Tax Compliant and Tax-Free Distribution Channel

Are you working with PPLI?

If you work with Private Placement Life Insurance (PPLI), at some point in a transaction you must address the issues of diversification and investor control. In the US context, code section 817(h) pertains to diversification and these Revenue Rulings for investor control: Rev. Rul. 77-85, 1977-1 C.B. 12; Rev. Rul. 82-54, 1982-1 C.B. 11; Rev. Rul. 2003-91; Rev. Rul. 2003-2 C.B. 347 (Jul. 24, 2003).

What if you were able to structure a policy that managed your clients’ assets in multiple jurisdictions throughout the world without any concern for diversification of investments and investor control issues? What if you could even include US persons in the structure and be in compliance with US tax law, and not be concerned with diversification of investments and investor control issues?

The PPLI policy would then become in effect a tax-free distribution channel for the client with multiple asset classes inside the policy. The assets would grow tax-deferred, and pass as a tax-free death benefit when the insured passes. (A technical discussion of diversification and investor control issues, as it relates to variable insurance contracts and PPLI in particular, is not in the scope of this brief article.)

Life insurance law of Barbados

At the heart of this structure is the simple and straightforward variable life insurance law of Barbados. We have produced the code sections of the Barbados code that are most relevant for international client structuring at the end of this article. These sections are remarkable for the few points that must be complied with to achieve a compliant policy.

Can real estate and ongoing businesses be included in these structures? Again, with proper planning and careful attention to structuring, the answer is definitely, “Yes.”

We welcome your brief client fact pattern, so we can show you what is possible. Our structures achieve tax savings and keep full compliance with tax authorities. If you are looking for structures that offer your clients privacy and still include tax compliance, our PPLI structures can be your solution. We welcome your inquiries.

An Act to revise the law regulating the carrying on of insurance business in Barbados in order to strengthen the protection given to policyholders; to increase the capital and solvency requirements of insurance companies; to expand the existing regulatory framework to include the regulating of all insurance intermediaries; and to give effect to matters related thereto.

(5) The Supervisor may attach such further conditions to the issue of approval under subsection (1) as are relevant to the nature and class of the variable insurance business that the insurer intends to carry on including
(a) requiring the insurer to disclose to any applicant for a policy any one or more of the following:
(i) a statement of the investment policy of any separate account maintained in respect of such variable insurance policy including a description of the investment objectives intended for the separate account and the principal types of investments intended to be made, and any restrictions or limitations on the manner in which the operations of the separate account are intended to be conducted;
(ii) any restrictions or limitations on the manner in which the operations of such variable insurance policy are intended to be conducted;
(iii) a statement of the charges and expenses in respect of such variable insurance policy;
(iv) a summary of the method to be used in valuing assets in respect of which benefits under such variable insurance policy are to be determined; and
(v) illustrations of benefits payable under the variable insurance contract;
(b) requiring that any material contract between an insurer and suppliers of consulting, investment, administrative, sales, marketing, custodial or other services with respect to variable life insurance operations shall be in writing and provide that the supplier of such services shall furnish the Supervisor with any information or reports in connection with the services which the Supervisor may request in order to ascertain whether the variable life insurance operations of the insurer are being conducted in a manner consistent with this Act, and any other applicable law or regulation;
(c) requiring the insurer to furnish, in such manner and at such times or intervals as may be prescribed, such information relating to the value of benefits under the policies as may be prescribed, whether by sending notices to the policy-holders or depositing statements with the Supervisor;
(d) requiring that the variable insurance policy be in a specific form or contain such mandatory provisions as may be prescribed in any regulations;
(e) requiring that the insurer maintain reserves in addition to any reserves which the insurer is required to maintain under this Act;
(f) restricting the descriptions of property or indices of value of property by reference to which benefits under the policy will be determined in accordance with the regulations prescribed for such purpose; or
(g) regulating the manner in which and frequency with which property of any description is to be valued, for the purpose of determining the benefits, and the times at which reference is to be made for that purpose to any index of value of property in accordance with the regulations prescribed for such purpose.

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

Michael Malloy Contact Info


Succession Planning

     PPLI, EWP and Succession Planning working together 


PPLI Offers the Following Advantages

  • Transfers assets without forced heirship rules
  • Transfers assets directly to beneficiaries
  • Transfers assets using a controlled and orderly plan


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.1  A PPLI policy purchased outside the home country of the owner or policy holder is one method to mitigate these forced heirship rules.2

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.3 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.”  Since a typical PPLI policy is executed outside the home country of the policy owner, the forced heirship laws do not apply, as the policy will be governed by the laws where the insurance company is domiciled.4

This element of Expanded Worldwide Planning (EWP) provides a wealth holder an excellent method to enact an estate plan that conforms to his/her own wishes, and not be dictated by the forced heirship rules of his/her home country.  To be successful this needs to be well-coordinated with all the aspects of a properly structure PPLI policy, as well as all the other elements of a wealth owner’s financial and legal planning.


  1. “Wikipedia Forced heirship,”
  2. Whelehan, “International Life Insurance: An Overview,” in International Life Insurance, edited by David D. Whelehan, JD (Chancellor Publications Limited, 2002) at 1.
  3. Christensen, Burke and Graves, Edward, McGill’s Legal Aspects of Life Insurance, (The American College Press 2008), at 1.3.
  4. supra note 2.


by Michael Malloy CLU TEP RFC, @ EWP Financial

Michael Malloy Contact Info