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

 

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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, @ Advanced Financial Solutions, Inc

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The True Value of Zero = Privacy

Professor PPLI Explains Zero

Part 1

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Our next few articles will comprise an in-depth look at the five main components of our PPLI Concept Map: Professor PPLI Defines Nothing. We also offer you over the next five Parts, “She Was Good For Nothing,” by Hans Christian Andersen. This charming fairy tale supports our theme of nothing.

Zero is a powerful number. Any number multiplied by zero becomes zero. Yet, zero is also nothing. How does this nothing relate to the topic of our using of Private Placement Life Insurance (PPLI) to structure the assets of wealthy families? Unless you understand how PPLI works with the six principles of Expanded Worldwide Planning (EWP), you will understand  nothing about PPLI. PPLI makes these six principles come alive like nothing else in the realm of asset structures.

First, we will explore the concept of nothing from a mathematical  perspective, then move on to its relationship to EWP, and conclude with how this all relates to one of the six principles of EWP, privacy.

The Power of Zero

Doctor Ian at the Math Forum demonstrates how multiplying any number by zero equals zero.

“1 * 0 = 0

27 * 0 = 0

1,887,457,234,543,243,113,946 * 0 = 0

When you multiply one number by another, you can think of starting at some point (‘the spot marked X’, or wherever) and moving some distance away from it. To move, you need to know two things:

  1) how many steps you’re going to take

  2) how big each step will be

Now, if each step is of zero size, then you can keep taking them, and you’ll never move anywhere. (Move a step of length zero. You’re still where you started. Do it again. Still there. Keep doing it… how many of those steps will you have to take to actually move somewhere?) So any number times zero is still zero.

Also, if you’re not going to take any steps, it doesn’t matter how large a step you would take, since you’re not going to take it. So zero times any number is still zero.”

For our exploration of zero in the world of PPLI tax structuring, we can think of zero as the actual insurance policy that holds a family’s assets in separate accounts in the name of a custodian such as a trust company, which will be in the name of the beneficial owner of the assets–the insurance company. The assets do not change, but how they are structured changes.

Since you can place almost any asset that can be held by a trust company into a PPLI policy, the insurance policy acts like the empty box that we use to explain the concept of zero. The empty box is an abstraction, yet like the PPLI policy, it is the vehicle that can help achieve the six principles of EWP for wealthy families.

Brian Resnick’s article, “The mind-bendy weirdness of the number zero, explained,” on Vox gives us:

Zero is in the mind, but not in the sensory world,” Robert Kaplan, a Harvard math professor and an author of The Nothing That Is: A Natural History of Zero says. Even in the empty reaches of space, if you can see stars, it means you’re being bathed in their electromagnetic radiation. In the darkest emptiness, there’s always something. Perhaps a true zero — meaning absolute nothingness — may have existed in the time before the Big Bang. But we can never know.

Nevertheless, zero doesn’t have to exist to be useful. In fact, we can use the concept of zero to derive all the other numbers in the universe.

Kaplan walked me through a thought exercise first described by the mathematician John von Neumann. It’s deceptively simple.

Imagine a box with nothing in it. Mathematicians call this empty box “the empty set.” It’s a physical representation of zero. What’s inside the empty box? Nothing.

Now take another empty box, and place it in the first one.

How many things are in the first box now?

There’s one object in it. Then, put another empty box inside the first two. How many objects does it contain now? Two. And that’s how “we derive all the counting numbers from zero … from nothing,” Kaplan says. This is the basis of our number system. Zero is an abstraction and a reality at the same time. “It’s the nothing that is,” as Kaplan said.”

Since  we are exploring zero as an abstract concept, we will put it to another use below when we discuss privacy. In a sense everything can only be defined through its relationships with other elements and factors. Not wishing to be alone in stretching our meanings too far let us hear from Humpty Dumpty and Alice in Lewis Carroll’s Alice in Wonderland.

“When I use a word,” Humpty Dumpty said, in rather a scornful tone, “it means just what I choose it to mean—neither more nor less.” “The question is,” said Alice, “whether you can make words mean so many different things.” “The question is,” said Humpty Dumpty, “which is to be master—that’s all.”

How Zero = Privacy?

Now let us equate privacy with Mr. von Neumann’s first box above. Remember this first box is described as an “abstraction and a reality at the same time.” This can equally be said of a term like privacy. Privacy can be defined in the abstract, but it is how it is interpreted in reality that counts.

In many jurisdictions, privacy is considered a fundamental principle. In the U.S the right to privacy is stated in the Fourth Amendment to the U.S. Constitution:

“The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.”

