McDonalds and Stray Dogs

PPLI Gives Tax Relief

Incongruities can be resolved in both form and substance with Private Placement Life Insurance (PPLI). We frequently learn best from examples that jolt our minds into new understandings. When I was running recently in the park across from my hotel in Shanghai, I saw several stray dogs playing. They were having a marvelous time frolicking about on the lawn in between the beautiful, mature trees in the park.

These dogs had no sense that they were strays and thought of by humans as just common street dogs. In the international tax arena, strangely enough McDonalds has some connection to these dogs. We will explore this further in our article, but now back to #PPLI.

PPLI is of course a specialized form of life insurance, and when used properly fulfills the definition of life insurance in all respects. When used as a structure for wealthy international families, it acts more like a trust than traditional insurance.

This can make PPLI difficult to grasp for clients and advisors. If one starts from the six principles of Expanded Worldwide Planning (EWP), PPLI is seen in its true light: an excellent structuring tool for the assets of wealthy international families.

The six principles of EWP

 

Privacy  This is a key element. With FATCA, CRS, and Registers of Beneficial Ownership our clients are looking for ways to keep their affairs private, and still be compliant with tax authorities worldwide. But as you know, it takes study and constant attention to detail to create a proper structure.

 

Tax Shield  In high tax jurisdictions, a tax shield is important. Why pay more tax than is necessary? If there is a PPLI structure than can give you a tax-free environment wouldn’t it be desired by our clients?

 

Asset Protection  Asset protection is an element that almost all clients seek. Making their assets inaccessible to former spouses, creditors, and those seeking to claim them without legal authority. An excellently crafted PPLI structure can also accomplish this for them.

 

Succession Planning  Especially in jurisdictions that have forced heirship rules, succession planning is vital to clients. Most clients wish to distribute their assets according to their wishes and not according to a plan that they don’t agree with.

 

Compliance Simplifier  In today’s world attempting to hide assets only draws more attention to them. Most clients wish to be compliant with the world’s tax authorities, and at the same time keep as much privacy as possible. Finding our way in this maze of regulations is an important element.

 

Trust Substitute  In some jurisdictions, in particular, those that use civil law as opposed to common law, a trust substitute would be useful. Why create an entity that in the end will just be ignored by tax and legal authorities? Why not have a PPLI structure that works both in civil and common law jurisdictions?

 

We will now return to McDonalds and the stray dogs. We give you a few excerpts from Paul Caron’s New York Times article, “EU Ends Inquiry Into Luxembourg’s Tax Deal With McDonald’s.

“The European Union has sparred with multinationals like Apple and Amazon as well as countries such as Ireland in its efforts to curb tax avoidance. In the case of McDonald’s, it is standing down.

The European Commission, the bloc’s executive arm, had been examining whether a deal that Luxembourg granted to McDonald’s may have led to the fast food chain’s paying less tax than it owed. The commission said Wednesday that these deals did not constitute illegal state aid.

The profits under scrutiny had not been taxed in Luxembourg or the United States, according to the commission, but it said that this was a result of a mismatch between the countries’ tax laws rather than special treatment from Luxembourg, and that no rules had been broken. Still, Margrethe Vestager, the European Union’s competition commissioner, said that it was important that Luxembourg change its laws to ensure profits do not go untaxed regularly.”

“Of course, the fact remains that McDonald’s did not pay any taxes on these profits — and this is not how it should be from a tax fairness point of view,” Ms. Vestager said in a statement. “That’s why I very much welcome that the Luxembourg government is taking legislative steps to address the issue that arose in this case and avoid such situations in the future.”

McDonald’s and the government of Luxembourg welcomed the decision from the European Commission.

“We pay the taxes that are owed and, from 2013-2017, McDonald’s companies paid more than $3 billion just in corporate income taxes in the European Union with an average tax rate approaching 29 percent,” McDonald’s said in a statement.”

After carefully following the law, albeit to its own advantage, McDonalds is now cast as a stray dog–as something common and vagrant, certainly not something to be admired. But in one sense it was just being a smart tax payer, trying to pay as little tax as possible, but still following the law. One’s attitude toward McDonalds is, of course, determined by one’s own attitudes toward what is fair and good corporate behavior. Is McDonalds to be judged poorly or judged to be a smart tax payer?

