a contract between the owner of the policy and the insurance company to pay the beneficiary of the policy the death benefit upon the death of the insured under the contract. A typical beneficiary provision of a life insurance policy states:

“Unless an alternate payment plan, acceptable to us, is chosen, the proceeds payable at the insured’s death will be paid in a lump sum to the primary Beneficiary. If the primary Beneficiary dies before the insured, the proceeds will be paid to the contingent Beneficiary. If no Beneficiary survives the insured, the proceeds will be paid to your estate.”

Read full article in our partner site

Download PDF

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

Michael Malloy-CLU-TEP

 

 

 

#michaelmalloy #PPLI #EWP #privateplacement #lifeinsurance #advancedfinancialsolutions

 

 

International Tax Planning & Tax Shield-2

PPLI with IDF vs. Other Real Estate Structures

View PDF IMAGE

International Tax Planning, (EWP), and Tax Shield-2

Private Placement Life Insurance (PPLI) in Action

The Hampton Freeze & Beyond–Part 2

The universality of Expanded Worldwide Planning (EWP) is not to be denied. This is objectified by Wikipedia. In the first sentence of their page on International Tax Planning, Expanded Worldwide Planning (EWP) is featured.

We are taking a cue from Wikipedia. Over the next few weeks, we will feature one of the six principles of Expanded Worldwide Planning (EWP). The six principles are: privacy, asset protection, tax shield, succession planning, compliance simplifier, and trust substitute. Today we feature the tax shield.

PPLI Benefits Non-U.S. Persons with Real Estate

There are many obstacles that non-U.S. persons face in investing in U.S. real estate. The primary tax impediments to foreign investment in U.S. real estate in general and in real estate funds specifically are U.S. income, capital gains and withholding taxes. Adding Private Placement Life Insurance (PPLI) in combination with trusts and LLC elements eliminates or mitigates U.S., withholding taxes, U.S. income and capital gains taxes, and estate taxes.

Read full article in our partner site

Download PDF

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

Michael Malloy-CLU-TEP

 

 

 

#michaelmalloy #PPLI #EWP #privateplacement #lifeinsurance #advancedfinancialsolutions

 

 

The EWP Da Vinci Code – Part 2

Expanded Worldwide Planning-EWP & Asset Protection

Private Placement Life Insurance (PPLI) in Action

The EWP Da Vinci Code–Part 2

 

The universality of Expanded Worldwide Planning (EWP) is not to be denied. This is objectified by Wikipedia. In the first sentence of their page on International Tax Planning, Expanded Worldwide Planning (EWP) is featured.

We are taking a cue from Wikipedia. Over the next few weeks, we will feature one of the six principles of Expanded Worldwide Planning (EWP). The six principles are: privacy, asset protection, tax shield, succession planning, compliance simplifier, and trust substitute.

Quiet Protection of PPLI

Today we feature asset protection. Life insurance’s role as a protector of assets is quite different from our nature documentary example of a hunter and its prey. This role is more akin to the method used by dogs and cats in saving the lives of their families.

Read full article on our partner site

Download PDF

 

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

Michael Malloy-CLU-TEP

 

 

 

#michaelmalloy #PPLI #EWP #privateplacement #lifeinsurance #advancedfinancialsolutions

 

 

 

 

Expanded Worldwide Planning-EWP and Asset Protection

Private Placement Life Insurance (PPLI) in Action

The EWP Da Vinci Code–Part 1

by Michael Malloy CLU TEP RFC

 

The universality of Expanded Worldwide Planning (EWP) is not to be denied. This is objectified by Wikipedia. In the first sentence of their page on International Tax Planning, Expanded Worldwide Planning (EWP) is featured.

We are taking a cue from Wikipedia. Over the next few weeks, we will feature one of the six principles of Expanded Worldwide Planning (EWP). The six principles are: privacy, asset protection, tax shield, succession planning, compliance simplifier, and trust substitute.

The EWP Da Vinci Code

Read the full article in our partner site

Download PDF

 

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

Michael Malloy-CLU-TEP

 

 

 

#michaelmalloy #PPLI #EWP #privateplacement #lifeinsurance #advancedfinancialsolutions

 

 

 

 

 

Excellent Recognition – EWP

We have not achieved the recognition of the Strahov Library in Prague, but we invite you to do an internet search on expanded worldwide planning.” This concept that we have championed for years is finally receiving the attention it deserves. Wealthy families around the world are now receiving the six principles of Expanded Worldwide Planning (EWP) through properly designed Private Placement Life Insurance (PPLI) policies.

We welcome your comments and questions.  All the best to you and your families in these trying times. Yes, it is difficult, but, as always, new opportunities are created in the midst of uncertainty and hardship.