A right to privacy is explicitly stated under Article 12 of the 1948 Universal Declaration of Human Rights issued by the United Nations General Assembly:

“No one shall be subjected to arbitrary interference with his privacy, family, home or correspondence, nor to attacks upon his honor and reputation. Everyone has the right to the protection of the law against such interference or attacks.”

Caroline Garnham of Garnham Family Office Services in London writes with clarity and understanding about issues affecting wealthy clients. What follows is a telling description of a government’s thirst for tax dollars trampling on its citizens fundamental privacy rights. These are excerpts from her article, “It isn’t fair? Part 3.” How is “tax fairness” playing out in Great Britain today? This article relates recent incidents and key players in the drama.

“Edward Troup, now Sir Edward Troup was appointed Executive Chair and Permanent Secretary to HMRC in April 2016, for which he was knighted in the 2018 new year’s honours list. He was the former head of the firm’s tax department and the most brilliant brain I have ever encountered.

‘Tax law does not codify some Platonic set of tax raising principles. Taxation is legalised extortion and is valid only to the extent of the law’ – a point of with which I concur.

We have tightened our grip on those who deliberately cheat the system and continue to pursue those who refuse to pay what they owe.’

But the question now is, has HMRC gone too far?

The House of Lords Economic Affairs Committee, EAC, published its findings in December 2018, and thinks so!

A ‘careful balance must be struck between clamping down and treating taxpayers’ fairly. Our evidence has convinced us that this balance has tipped too far in favour of HMRC and against the fundamental protections every taxpayer expects.’

In 2000 some employers set up Employee Benefits Trusts for their employees.

This arrangement was considered effective in avoiding tax.

In 2010 HMRC warned that such arrangements were unacceptable, and that those who used such an arrangement had to repay the loan, pay the tax or face fines.

It is clear from what has already been published that the information to be received by HMRC this year from offshore financial institutions under the Common Reporting Standard once analysed will be used to attack settlors of offshore trusts. The first such attacks are expected in about six months.

HMRC has said that it will first go for well-known names with significant assets in trust. It has been advised to attack structures which have Persons of Significant Influence on the basis of sham. It will then look very closely for clauses in the Trust Deed once provided absolving the Trustee from any form of liability and duty to interfere. This it will take as further evidence that the Trust was nothing more than a nominee arrangement and tax the settlor as if no trust had been set up together with 200% penalties.”

Part 1 of “She Was Good For Nothing” by Hans Christian Andersen:

 “The mayor was standing at his open window; he was wearing a dress shirt with a dainty breastpin in its frill. He was very well shaven, self-done, though he had cut himself slightly and had stuck a small bit of newspaper over the cut.

“Listen, youngster!” he boomed.

The youngster was none other than the washerwoman’s son, who respectfully took off his cap as he passed. This cap was broken at the rim, so that he could put it into his pocket. In his poor but clean and very neatly mended clothes, and his heavy wooden shoes, the boy stood as respectfully as if he were before the king.

“You’re a good boy, a well-behaved lad!” said the Mayor. “I suppose your mother is washing down at the river, and no doubt you are going to bring her what you have in your pocket. That’s an awful thing with your mother! How much have you there?”

“A half pint,” said the boy in a low, trembling voice.

“And this morning she had the same?” continued the Mayor.

“No, it was yesterday!” answered the boy.

“Two halves make a whole! She is no good! It is sad there are such people. Tell your mother she ought to be ashamed of herself. Don’t you become a drunkard-but I suppose you will! Poor child! Run along now.”

And the boy went, still holding his cap in his hand, while the wind rippled the waves of his yellow hair. He went down the street and through an alley to the river, where his mother stood at her washing stool in the water, beating the heavy linen with a wooden beater. The current was strong, for the mill’s sluices were open; the bed sheet was dragged along by the stream and nearly swept away her washing stool, and the woman had all she could do to stand up against it.

“I was almost carried away,” she said. “It’s a good thing you’ve come, for I need something to strengthen me. It’s so cold in the water; I’ve been standing here for six hours. Have you brought me anything?”

The boy drew forth a flask, and his mother put it to her lips and drank a little.

“Oh, that does me good! How it warms me! It’s just as good as hot food, and it isn’t as expensive! Drink, my boy! You look so pale, and you’re freezing in your thin clothes. Remember it is autumn. Ooh, the water is cold! If only I don’t get ill! But I won’t. Give me a little more, and drink some yourself, but only a little drop, for you mustn’t get used to it, my poor dear child!”

And she walked out of the water and up onto the bridge where the boy stood. The water dripped from the straw mat that she had tied around her waist and from her petticoat.

