Did You Know This About PPLI & EWP? – Episode 4 – Life Insurance: The Magic Ingredient

#PPLI & #EWP FUNDAMENTALS

Did you know this about Private Placement Life Insurance and Expanded Worldwide Planning?

Private Placement Life Insurance (PPLI) In Action

EWP and PPLI: A Unity of Assets and Life Insurance

To truly appreciate what Private Placement Life Insurance (PPLI) can accomplish, you first must forget everything you currently know about life insurance. Yes, it is life insurance, but so radically different in cost and benefits, it has its own Wikipedia page, International Tax Planning.

On this page, you will read about the six principles of Expanded Worldwide Planning (EWP). We give you a short description of these six principles from the Wikipedia page later in this article.

First, let us list the key benefits of PPLI, so you can appreciate why Bloomberg said in a recent article:

“Athletes, celebrities, and family offices are embracing private placement life insurance, or PPLI, as a way to preserve wealth for their heirs. It’s a strategy that’s perfectly legal and has existed for decades.”

This is why Bloomberg is so excited about PPLI. In a properly structured policy:

  • All cash value growth grows tax-deferred, and is paid out as a tax-free death benefit;
  • No income taxes, and this includes capital gains tax;
  • Ability to access the cash value through tax free loans;
  • Adds asset protection and privacy;
  • Limited reporting;
  • Ability to avoid estate taxes;
  • No surrender charges.

An outstanding singular feature that catapults PPLI above any other life insurance policy is that all asset classes can be placed in a policy:

  • Real Estate/Physical assets
  • Hedge Funds/Alternative Asset classes
  • Private Equity
  • Intellectual Property
  • Art
  • Yachts and Private Jets
  • Alternative Currency denominations

Now let’s discuss the low-cost of this unique wealth structure tool. Depending upon the assets inside the policy, the total fees for a PPLI are 1-2% of the asset value in the policy. The cost of insurance charges are institutionally priced at the wholesale reinsurance company rates.

The death benefit is insured with these same reinsurance companies, the largest insurance companies in the world like Swiss Re and Munich Re with trillions of dollars in assets.

“To be eligible for a PPLI policy one must generally be what the SEC terms a Qualified Purchaser, having not less than $5M of investments. Most companies’ minimum premiums are also $5M.”

From the Wikipedia page, International Tax Planning, we give you the six principles which are making PPLI such a sought after wealth structuring technique.

Privacy

EWP gives privacy and compliance with tax laws. It also enhances protection from data breach and strengthens family security. EWP allows for a tax compliant system that still respects basic rights of privacy. EWP addresses the concerns of law firms and international planners about some aspects of CRS related to their clients’ privacy. EWP assists with the privacy and welfare of families by protecting their financial records and keeping them in compliance with tax regulations.

Asset protection

EWP protects assets with segregated account legislation by using the benefits of life insurance. This structure uses asset protection laws in the jurisdictions of residence to shield these assets from creditors’ claims. A trust with its own asset protection provisions can still receive additional protection with the policy.

Succession planning

EWP includes transfers of assets without forced heirship rules directly to beneficiaries using a controlled and orderly plan. This element of EWP provides a wealth holder a method to enact an estate plan according to his/her wishes without complying with forced heirship rules in the home country. This plan must be coordinated with all the aspects of a properly structured PPLI policy together with other elements of a wealth owner’s financial and legal planning.

Tax shield

EWP adds tax deferral, income, estate tax benefits and dynasty tax planning opportunities. Assets held in a life insurance contract are considered tax-deferred in most jurisdictions throughout the world. Likewise, PPLI policies that are properly constructed shield the assets from all taxes. In most cases, upon the death of the insured, benefits are paid as a tax free death benefit.

Compliance simplifier

EWP adds ease of reporting to tax authorities and administration of assets, commercial substance to structures. In addition, the insurance company is considered the beneficial owner of the assets. This approach greatly simplifies reporting obligations to tax authorities because assets in the policy are held in segregated accounts and can be spread over multiple jurisdictions worldwide.

Trust substitute

EWP creates a viable structure under specific insurance regulations for civil law jurisdictions. It also creates a new role for commercial trust companies. In most civil law jurisdictions, trusts are poorly acknowledged and trust law is not well developed. As a result, companies with foreign trusts in these civil law jurisdictions, face obstacles.

Conclusion

A PPLI asset structure is arguably the most efficient structure available today for wealthy families who wish a conservative and efficient structure to integrate tax-free investment growth, wealth transfer, and asset protection.

by Michael Malloy, CLU TEP RFC.
CEO, Founder @EWP Financial

~ Your best source for PPLI and EWP

Michael Malloy-CLU-TEP

 

 

 

 

 

 

 

 

 

 

 

Did You Know This About PPLI & EWP? – Episode 3 – EWP’s Foundation Is The Six Principles

Fundamentals of Private Placement Life Insurance
&
Expanded Worldwide Planning

 

Did You Know This About PPLI & EWP?

EWP’s Foundation Is The Six Principles

Video 3

It makes sense to partner with a concept that is recognized as a cornerstone of financial stability—the six principles of Expanded Worldwide Planning, or EWP for short. The six principles are recognized as such by Wikipedia in its article on International Tax Planning. You too can employ these principles to grow and strengthen your own financial assets. How can you accomplish this? By using an asset structure that has at its very roots the six principles of EWP.

Here is the text from Wikipedia’s article on International Tax Planning which features the Six Principles of EWP

International Tax Planning

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.