Download PDF

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

Michael Malloy-CLU-TEP

 

 

 

#michaelmalloy #PPLI #privateplacement #lifeinsurance #advancedfinancialsolutions

 

 

 

 

Q & A – Fence = Privacy…Well Sort of

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

 

Get the book now!

See original article

Fence = Privacy…Well Sort of

Let PPLI Be Your First Defense

Section 2, Part 1

When it comes to the six principles of Expanded Worldwide Planning (EWP), few asset structuring tools work as well as PPLI for wealthy families throughout the world. Professor PPLI, how did this come to be?

You might describe this occurrence as a happy accident. The six principles of EWP came into their own after FATCA and CRS. With these two important changes in the planning landscape, wealthy families wished a more conservative and stable method in which to organize their financial holdings. Why not use a financial tool that has been around in different forms since 100 B.C.? This is, of course, life insurance.

PPLI delivers to  wealthy families all six principles of EWP: privacy, asset protection, tax shield, succession planning, compliance simplifier, and trust substitute. All these outstanding benefits in one low-cost and simple structure.

Professor PPLI, please tell us how the U.S. tax system can benefit wealthy clients throughout the world?

The tax system in the U.S. gives the individual states much independence in structuring their tax laws. In some ways, it can be compared to the cantons in Switzerland that were able to structure their laws to attract corporations from around the world to locate headquarters there. In the U.S. several states compete by designing favorable trust and tax laws that encourage wealthy families from around the world to move their financial assets to these states.

These states are most notable: South Dakota, Nevada, Delaware, Wyoming, and recently New Hampshire. In general the U.S. gives families stability with a strong rule of law that protects personal property. Also, since the U.S. is not a party to CRS there is limited reporting. With the favorable laws in these states coupled with a PPLI policy, the family has an excellent home for its worldwide holdings.

At Advanced Financial Solutions almost all our PPLI policies involve some sort of cross border situation. Professor PPLI, please tell us how these cross border planning situations are best approached.

Throughout the world governments pass new tax laws daily and its citizens and those who come under its jurisdiction must comply with these laws, or face certain penalties. Also, tax laws change frequently and how you must comply does not always translate into a simple answer or number on your tax return.

This is why at Advanced Financial Solutions Inc., we thoroughly research our PPLI structures, and make sure they comply with all the tax authorities involved in the locations of a client’s assets. Because a properly structured PPLI policy can hold almost any asset, this thorough research must be specific to the laws pertaining to this asset class.

For instance, some clients might wish to invest in an Australian security, or others have a private jet registered in a specific jurisdiction. We undertake this research at the beginning of the policy design to insure that it is fully compliant. Even operating businesses can be placed inside a PPLI policy with the proper structuring. This is all part of our unique method of asset structuring for wealthy families throughout the world.

 

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

Michael Malloy-CLU-TEP

 

 

 

#michaelmalloy #PPLI #privateplacement #lifeinsurance #advancedfinancialsolutions

 

 

 

 

 

PPLI Combines Beauty and Utility

Let Us Learn from a Master Thinker

Part 4

Download PDF

 Our next few articles will comprise an in-depth look at the five main components of our PPLI Concept Map: Professor PPLI meets Leonardo da Vinci.

Professor PPLI has landed, and repeats Leonardo da Vinci’s phrase, “Can’t beauty and utility be combined.” In a sense, Leonardo’s whole life was dedicated to these words. At Advanced Financial Solutions, Inc. we strive to follow in Leonardo’s footsteps in creating PPLI structures for wealthy families that give the best possible combination of privacy, tax savings, and compliance with tax authorities worldwide.

Let us first explore beauty. Beauty has many levels. At the highest level beauty embodies our finest aspirations. On a more mundane level, it comes closer to what makes us experience joy in our everyday lives.

Those of us who create Private Placement Life Insurance (PPLI) asset structures for wealthy clients can find beauty in a well-designed structure that is implemented successfully to achieve the aims of privacy, asset protection, and tax reduction. It is a type of architecture or engineering that uses laws, concepts, and ideas and blends them with the family dynamic and country specific challenges of each highly individual case.

George Santayana, the influential 20th century thinker, gives us his famous definition of beauty from The Sense of Beauty.

“We have now reached our definition of beauty, which, in the terms of our successive analysis and narrowing of the conception, is value positive, intrinsic, and objectified. Or, in less technical language, Beauty is pleasure regarded as the quality of a thing. … Beauty is a value, that is, it is not a perception of a matter of fact or of a relation: it is an emotion, an affection of our volitional and appreciative nature. An object cannot be beautiful if it can give pleasure to nobody: a beauty to which all men were forever indifferent is a contradiction in terms. … Beauty is therefore a positive value that is intrinsic; it is a pleasure.”

The PPLI Reality Check

We all know what one person or cultural might call lovely and beautiful does not always translate to another culture. We see this when we travel to countries that have cultures, traditions, and objects quite different than our own.