“I work and slave till the blood runs out at my fingernails, but I do it gladly if I can bring you up honestly, my sweet child!””

We hoped you enjoyed this article and the beginning of Hans Christian Andersen’s fairytale. Nothing turns out to be an exciting topic for us, and we will continue our lively topic in the next four articles. Please bring us your PPLI questions and inquiries. We enjoy all opportunities to discuss our favorite topic, and bring you an asset structuring tool that offers so many exceptional benefits. Contact Us!

 

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

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Fence = Privacy–Well Sort of

Let PPLI Be Your First Defense

Part 1

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

These two neighbors are discussing a new tax law in their fenced backyard. Private Placement Life Insurance (PPLI) is a well-established, yet conservation ring fence for your assets. Once assets are structured properly in a PPLI policy, the insurance company becomes the beneficial owner of the assets.

According to Investopedia, “a ring fence is a protection-based transfer of assets from one destination to another, usually through the use of offshore accounting. A ring fence is meant to protect the assets from inclusion in an investor’s calculable net worth or to lower tax consequences.”

This definition reveals the etymology of the word fence. The Online Etymology Dictionary tells us that in the 14th century the word fence was used as an “action of defending, resistance; means of protection, fortification.”

The advantage of an insurance ring fence is that life insurance is a common structuring tool and is used by millions around the world to provide financial security.

Now back to our two neighbors. In our scene the barbecue is pouring out smoke, and smoke can mean trouble. Indeed, it is black smoke which reminds us of a passage at the beginning of Charles Dickens’s Bleak House. We will visit Charles Dickens’s London later on, where Dickens uses fog as a metaphor for the decrepitude of polluted London in the mid-19th century. Indeed, Dickens’s London was a mixture of both fog and smoke during much of the year.

In the context of our story, smoke, whether foul or benign, can easily escape a fenced backyard. Smoke is subject to wind currents, and other atmospheric elements. PPLI structures use a “smoke free” strategy. One that is not subject to the vagaries of the weather.

A properly structured PPLI policy is a ring fence that gives wealthy clients’ assets an airtight chamber. Inside this chamber the six principles Expanded Worldwide Planning (EWP) breathe clean air with no pollutants. The six principles of EWP are: Privacy, Asset Protection, Succession Planning, Tax Shield, Compliance Simplifier, Trust Substitute.

Imagine the scene in our panel taking place anywhere in the world. A government passes a new tax law and its citizens must compile with it, or face certain penalties. Tax laws change frequently and how you must compile–how much tax you must pay under the new law–does not always translate into a simple answer or number on your tax return. This is why we thoroughly research our PPLI structures, and make sure they compile with all the tax authorities involved in the locations of a client’s assets.

Let us back up briefly and visit an excellent basic description of PPLI.

Al W. King III, left, and Pierce McDowell III, are co-founders of the South Dakota Trust Company, LLC in Sioux Falls, S.D. We give you the opening paragraphs from their Trusts & Estates article, “Powerful Private Placement Life Insurance Strategies With Trusts.”

“What is PPLI?

PPLI is essentially a flexible premium variable universal life (VUL) insurance transaction that occurs within a private placement offering. The private placement component adds extensive flexibility to the VUL product pricing and asset management offerings. Because PPLI is sold through a private placement memorandum, every situation can be individually negotiated and custom designed for the client. PPLI can be for single life or survivorship and is offered only to an accredited investor.

PPLI has both a death benefit and a cash value (that is, investment account) and is generally designed to maximize cash value and minimize death benefits. Consequently, PPLI is usually designed as a non-modified endowment contract (non-MEC) policy, with four to five premiums versus a single premium policy (that is, a MEC). In this way, cash values can be accessed tax-free during an insured’s lifetime.

The PPLI cash value is generally invested among a variety of available registered and non-registered fund options (that is, hedge funds, private equity (PE) and other alternative investments).”

From Cole Porter we give you a different aspect of a fence: one that constricts and prevents the innovative structuring techniques that are possible with PPLI. The mystique of the American cowboy roaming the vast open spaces of the western U.S. comes alive in this popular song from the 1930s, Don’t Fence Me In,” courtesy of Warner/Chappell Music, Inc..