At Advanced Financial Solutions, Inc. we carefully examine the laws and regulations of all the countries of the world, seeking ways to lower your taxes using PPLI. We hope you will join our lists of satisfied clients by seeking our advice on structuring your assets.

We seek to keep you compliant with the world’s tax authorities, and at the same time pay as little tax as possible. Contact us today for a free initial consultation.

 

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

 

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How PPLI Negotiates for You

World Leaders Teach EWP

Negotiating is at the heart of Expanded Worldwide Planning (EWP), and Private Placement Life Insurance (PPLI).  What can we learn from the much publicized negotiation between Donald Trump and Kim Jong Un? One thing is obvious about this meeting.  We don’t really know much. The most substantive talks were held in private between the two leaders. As the saying goes, “After all is said and done, more is said than done.”

So what we read in the press about this negotiation is mostly speculation and conjecture, and another part is supplied by our own attitudes towards these world leaders and their countries. This is precisely what is avoided in EWP.  By using a properly structured PPLI policy, we are able to build a plan on a strong foundation of knowledge.

A good part of this solid foundation is insurance regulations. These regulations tend to be simpler and more straightforward than the tax codes of the world’s countries, and supply many key benefits that are not allowed under tax codes.

One definition of negotiating from the Wiktionary is “To succeed in coping with, or getting over something.” This is why we can say PPLI NEGOTIATES FOR YOU. It allows you to succeed using the key elements of EWP: privacy, asset protection, succession planning, tax shield, compliance simplifier, and trust substitute.

How this ability to succeed in planning for wealth international families plays out in detail depends on the particulars involved: where the family reside; the tax codes of the countries where the various family members reside; the nationalities of these family members; the assets involved; and most importantly, the tax and estate planning aims of the family.  All these elements are part of a successful EWP engagement, and what our firm enjoys most–giving families the most cost efficient and comprehensive plan possible.

History of PPLI

In the various press stories on the Trump and Kim Jong Un negotiation are historical perspectives going back to Kim’s father and grandfather. This made us realize that we have never given you a history of PPLI. Here is a short one courtesy of Trusts & Estates by Grant R. Markuson.

“PPLI really began as a way of customizing specific types of insurance products as part of corporate benefit planning for senior executives. Although the rank and file employees may have been happy with the benefits of more typical insurance offerings, senior executives often desired greater investment options, lower fees, and greater overall customization. This, in conjunction with the growing use of variable contracts, led to the birth of individualized PPLI products. The Internal Revenue Service (Service) initially ruled on these types of customized variable products in a series of Revenue Rulings from 1977-1982.

 

In the early 1990s, PPLI products for wealthy individuals surfaced again out of the Channel Islands. Soon after that, Cayman Island and Bermuda based products started to surface. As the hedge fund industry started to pick up steam during this period, many of the products were being specifically developed for these investments. In the mid 1990s, many of the major U.S. and European carriers entered the international PPLI market, which brought this type of planning back into the mainstream.”

To bring our brief history up to the present, we find a robust appetite for PPLI and EWP at present with the fast paced growth of wealthy international families throughout the world. Using PPLI and EWP at the service of these families can achieve bespoke solutions not possible with other methods of international tax planning.

We welcome the opportunity to negotiate on your behalf and reach a successful result for all concerned. Thank you for your continued trust and support. Please give us your thoughts.

 

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

 

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Privacy Flows with EWP and PPLI

GO WITH THE FLOW

“Go with the flow” can have several meanings, and oddly enough, in the context of Expanded Worldwide Planning (EWP) it can pertain to privacy.  As our firm specializes in structuring for international clients using Private Placement Life Insurance (PPLI), we will discuss two recent news articles and how they relate to securing privacy, as well as full compliance, for families involved in international tax planning. The articles are interesting in themselves, and we have used them to make a few points related to our topic.