This idea mirrors the many different ways that PPLI is implemented throughout the world. What works in one country, or set of circumstances, does not work in another. Through research into the tax codes and insurance regulations of all the countries and entities involved must be commenced at the very beginning of each PPLI case that comes to us.

In Part 3 of our Concept Map we made no mention of the fairy who introduced the topic of beauty. Hans Christian Andersen, the great Danish writer of fairy tales tells us, “The most wonderful fairy tales grow out of that which is reality.”

This embodies the reverse of what happens at Advanced Financial Solutions, Inc. When you first come and tell us what you wish to gain by using our services, all the facts are somewhat a fairy tale, in that we don’t know if our type of structuring will work for you. Only after a detailed review of your situation, can we say with confidence, if it achieves the “reality” of a proper PPLI structure.

This detailed review, or reality check, is done at no cost to you. We wish to partner with you on a truly bespoke PPLI structure that achieves as many of the elements of Expanded Worldwide Planning, EWP as possible. These elements are privacy, asset protection, tax shield, succession planning, compliance simplifier, and trust substitute.

Details of the 953(d) Election

Now, as we promised you in Part 3, here is more detail on the 953(d) election. What is the difference between foreign and domestic insurance? In this context, we are speaking about U.S. based insurance companies as the domestic ones.

Domestic life insurance is state regulated in the U.S.. Policyholders and carriers can transact and negotiate only in the state where the carrier is licensed. The choice of investments is relatively limited, often in-house company funds only, with associated higher costs, sometimes much higher. Commissions can represent a fairly large proportion of the paid-in premium.

Foreign life insurance is regulated by the jurisdiction of the country of domicile. i.e., that countries’ financial regulator. Investment risk for variable policies is borne solely by the policyholder. The policyholder has much more flexible options, the cost of insurance is significantly much lower as the policyholder pays just the pure re-insurance cost, and brokers are paid a small percentage fee, similar to an asset management fee. In short, tax deferral remains assured, asset protection is tighter, privacy is greater, costs are lower, investment flexibility is greater and its fully compliant. At the private banking level, offshore insurance is a no-brainer.

The “953(d)” Insurance Company

The 953(d) 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 insurance company and policyholders.

As a U.S. taxpayer, the insurance company can invest in assets located anywhere in the world, including the U.S. and Europe. Through the policy structure, the policyholder and/or the beneficiaries can legally defer income tax and capital gains tax. Assets within the policy are paid to the beneficiaries as a tax free death benefit when the insured passes. Regardless of the location of those assets; U.S., Europe, Asia, the insurance company does not engage in trade and business in the U.S. and is not subject to state insurance laws.

Tax

The “953(d)” insurance company pays U.S. federal income tax on its worldwide income, it has therefore a US tax ID number, a “TIN”.  Moreover the policyholder is exempt from the 1% federal excise tax on premium payments as the company is treated as domestic, plus there is no state insurance premium tax.  There is no withholding tax on U.S. source dividend income. There is a U.S. DAC tax that must be paid, but it is lower than the 1% FET, currently it is 70 basis points.

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.

Legal & Compliance

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.

Combining Beauty and Utility

How did Leonardo combine beauty and utility? One need go no further than his notebooks. In her New Yorker review of Walter Isaacson’s biography of Leonardo da Vinci, “The Secret Lives of Leonardo da Vinci,” Claudia Roth Pierpont conveys beautifully the magic of Leonardo’s notebooks.

“These drawings are part of a vast treasury of texts and images, amounting to more than seven thousand surviving pages, now dispersed across several countries and known collectively as “Leonardo’s notebooks”—which is precisely what they were.

Private notebooks of all sizes, some carried about for quick sketches and on-the-spot observations, others used for long-term, exacting studies in geology, botany, and human anatomy, to specify just a few of the areas in which he posed fundamental questions, and reached answers that were often hundreds of years ahead of his time. Why is the sky blue? How does the heart function? What are the differences in air pressure above and beneath a bird’s wing, and how might this knowledge enable man to make a flying machine? Music, military engineering, astronomy. Fossils and the doubt they cast on the Biblical story of creation.

“Describe,” he instructs himself, “what sneezing is, what yawning is, the falling sickness, spasm, paralysis, shivering with cold, sweating, fatigue, hunger, sleep, thirst, lust.” He intended publication, but never got around to it; there was always something more to learn. In the following centuries, at least half the pages were lost. What survives is an unparalleled record of a human mind at work, as fearless and dogged as it was brilliant.”

We attempt to be fearless and dogged in pursuit of the perfect PPLI structure for you. Please let us know how we can serve you to this end. Thank you for your continued trust and support.

 

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

Michael Malloy-CLU-TEP

 

 

 

 

 

 

 

#michaelmalloy #PPLI #privateplacement #lifeinsurance #advancedfinancialsolutions