“Oh, give me land, lots of land under starry skies above

Don’t fence me in

Let me ride through the wide open country that I love

Don’t fence me in

Let me be by myself in the evenin’ breeze

And listen to the murmur of the cottonwood trees

Send me off forever but I ask you please

Don’t fence me in

Just turn me loose, let me straddle my old saddle

Underneath the western skies

On my Cayuse, let me wander over yonder

Till I see the mountains rise

I want to ride to the ridge where the west commences

And gaze at the moon till I lose my senses

And I can’t look at hovels and I can’t stand fences

Don’t fence me in

Oh, give me land, lots of land under starry skies

Don’t fence me in

Let me ride through the wide open country that I love

Don’t fence me in

Let me be by myself in the evenin’ breeze

And listen to the murmur of the cottonwood trees

Send me off forever but I ask you please

Don’t fence me in

Just turn me loose, let me straddle my old saddle

Underneath the western skies

On my Cayuse, let me wander over yonder

Till I see the mountains rise

Ba boo ba ba boo

I want to ride to the ridge where the west commences

And gaze at the moon till I lose my senses

And I can’t look at hobbles and I can’t stand fences

Don’t fence me in

No

Poppa, don’t you fence me in”

We now travel back to London for a discussion of privacy and data protection. This subject is key to the debate about tax that is taking place on the world’s stage. What our two neighbors are discussing in their backyard is an important topic for governments and those that advise wealthy clients. Caroline Garnham is a London attorney, who heads the firm of Garnham Family Office Services, and is one of our favorite writers on this subject.

First, we give you Dickens’s memorable depiction of foggy London.

“Fog everywhere. Fog up the river, where it flows among green aits and meadows; fog down the river, where it rolls defiled among the tiers of shipping and the waterside pollutions of a great (and dirty) city. Fog in the eyes and throats of ancient Greenwich pensioners, wheezing by the firesides of their skipper, down in his close cabin, fog cruelly pinching the toes and fingers of his shivering little ‘prentice boy on deck. Chance people on the bridges peeping over the parapets into a nether sky of fog, with fog all round them, as if they were up in a balloon and hanging in the misty clouds.”

Was Tony Blair right second time?

Is privacy and data protection a good thing or not?

Should there be a public register of what you own? Would you like your neighbours, friends, children and employees knowing precisely what you own; properties, businesses, pensions and bank accounts? Why not – if you have nothing to hide?

Tony Blair, is on record as saying that one of his greatest regrets had been his own Freedom of Information Act. Why because in his view ‘information is neither sought because the journalist is curious to know, nor given to bestow knowledge on ’the people’. ‘It is used as a weapon’.

To protect his privacy once he left office and started to make money, he erected barriers to prevent an accurate assessment of his wealth His income was channelled through a complicated legal structure. At the top was BDBCO No.819 Limited a company called either Windrush or Firerush. Windrush Ventures No.3 LP was part owned by Windrush Ventures No.2 LP which in turn controlled Windrush Ventures Ltd. The scheme’s advantage was that the LPs, or limited partnerships, were not obliged to publish accounts. Even without public registers and the protection of limited partnerships, Tom Bower, author of ‘Broken Vows’ managed to track down these details – so why do we need a public register?

Furthermore, the drive for a public register is for ownership of companies and properties, but  not of the beneficiaries of a trust – so for anyone wishing to disguise their ownerships they simply need to set up a trust – or take their assets outside the Overseas Territories and Crown Dependencies – in which case Britain plc is shooting itself in the foot. We will get nothing and business will flee from the territories we should be protecting.

This week a Government Bill designed to protect the City in the event of a no-deal Brexit was pulled in the face of almost certain defeat after MPs added an amendment that would have forced greater transparency on the Isle of Man, Guernsey and Jersey – the Crown Dependencies.

The idea of public registers of companies, was originally proposed by David Cameron and George Osborne in 2013 in the fight against the use of offshore financial centres to launder money using a myriad of offshore companies. It was dropped when May became Prime Minister, but resurrected by a bank benchers Hodge and Mitchell.

It is generally accepted that the UK cannot interfere in the affairs of another country even an ‘Overseas Territory’ such as the BVI or Cayman, or a ‘Crown Dependency’ such as Guernsey except in extreme circumstances.”

The UK has however intervened in the affairs of the Overseas Territories, such as in the repeal of the Death Penalty in 1991 and decriminalising homosexuality in 2,000, but has made no such intervention in the Crown Dependencies, which is why the bill had to be pulled to give time for a more detailed debate.

Hodge takes the view that a public register of ownership to stamp out the ‘traffic of corrupt money and illicit finance’ across the world’ justified such intervention! The Paradise Papers according to the campaign group Global Witness estimates that £68bn flowed out of Russia via the British-overseas territories between 2007 and 2016, – but what of other countries? To date only three prosecutions have been made. Is this a good enough justification for undermining the privacy of many others?

Andrew Mitchell takes it one stage further, ‘It is only by openness and scrutiny, by allowing charities, NGOs and the media to join up the dots, that we can expose this dirty money and those people standing behind it. Closed registers do not begin to allow us to do it’

That did not prevent Tom Bower finding out all he needed to know about Tony Blair!