Because PPLI is issued under a variable universal life insurance contract, the insurance company becomes the beneficial owner of the assets inside the policy.  When reporting to the tax authorities of the jurisdictions involved with the policy, the insurance company becomes the owner of the assets inside the policy, even though the assets are held in separate accounts for the benefit of the owner of the assets.  It is the goal of EWP to secure as much privacy for clients that is allowable under law, and still be fully compliant with tax authorities worldwide.

Now back to our new articles and “going with the flow.” In a certain sense, the flow of information and the flow of wealth is akin to plumbing.  As long as things flow, in the direction intended there is not a problem.  When things begin to backup or flow in the wrong direction, we encounter problems.

Our first news article discusses the movement of families within the U.S. to states with no or little state income tax, and how the states that have high state income taxes like New York and California are unprepared for the loss of these tax dollars. The point is also made in the article that the states like Florida and Texas that are receiving the migrating families are also unprepared for the influx of new people in their states. In our analogy, we have a situation here where things are flowing in a direction that is not intended.

Here are a few of the salient points courtesy  of the Wall Street Journal by Arthur B. Laffer and Stephen Moore, “So Long, California. Sayonara, New York.” 

“Since 2007 Texas and Florida (with no income tax) have gained 1.4 million and 850,000 residents, respectively, from other states. California and New York have jointly lost more than 2.2 million.”

 

“As the migration speeds up, it will raise real-estate values in low-tax states and hurt them in high-tax states.”

 

“Despite its shrinking tax base, New York spends nearly twice as much on state and local government per person ($16,000) as does economically booming Tennessee ($9,000).”

Our second news article is about the flow of information, and a possible unintended consequence of regulating it. Perhaps the pipes have been put at the wrong angles, or in the wrong place?

Again, from the Wall Street Journal by Steve Rosenbush, “The Morning Download: Europe’s New Privacy Rule, in Unexpected Twist, Helps Facebook, Google.”

The main point of the article is contained in these two quotes:

“The EU will begin enforcing the General Data Protection Regulation, “which in many cases require companies to obtain affirmative consent to use European residents’ personal information,” the Journal’s Sam Schechner and Nick Kostov report

 

“Google and Facebook, using their scale and sophistication, “are applying a relatively strict interpretation of the new law, competitors say—setting an industry standard that is hard for smaller firms to meet,” the Journal reports.”

How does our discussion of “go with the flow” pertain to the benefits of using EWP and a properly constructed PPLI policy to provide privacy?  In the first article, the families were moving to save significant tax dollars.  Inside the privacy protection of PPLI, there is a similar movement, as the assets inside the policy, if structured correctly, are in a tax-free environment.  Like the families in question, they have gone from a high tax situation to a no tax situation–if they moved to Florida and Texas where there is no state income tax.

The new privacy regulations in the second article that favor companies like Google and Facebook show how laws change over time, and when the laws change, it affects the companies subject to the regulation.  One favorable element of using PPLI for structuring is that it is subject to the insurance regulations of the tax authorities involved in the policy structure.  Insurance regulation tends to be much more simple and straightforward than tax codes, and this greatly favors families in their planning.

The insurance codes in most countries are also less subject to change than the tax codes. Insurance is also considered a vehicle that benefits the whole society. EWP structures enjoy the simplicity that insurance affords.

Our firm is here to assist you in “going with the flow” in the right direction, so please let us know your needs, and so we can find out if your situation is right for EWP and PPLI.

 

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

 

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EWP for Tomorrow’s Movers and Shakers

PPLI for International Entrepreneurs

 International tax planning is best done before fortunes are made.  Rarely does this occur.  Our firm is fortunate to have a case where Expanded Worldwide Planning (EWP) is benefiting one such person.  By consolidating his worldwide holdings, which are in the startup phase, inside a properly constructed Private Placement Life Insurance policy (PPLI), we are securing these benefits for him:

  • All assets inside the PPLI policy receive tax deferral, not only investments, but business income too.
  • The assets pass tax-free to the beneficiaries named in the PPLI policy. In a properly structured policy one creates a tax-free environment for these assets. Assets can be located anywhere in the world.
  • Because life insurance is used, FATCA and CRS reporting is greatly simplified, and in some cases, is eliminated.
  • Families receive enhanced privacy, because the insurance company becomes the beneficial owner of the assets inside the PPLI policy.
  • The EWP structure provides excellent asset protection.
  • The EWP structure is low cost with fees averaging 1% of assets.
  • The EWP structure is fully compliant with the tax authorities of all tax jurisdictions.
  • Should an untimely death of the wealth creator occur, his family is protected with a tax-free PPLI death benefit.

