Time On Your Side

PPLI Produces Longevity Through Time

The stability of Private Placement Life Insurance (PPLI) in structuring assets for wealthy international families is a creation of how we look at the element of time. PPLI relies on the laws and regulations of insurance. These laws and regulations in most countries have been in effect for a longer period of time and are less subject to change than the tax codes in these countries.

When a new trend emerges frequently people line up on either side of the topic: some being in favor and others opposing this new trend. One such new trend for wealthy international families are the various citizenship by investment programs that are being offered by many countries. We will explore this trend, but first more on the workings of how PPLI can assist in the structuring of assets.

How does the element of time enter the picture? How does it add the stability that is currently being sought in the whirlwind of change brought about by FATCA, CRS, and the Registers of Beneficial Ownership?

This topic came into the light when I was reading a book that used first person interviews with various subjects to make certain points. I found the interviews lacked depth. Not particularly because they were poorly conducted, but just the fact that when you meet someone for the first time it is not the same experience as knowing a person for a long time.

In other words, one cannot form a deep, lasting friendship with someone unless one has known this person over some longer period of time. We can call this aspect of time duration or longevity. This aspect of time produces in us a certain feeling of comfort, much like returning to a habitual routine after a period of absence from it.

When we structure the assets of a family, we wish to bring them the comfort of having–Time On Your Side: knowing that the next generation will inherit assets through a tax-free PPLI death benefit. This is accomplished by using the time-tested body of insurance laws and regulations throughout the world.

The Economist article, “Selling citizenship is big business–and controversial,”  is in part disparaging of citizenship by investment programs because they are relatively new phenomenon, and somewhat outside the regulation of individual governments. Here are a few excerpts:

“To meet the demand for long-term visas and passports, more and more countries are flaunting their attractions. About 100 offer a “residence by investment” programme. Over a dozen offer citizenship—including five Caribbean island-states, Vanuatu, Jordan and, within the EU, Austria, Cyprus and Malta.”

 

“The industry, however, is under a cloud. It is suspected of commercialising and trifling with rights and privileges that patriots regard as sacred; and of making life easier for crooks and terrorists.”

 

“For the European Union in particular, the issue is delicate. It touches on one of the most “national” of competences—who lives in a country and bears its passport—yet has Union-wide consequences. An EU-member-country’s passport is also an EU passport; a “Schengen” visa grants access to 22 EU members and four other countries.”

 

“Both the EU and the OECD, a club of rich countries, are looking leerily at CRBI schemes. Later this year, the European Commission, the EU’s executive, is to publish a report on those offered by EU members. The industry fears the worst.”

 

At Advanced Financial Solutions, Inc. we are eager to put Time On Your Side, and hope you will take advantage of our many PPLI structuring programs that operate worldwide. Please let us know how we can help you achieve your aims in the area of privacy and tax minimization.

 

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

 

Michael Malloy, CLU, TEP

 

 

 

 

The 80/20 Rule

The 20% Is Yours With PPLI

In terms of structuring assets for wealthy international families, Private Placement Life Insurance (PPLI) puts you at the top of your class.  What is top of your class? Let us apply the 80/20 rule.

Wikipedia gives us a brief history of the 80/20 rule.

The Pareto principle (also known as the 80/20 rule, the law of the vital few, or the principle of factor sparsity) states that, for many events, roughly 80% of the effects come from 20% of the causes.

Management consultant Joseph M. Juran suggested the principle and named it after Italian economist Vilfredo Pareto, who noted the 80/20 connection while at the University of Lausanne in 1896, as published in his first work, Cours d’économie politique.

Essentially, Pareto showed that approximately 80% of the land in Italy was owned by 20% of the population.

It is an axiom of business management that “80% of sales come from 20% of clients”. Richard Koch authored the book, The 80/20 Principle, which illustrated some practical applications of the Pareto principle in business management and life.

Expanded Worldwide Planning (EWP) is the overarching principle that our firm embraces that is becoming a new model for those who structure the assets of wealthy international families. If we define success as the 20% part of the 80/20 equation, what are these characteristics that assist in this success:

  • 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.

80/20 In Action

According to a recent report on CNBC, just three stocks are responsible for most of the market’s gain this year.  Amazon, Netflix, and Microsoft together are responsible for 71% of S & P 500 returns and for 78% of NASDAQ 100 returns.  Not quite 80/20, but the principal is there.

Now let see how the 80/20 plays out more personally in our daily lives. If you have had the experience of working closely with a group of people over a long period of time, you find out their strengths and weakness and your own. 

You find that that some do things well in some areas and not so well in others–and if you are honest with yourself–this applies to observations about yourself too.  So if we take the 80/20 rule as our guide, we are grouped into the 80% part or the 20% part, depending on the task or character trait that we are measuring.

Our firm must conduct diligent research to achieve the aims of the families that approach us for PPLI structuring. We must find the best possible way to give them the tax and enhanced privacy benefits that they seek. Our goal at the end of our research, is to place the family in the 20% part of the equation.

We wish to elevate you to the 20% through our rigorous and thorough PPLI structuring process. We invite you to contact us today so we can begin the process now.

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

 

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