The real debate needs to be on how far can we undermine the human right to privacy enshrined in many countries so that rich countries can pick out a few bad apples in a barrel of good ones?”

Find out today how an asset structuring technique–PPLI–can be both conservative and sophisticated. PPLI can give you both privacy and full compliance with the world’s tax authorities. We welcome your call or email. Contact Us right now!

 

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

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Resolving the Contradiction of Changeless Change

PPLI Can Do It

Resolving the Contradiction of Changeless Change

Can you use a well-established product as a process for the structuring of the worldwide assets of wealthy international families? Yes, is the resounding response from Private Placement Life Insurance (PPLI).

PPLI is both a standard product and a process, and hence its versatility, and at the same time, its stability. PPLI gives a structural framework to the diverse holdings of wealthy international families. Because PPLI is a product and common in the world’s tax and legal frameworks, there is a large body of laws and regulations that give advisors–a road map to follow.

This allows PPLI to give the assets of wealthy international families full privacy and tax savings, and at the same time, compliance with the world’s tax authorities.

To explore the concept of change, our article gives you an example from the world of self-driving automobiles.   We also share with you a legal challenge to the OECD’s CRS program.

Changeless Change is also a good description of China. This ancient civilization has transformed itself into a 21st century nation in only a few short years. Shanghai, China, is the venue of the video, “Our Journey Together” Part III, of my presentation at the 5th annual FOA Forum that we offer you below.

PPLI is also known as Private Placement Variable Universal Life Insurance (PPVUL). Its name speaks to the internal workings of the product. It is both life insurance and a home for investments. This is a definition from Cornell University Law School’s Wex Legal Dictionary:

“A form of whole life insurance that combines aspects of universal life insurance and variable life insurance and provides for a death benefit and accrues cash value on a tax-deferred basis. Variable universal life insurance (“VUL”) policies allow for flexibility in premiums, death benefits, and investment options.”

So how does a product become a process, a structuring tool? PPLI is a type of PPVUL, but with very unique characteristics. These are the characteristics that allow clients to accomplish so many valuable elements in the single structure:

Open Investment Universe–Almost any asset that can be held by a trust company can become part of a PPLI policy. With proper structuring even operating businesses can be included.

Simplified Reporting–The assets inside the policy are held in separate accounts for the policyholder, meaning that they are not part of the general assets of the insurance company. But for reporting purposes, the insurance company becomes the beneficial owner of the assets.

Asset Protection–The insurance policy adds another layer of asset protection in the structure. The domicile of the insurance companies also is a help here, as they are located in jurisdictions that have strong asset protection laws, like Bermuda and Barbados.

Low Fees/Commissions–Most often there is a 1% set-up fee. And the ongoing fees are frequently less than 1% of the assets inside the policy. This contrasts sharply to the large first year commissions charged by Universal Life and Whole Life policies.

Now for our examples of how change plays out in the world today. Self-driving cars and the OECD’s CRS are concepts that did not exist a few years ago. To make their way into our everyday world is not an easy task. They both have something to offer, but they must fit into other structures that have existed for longer periods. They are like new pieces of a jigsaw puzzle introduced when the puzzle seems to be complete.

Self-driving cars Encounter Political Roadblocks” by Mike Colias and Tim Higgins of the Wall Street Journal, give us a glimpse into the process of integrating technological change into the world.

“Auto makers and other companies racing to commercialize self-driving car technology are facing pushback from local politicians, complicating their plans to bring real-world testing to more U.S. cities.

In New York City, General Motors Co. has put on hold plans to begin testing in Manhattan because Mayor Bill de Blasio has expressed concerns about the technology’s safety, according to people familiar with the matter. GM said last year it would be the first company to start driverless-car testing in the city, starting in early 2018.

In Chicago, the city council’s transportation-committee chairman has vowed to block self-driving cars from operating in the nation’s third-largest metropolis, citing safety concerns and the potential for displacing taxi drivers and other jobs.

Even in Pittsburgh, a hotbed for autonomous-vehicle research and development, city officials have recently adopted more stringent requirements, demanding that driverless-car developers detail how a vehicle’s safety system works before granting permission to test on public roads.

A fatal crash in March, when an Uber Technologies Inc. self-driving test car stuck and killed a pedestrian in Tempe, Ariz., has fueled concerns over putting such prototypes on public roads, especially in big cities that tend to be more crowded, transportation officials say. Also, many city leaders say they want companies to show that the technology will provide wider social benefits, such as reducing congestion and helping low-income residents get around.