Our client has businesses in natural resources, sports, gaming, trading, content management, and investments.  His enterprises are in the U.S., Europe, and Africa.  He is a U.S. Green card holder with residence status in the U.K., and travels with a passport from a third country.  His startup businesses only generate $2-3MU.S. annually with outstanding potential to grow to $5-10MU.S. in just a few years.  He is a perfect candidate for EWP planning, and coming to us at the most opportune time.

When you work in a field you sometimes take things for granted that are really quite extraordinary.  This is the case here.  I was having lunch with a friend a few days ago, and told him what our firm was doing for this client.  My friend was astonished and said, “This is a perfect fit.”

If you know additional “perfect fits” please let us know, and we can accomplish the same for them.  Thank you for your continued trust and support.

 

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

 

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The Pythagorean Theorem Revisited

PPLI+ Tax Treaty2  = EWP2

International tax planning must combine items from various disciplines to achieve a successful result.  We will take liberties with the Pythagorean Theorem to make our point. Tax codes do not have the exactitude of mathematical formulas, but international families must frequently combine several elements to achieve the desired results. The elements we will discuss are Private Placement Life Insurance (PPLI), Expanded Worldwide Planning (EWP), and international tax treaties.  We will have a short refresher on the Pythagorean Theorem later on, but no quiz!

In the Pythagorean Theorem once two sides are known, you can solve for the third side using the Theorem.

We wish to solve for EWP, so let us explore how tax treaties allow us to achieve a successful result in solving our equation. At the heart of EWP is a properly structured PPLI policy. The assets inside this policy can be anything that can held by a trust company. These assets can also be located anywhere in the world.  While these assets are inside this PPLI policy, all tax is deferred.  At the death of the insured life/lives under the policy, these assets pass tax-free to the beneficiaries of the PPLI policy.

According to the Wikipedia Tax treaty page, “The stated goals for entering into a treaty often include reduction of double taxation, eliminating tax evasion, and encouraging cross-border trade efficiency. It is generally accepted that tax treaties improve certainty for taxpayers and tax authorities in their international dealings.”

At Advanced Financial Solutions, Inc., we research jurisdictions that give wealthy international families the most benefits.  Let us site an example of a Chinese family, who invests in U.S. real estate through a real estate investment advisor.  Depending on their estate planning needs, the investment advisor can create a new fund as a PPLI or a Private Placement Variable Annuity (PPVA). The policy will be owned by a foreign trust established by the family.

All of the real estate income and gains within the annuity contract will not be subject to taxation or withholding taxes under Article 17 of the U.S. –People’s Republic of China Income Tax Treaty.

Using EWP and PPLI we have provided this Chinese family, tax compliance, tax efficiency, simplified reporting, and enhanced privacy.

I know those of you who enjoy math have been waiting for the return of the Pythagorean Theorem.  Here it is in its most simple form courtesy of Margaret Patterson of Dr. Math:

So if you are told that you have a right triangle whose sides are 3 and 4,
like this:

|\
| \             Then you can use this theorem to find out what the
3 |  \ c          third side is.
|   \           3*3 + 4*4 = 9 + 16 = 25 = 5*5, so c=5
|____\
4

Our firm enjoys solving your problems, so please give us one that can be solved using EWP and PPLI. 

We appreciate your continued trust and support.

 

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

 

 

 

 

Tax History and PPLI

EWP: The Past Comes Home to the Present

 With the current emphasis on tax transparency, we will briefly examine the history of taxation and how it correlates to our specialty:  how international families can pay less tax and still be compliant with tax authorities.  Expanded Worldwide Planning (EWP) uses a properly structured Private Placement Life Insurance (PPLI) policy to achieve this aim.