“It’s a lot of local politics that are difficult to navigate,” said Bradley Tusk, founder of Tusk Ventures, which works with startups on regulations and other political issues. “These are hard issues. You’re talking about small spaces that are very congested.

Meanwhile, a Senate bill that aims to establish nationwide regulations for self-driving cars has stalled in Congress. Without federal direction, cities and states are left to act on their own, creating a patchwork of rules and red tape for companies plowing billions into the technology and hoping to eventually turn their testing into profitable ventures.

GM Chief Executive Mary Barra has called self-driving vehicles “the biggest opportunity since the creation of the internet.” GM, Alphabet Inc.’s self-driving car unit Waymo LLC and others are betting these services will create a market for customers wanting to hail a robotic car much like they do an Uber or Lyft Inc. ride. Some analysts estimate that market could eventually be valued at trillions of dollars.

GM and Waymo are among companies that have been testing in a handful of U.S. communities for years and are getting closer to launching services to paying customers. GM plans to introduce a new robot-taxi service next year, likely in San Francisco, where the auto maker has done the bulk of its testing. Waymo said Nov. 13 that it will begin offering rides in self-driving cars to Phoenix-area customers in the coming weeks.

Companies say that in some cities, they are working closely with officials to assuage concerns, but much more work is needed before a wider rollout is possible.”

Barney Thompson of the Financial Times, shares with us “EU National Challenges HMRC Over New Data Sharing Rules.” CRS aims to assist governments in the fair collection of taxes, but are data protection safeguards in place to protect our rights to privacy?

“An EU national is challenging HM Revenue & Customs over new rules that require tax authorities around the world to automatically exchange information on millions of their citizens who live abroad.”

In a complaint to the UK’s data protection regulator, the EU citizen said the common reporting standard — a key measure against tax evasion developed by international experts that is now being gradually introduced by more than 100 countries — made her personal information vulnerable to cyber hacking or an accidental leak.

However, campaigners have defended the measure, saying it was an important tool in the fight against tax avoidance and evasion, notably through offshore financial centers.

The EU citizen who has made the complaint about the common reporting standard — who does not want to be identified — is currently domiciled in Italy but is described as having “a very international background”.

She lived in the UK for several years and was tax resident in Britain, acquiring a unique taxpayer reference and a national insurance number. She also still has a UK bank account with a deposit of £4,000.

Even with this relatively small amount, her bank is required under the common reporting standard to disclose certain information to the HMRC, including the account number, balance, her name, date of birth and tax number.

In turn, HMRC must pass on the information to its counterpart in Italy, which it is due to do in September.

Exchange of information would be automatic

In theory, any UK bank account holder living in another country that abides by the common reporting standard falls under the scope of its rules.

Within the EU, almost 19m people are estimated to live in a different member state to the one in which they were born.

Like the US foreign account tax compliance act, on which it is based, the common reporting standard was designed as a way to counter global tax evasion by making the exchange of information between countries automatic rather than have tax bodies request it if they suspect wrongdoing.

The standard was developed by the Organisation for Economic Cooperation and Development, the Paris-based international body that co-ordinates co-operation between different tax jurisdictions.

Several countries have poor data security

In her complaint against the common reporting standard to the UK Information Commissioner’s Office, the EU citizen said the exchange of information required by the rules will expose her to “a disproportionate risk of data loss and potentially hacking”.

She added: “This risk has crystallised recently in light of incidents in which HMRC has lost data concerning UK taxpayers and recent data breaches concerning UK banks.”

Her complaint cited how HMRC had lost the personal records of 25m taxpayers in 2007, as well as a media report in 2017 outlining how the tax authority’s website was vulnerable to cyber attacks. HMRC subsequently took action to fix the weaknesses.

Among the countries that have signed up to the common reporting standard are several with poor data security records, added the woman’s complaint.

Furthermore, data leaks such as during the TSB online banking failure this year and attempts by cybercriminals to hack the online tax details of British taxpayers illustrated the dangers around the mass exchange of sensitive personal information, it said.

As a result, the common reporting standard infringed the new EU-wide General Data Protection Regulation, which came into force in May, as well as European human rights laws, said the complaint.

Rules risk ‘identity theft on a grand scale’

The Information Commissioner’s Office has the power to impose temporary or permanent limits on the processing of personal data if it decides that GDPR rules are being infringed.

The office said:

“We have received a complaint relating to HMRC and the common reporting standard and will be looking into the details.”

Filippo Noseda, a partner at law firm Mishcon de Reya, who is acting for the EU national, said the data breach risks involved in the standard “could lead to identity theft on a grand scale”.

Mr Noseda acknowledged that rich clients of law firms would appreciate not having their tax details and activities shared between authorities.

But he added:

“The endgame is not to go back to banking secrecy. We need to find a system that is balanced.”

John Christensen, director of the Tax Justice Network, a campaign group, defended the common reporting standard, saying it needed to be broad to deter individuals from using offshore structures to avoid and evade tax.

“The [standard] has given the tax authorities the information they previously did not have access to, which enables them to pinpoint where tax evasion is happening,” he added.

 

“Tax avoidance and evasion are . . . deliberately and purposefully depriving tax authorities of finances.”

 

HMRC declined to discuss the EU citizen’s case but added:

“HMRC shares some personal data with overseas tax authorities to ensure that the right tax is being paid. HMRC only ever shares information when it’s entirely lawful to do so. This includes complying with applicable GDPR requirements.”

 

Advanced Financial Solutions, Inc. uses a stable and well-accepted financial concept, life insurance, to structure the assets of wealthy international families. Our main tool, PPLI, is a versatile and underutilized form of life insurance that gives excellent structuring results. Please join our list of very satisfied clients by contacting us today about your worldwide assets. We are here to bring you the right kind of change that is disruptive in a positive way.

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

 

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Positive and Beneficial Influence

PPLI Achieves Both

A Private Placement Life Insurance (PPLI) structure exerts a positive and beneficial interest on the assets which it holds. Let us examine how this is accomplished, and also what it means to exert influence. Babies and small children learn very soon how to exert influence on their parents.

I was having dinner with a five year old and his parents recently, and when the five year old ceased to be the center of the conversation, he would emphatically say, “I have something very important to tell you.” Of course, our conversation would cease and the five year old was very pleased!

PPLI achieves this benign influence over assets by employing the six key elements of Expanded Worldwide Planning (EWP). I would say that this influence is much greater than benign–it is transformative. Let us briefly state the importance of these six elements in creating a transformative PPLI policy structure.

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?

In the realm of politics, lobbying government officials is a method of attempting to exert influence. There is an outcry of concern when this influence is considered undue influence, and this is defined differently throughout the world. What is lobbying in one country might be considered bribery in another country.

This article by Julie Bykowicz caught our eye this week in one of our favorite publications, The Wall Street Journal,

“The New Lobbying: Qatar Targeted 250 Trump ‘Influencers’ to Change U.S. Policy. Blockaded by Mideast neighbors, the emirate employed an unconventional lobbying campaign to win over an unconventional U.S. president.”

 

“Longtime New York restaurateur Joey Allaham visited Manhattan’s Park East Synagogue late last year with an offer for lawyer Alan Dershowitz. Come visit Doha, the capital of Qatar, by invitation of the emir.

Mr. Dershowitz says he hadn’t met Mr. Allaham before and initially demurred before agreeing to go. The professor also didn’t know he was on a list of 250 people Mr. Allaham says he and his lobbying-business partner, Nick Muzin, identified as influential in President Trump’s orbit.

The list was part of a new type of lobbying campaign Qatar adopted after Mr. Trump sided with its Persian Gulf neighbors who had imposed a blockade on the tiny nation. Qatar wanted to restore good relations with the U.S., Mr. Allaham says. Win over Mr. Trump’s influencers, the thinking went, and the president would follow.”

We look forward to lobbying on your behalf to create a PPLI structure that employs all six of the key elements of EWP.

Please let us know how we can serve you to this end. Place your comments at the end of this post and sign up to get updates.

 

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

 

 

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Overcoming Obstacles Gracefully

Let PPLI Show the Way

Private Placement Life Insurance (PPLI) is a vehicle to overcome obstacles for structuring assets for wealthy international families. This is greatly aided by the concept of Expanded Worldwide Planning (EWP). Sometimes inspiration is necessary to overcome obstacles. To find this inspiration look no further than the remarkable life of Helen Keller. We will learn more about her amazing life later on, but first, let us focus on EWP.

We find the definition of EWP in the Wikipedia page International tax planning. Here is the opening paragraph:

International tax planning also known as international tax structures or expanded worldwide planning (EWP), is an element of international taxation created to implement directives from several tax authorities following the 2008 worldwide recession.

Further explanation is given in the Principles section:

EWP allows a tax paying entity to simplify its existing structures and minimize reporting obligations under the Foreign Account Tax Compliance Act (FATCA) and CRS. At the heart of EWP is a properly constructed Private placement life insurance (PPLI) policy that allows taxpayers to use the regulatory framework of life insurance to structure assets along the client’s planning needs.