We show you this beautiful image of Hatshepsut’s temple in Egypt, because the first known records of taxation occur there. Of course, the modern tax codes of our time did not exist then, nor did PPLI.

In its best sense, governments tax their citizens to pay for services that they cannot easily provide themselves like roads, fire protection, and security. With our global economy and modern freedom of movement governments are now grappling with taxation issues for families and companies that span over the entire globe, not just within their borders.

We are a proponent of EWP which solves many issues for families by creating simple structures using PPLI that give tax savings, along with tax compliance. One aspect of our structures that give families these valuable traits is in-kind premium payments.  Since we use insurance companies based in jurisdictions that accept in-kind premium payments, families can contribute their companies in lieu of the usual cash that is required.

PPLI is a bespoke product that is tailored made for families.  Many asset classes can become tax-advantaged under this worldwide, tax-favored umbrella that we craft for them.  In the U.S. it is popular to use PPLI mainly for securities, mostly ones that can generate high taxes like hedge funds.  In using EWP for international families, we use structures that are flexible and easily adaptable to the worldwide holdings of these families. Since these structures usual contain multiple asset classes like companies, valuables, and collectibles, and not just securities.

Now back to the history of taxation.  Courtesy of Wikipedia , “Tax,” and “Taxation in the United States,” we give you some interesting facts to reflect upon:

–”The first known system of taxation was in Ancient Egypt  around 3000–2800 BC in the First Dynasty of Egypt of the Old Kingdom of Egypt.”

 

–”Records from the time document that the Pharaoh would conduct a biennial tour of the kingdom, collecting tithes from the people. Other records are granary receipts on limestone flakes and papyrus.”

 

–”Effective tax rates were higher in Britain than France the years before the French Revolution, twice in per capita income comparison, but they were mostly placed on international trade. In France, taxes were lower but the burden was mainly on landowners, individuals, and internal trade and thus created far more resentment.”

 

–”Historically, taxes on the poor supported the nobility; modern social-security systems aim to support the poor, the disabled, or the retired by taxes on those who are still working.”

 

–”The first federal income tax [in the United States] was adopted as part of the Revenue Act of 1861. The tax lapsed after the American Civil War. In 1913, the Sixteenth Amendment to the United States Constitution was ratified, permitting the federal government to levy an income tax on both property and labor.”

As the saying goes, “There is no certainty like death and taxes.”  We cannot assist you with the former, but if you are an international family and wish to explore how your holdings can become tax compliant by using PPLI, and at the same time have tax-deferral and a tax-free death benefit, we are here to assist you in this effort.

 

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

 

 

 

 

 

 

 

PFIC + subpart F + GILTI rules

PFIC + subpart F + GILTI rules = PPLI Opportunity 

A lot of acronyms to swallow!  Yes, the recently enacted U.S. tax reform legislation has been very unkind to those subject to these sections of the U.S. tax code.  Our good friend Private Placement Life Insurance (PPLI) in combination with Expanded Worldwide Planning (EWP) can soften, and in some cases, eliminate these taxes. We will discuss each of these tax rules separately, but first some basics on how you can achieve this success.

Distributions from a properly structured PPLI policy are distributions from a life insurance policy. Like all policies, both U.S. and issued in other jurisdictions around the world, the distributions are subject to the tax code sections that apply to life insurance.

In the U.S. context one can withdraw all basis in the policy, which are the premiums paid, tax free, and take very low cost loans to withdraw the remaining funds.  The costs of these loans is equivalent to an administrative charge, and is usually in the range of 25 bps. PPLI companies are most frequently found in Bermuda and Barbados, and have similar very friendly client access to the funds inside the policy.

The concept of a distribution is important, because a properly structured PPLI policy can hold many different types of assets, basically anything that can be hold by a trust company. More pointedly for our short blog, passive foreign investment company (PFIC) income and subpart F income can be structured inside a PPLI policy, and, therefore, shielded from tax.