These international assets can also comply with tax authorities worldwide. EWP also brings asset protection and privacy benefits that are set forward in the six principles of EWP below. The other elements in the EWP structure may include the client’s citizenship, country of origin, actual residence, insurance regulations of all concerned jurisdictions, tax report requirements, and client’s objectives.

Planning with trust and foundations frequently offer only limited tax planning opportunities, whereas EWP provides a tax shield. Adding a PPLI policy held by the correct entity in the proper jurisdiction creates a notable planning opportunity.

The Six Principles of EWP

To address the obstacles in structuring assets for wealthy international families, these six principles are incorporated in the solution to produce the best possible planning outcome for the family.

Privacy

Asset Protection

Succession Planning

Tax Shield

Compliance Simplifier

Trust Substitute 

The Life of Helen Keller

We return to Wikipedia for this summary of the remarkable life of Helen Keller:

Helen Adams Keller (June 27, 1880 – June 1, 1968) was an American author, political activist, and lecturer. She was the first deaf-blind person to earn a bachelor of arts degree. The dramatic depictions of the play and film The Miracle Worker made widely known the story of how Keller’s teacher, Anne Sullivan, broke through the isolation imposed by a near complete lack of language, allowing the girl to blossom as she learned to communicate. Her birthplace in West Tuscumbia, Alabama, is now a museum and sponsors an annual “Helen Keller Day”. Her birthday on June 27 is commemorated as Helen Keller Day in the U.S. state of Pennsylvania and was authorized at the federal level by presidential proclamation by President Jimmy Carter in 1980, the 100th anniversary of her birth.

Thankfully in our EWP and PPLI structuring we do not face the tremendous challenges faced and overcome so gracefully by Helen Keller. She can serve as a model for all of us for what is possible in the face of extreme difficulty. As always, we welcome your comments and questions.

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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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Tax Compliance & Privacy Together: PPLI

Expanded Worldwide Planning (EWP) in Action

A government needs tax dollars to achieve its aims.  Many countries give their citizens, at least in their official pronouncements, a right to keep their financial affairs private.  We have conflict here.  How is this conflict resolved?

In most governmental systems throughout the world, the judicial system has the role of mediator between a government and its citizens. We will discuss two current topics in this area below.  But first, since our role is to assist private clients in navigating the difficult waters between tax compliance and privacy, a word on how we accomplish this.

We are advocates of Expanded Worldwide Planning (EWP).  EWP works to resolve the conflict outlined above. This is achieved by using a properly structured Private Placement Life Insurance (PPLI) policy.

Any asset that can be held in custody by a reputable trust company can go into the PPLI structure. Many policies are owned by trusts which can be domiciled in jurisdictions in keeping with the client’s planning needs. In terms of asset management, it is an open architecture model where the assets can be located in multiple jurisdictions with multiple asset managers.

PPLI insurance costs generally average about 1 percent of the cash value of the policy. The cost of the death benefit varies with the health and age of the insured person, and generally policies are designed with the lowest death benefit possible. Tax and enhanced privacy benefits outweigh the costs of using a PPLI structure. Asset management fees will depend on the asset manager(s) selected to manage the assets inside the policy.

Notable Current Issues on This Topic

These two important items are brought to us courtesy of the Society of Trust and Estate Practitioners (STEP).

  • Powers to issue ‘unexplained wealth orders’ against people who cannot account for their assets, as set out in the UK Criminal Finances Act 2017, will come into effect this Wednesday (31 January), the UK government has announced. A new procedure allowing the authorities to issue bank account freezing and forfeiture notices without a court order comes into force at the same time. An extended legal definition of ‘cash’, to include many kinds of physical property, will come into force on 16 April, along with a new procedure to seize, detain and forfeit it.
  • The trusts, tax structures and other banking arrangements disclosed by documents stolen from offshore law firm Appleby Global are unlikely to be examined in detail in the course of the firm’s breach of confidence litigation against the BBC and the Guardian, according to an interim judgment of the England and Wales High Court. The primary issue will be whether the defendants’ journalism was sufficiently in the public interest to outweigh the breach of confidence entailed by the hacking of Appleby’s computer system, and the subsequent leaking of its client documents to the media (Appleby v BBC and The Guardian, 2018 EWHC 104 Ch).

The first news item is striking in that the UK government has eliminated the obtaining of a court order in allowing authorities to issue bank account freezing and forfeiture orders.  We mention the second item, Appleby v BBC and The Guardian, because the issue the Court is deciding goes to the heart of all the recent leaks of private client information by news organizations and non-profits.

EWP and a properly structured PPLI policy cannot solve all your problems, but we hope we can assist in solving a few of them.  We welcome your inquiries, comments, and suggestions.

 

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