It is not in the scope of this blog to discuss the technical tax aspects of these code sections, so we refer you to an excellent article by James Meadow CA, CPA (NC), LLM (US TAX), MBA published recently in Moodys Gartner Tax Law, “The US “Transition Tax” for 2017: More Sad News for Many US Citizens Residing Abroad,”

The article discusses tax from the standpoint of how it affects U.S. persons residing outside the U.S., but gives a very clear and cogent review of how PFIC holdings and those taxed under subpart F are treated under the new U.S. legislation.

The recent legislation has brought an increase in taxation for those who have subpart F income. Thus, we encourage those in this situation to explore using PPLI.  Using PPLI to shield PFIC income has been used for many years.

Section 951A gives us GILTI

The new U.S. tax legislation gives us a new section of the tax code, Section 951A. For those who have an interest in a controlled foreign corporations (CFC), particularly if they are not C corporation shareholders, there is a new opportunity to use a PPLI structure to shield this income from tax. Section 951A gives us global intangible low-taxed income (GILTI), which if held in other than a C corporation, has very unfavorable tax consequences that can be greatly mitigated by using PPLI.

We use the concept of Expanded Worldwide Planning (EWP) that allows income with unfavorable tax consequences to be reclassified as a distribution from a properly structured PPLI policy.

Your suggestions, comments, and questions are greatly appreciated. Thank you for your continued trust and support.

 

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

 

 

 

 

 

 

PPLI + EWP = Unique Benefits

Expanded Worldwide Planning (EWP)

If a tax authority wishes to tax something, two items of concern are what type of tax to apply and was the transaction done in its jurisdiction. In our internet age this is not always so easy to clarify.  Our embrace of Expanded Worldwide Planning (EWP) makes this process of classification of tax and location simpler.

At the heart of EWP is a properly structured Private Placement Life Insurance (PPLI) policy. The assets inside this policy can be anything that can held by a trust company. These assets can also be located anywhere in the world.  While these assets are inside this PPLI policy, all tax is deferred.  At the death of the insured life/lives under the policy, these assets pass tax-free to the beneficiaries of the PPLI policy.

The news items that gave birth to our thoughts we will discuss below.  But first some more about EWP and PPLI, and how it can streamline reporting obligations to tax authorities, and bypass the need to classify the type of tax that needs to be applied to the assets. As we stated above,all tax is deferred for assets inside a properly structured PPLI policy.

Further, for reporting purposes, the insurance company becomes the beneficial owner of the assets inside the policy.  For clients not seeking to hide assets, but seeking legitimate privacy, this is an added bonus for using EWP.

What to tax and where it is located?

 Our first news item we have quoted previously, and now use it to illustrate how a new tax entity is not so easy to fit into an existing tax code that was written before this new tax entity was even invented. The taxation of property and currency occupy different sections of a tax authorities code.

 Courtesy of Mateo Jarrin Cuvi of Taxlinked.net

“Israel’s tax authorities have decided to classify Bitcoin & other cryptocurrencies as property instead of currencies. How will this affect their taxation.”

Our next quote deals with the location of the item to be taxed, and nicely illustrates how this can be challenging to governments and tax authorities.

Courtesy of Brent Kendall and Nicole Hong of the Wall Street Journal

“High Court Grapples With Case of Emails Stored Abroad”

WASHINGTON—Supreme Court justices voiced concern Tuesday that Microsoft’s resistance to U.S. search warrants for customer emails stored overseas would hamper criminal investigations, in a case that pits leading tech companies against law enforcement.

The justices were reviewing a lower-court ruling Microsoft won in 2016 that clipped the Justice Department’s authority to obtain overseas emails. The battle dates back to 2013 when the U.S. got a warrant that ordered Microsoft to hand over messages in an email account that was linked to narcotics trafficking. Microsoft argued the warrant wasn’t valid because the emails were stored in Ireland.”

Wealthy international clients are looking for simple and compliant structures that also have privacy safeguards.  Using EWP with PPLI can give this to them.  Please let us know how we can assist you further with using these unique and straightforward structures.

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

 

 

 

 

 

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, @ Advanced Financial Solutions, Inc