History

In 2010, the United States introduced the Foreign Account Tax Compliance Act (FATCA). Later the Organization for Economic Co-operation and Development (OECD) expanded these directives and proposed a new international system for the automatic exchange of information – known as the Common Reporting Standard (CRS). The organization also attempted to limit companies’ ability to shift profits to low-tax locations, a practice known as base erosion and profit shifting (BEPS). The goal of this worldwide exchange of tax information being tax transparency, it requires the exchange of a significant volume of information. As a result, there are concerns about privacy and data breach in interested industries. EWP has been an important element on the agenda of the OECD following the succession of leaked revelations about various jurisdictions, including the Luxembourg Leaks, Panama papers and Paradise papers. In December 2017, European Union finance ministers blacklisted 17 countries for refusing to cooperate in its investigation on tax havens

Principles

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.

Features

Privacy

EWP gives privacy and compliance with tax laws. It also enhances protection from data breach and strengthens family security. EWP allows for a tax compliant system that still respects basic rights of privacy. EWP addresses the concerns of law firms and international planners about some aspects of CRS related to their clients’ privacy. EWP assists with the privacy and welfare of families by protecting their financial records and keeping them in compliance with tax regulations.

Asset protection

EWP protects assets with segregated account legislation by using the benefits of life insurance. This structure uses asset protection laws in the jurisdictions of residence to shield these assets from creditors. A trust with its own asset protection provisions can still receive additional protection with the policy.

Succession planning

EWP includes transfers of assets without forced heirship rules directly to beneficiaries using a controlled and orderly plan. This element of EWP provides a wealth holder a method to enact an estate plan according to his/her wishes without complying with forced heirship rules in the home country. This plan must be coordinated with all the aspects of a properly structured PPLI policy together with other elements of a wealth owner’s financial and legal planning.

Tax shield

EWP adds tax deferral, income, estate tax benefits and dynasty tax planning opportunities. Assets held in a life insurance contract are considered tax-deferred in most jurisdictions throughout the world. Likewise, PPLI policies that are properly constructed shield the assets from all taxes. In most cases, upon the death of the insured, benefits are paid as a tax free death benefit.

Compliance simplifier

EWP adds ease of reporting to tax authorities and administration of assets, commercial substance to structures. In addition, the insurance company is considered the beneficial owner of the assets. This approach greatly simplifies reporting obligations to tax authorities because assets in the policy are held in segregated accounts and can be spread over multiple jurisdictions worldwide.

Trust substitute

EWP creates a viable structure under specific insurance regulations for civil law jurisdictions. It also creates a new role for commercial trust companies. In most civil law jurisdictions, trusts are poorly acknowledged and trust law is not well developed. As a result, companies with foreign trusts in these civil law jurisdictions face obstacles.

by Michael Malloy, CLU TEP RFC.
CEO, Founder @EWP Financial

~ Your best source for PPLI and EWP

Michael Malloy-CLU-TEP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expanded Worldwide Planning Interview with Joe Robert and Michael Malloy

EWP

INTERNATIONAL TAX PLANNING

INTERVIEW

Michael Malloy CLU TEP RFC & Joe Robert

“On Today’s Episode Joe speaks with Michael Malloy. Michael is going to discuss with Joe about EWP…What is EWP exactly?…. Expanded world wide planning. Michael is going to tell YOU about financial planning, asset protection, estate planning and life insurance planning. And finally how people industry and relationships are key to increasing net worth.”

 

PDF Summary

Interview Highlights – Part 1

 

Interview Highlights – Part 2

 

FULL INTERVIEW

 

by Michael Malloy, CLU TEP RFC.
CEO, Founder @EWP Financial

Michael Malloy-CLU-TEP

 

 

 

 

 

 

 

 

 

EWP Stories-1

Expanded Worldwide Planning
International Tax Planning

UPDATED

EWP Stories
Part 1: Privacy

Doenload PDF

Privacy is a key element. Wealthy families are looking for ways to keep their affairs private, and still be compliant with tax authorities worldwide.

What was once private and personal becomes public and accessible to all. Computers and other electronic devices are part of our lives, whatever our opinion of them. These devices can add convenience and efficiency to our lives, but at a cost.

At EWP Financial we embrace the Privacy Principle. The Privacy Principle is unique as it simply and legally shields wealthy families from unwished intrusions into their financial affairs. At the same time, the Privacy Principle is fully transparent and gives wealthy families a bespoke, compliant asset structure for all their holdings, wherever they might be throughout the world.

Watch our #Privacy videos


Electronic Privacy?

Andrew Grove, co-founder and former CEO of Intel Corporation, expressed the following thought:

“Privacy is one of the biggest problems in this new electronic age. At the heart of the Internet culture is a force that wants to find out everything about you. And once it has found out everything about you and two hundred million others, that’s a very valuable asset, and people will be tempted to trade and do commerce with that asset. This wasn’t the information that people were thinking of when they called this the information age.”

The ancient Greeks called man, “a political animal.” In today’s world almost all so-called facts are politicized. It is no different with privacy. Certain groups consider the journalistic authors of the Panama Papers and the Paradise Papers heros of a free press. Others say that these same journalists were thieves, who unlawfully stole private financial data. Whatever your opinion, these events did happen, and the targets were most decidedly wealthy families throughout the world.

How does the privacy afforded by a properly structured Private Placement Life Insurance (PPLI) policy protect the families whose financial information was published for the entire world to see?

The Privacy Principle of EWP accomplishes its objective in several key ways:

  • Upon transfer into the PPLI policy, the insurance company becomes the beneficial owner of all the assets in the policy;
  • If there is reporting to a tax authority for the asset structure, only one number is reported. This is the total cash value of all the assets in the PPLI policy. The individual assets are not reported;
  • The bank account that is usually opened in connection with a PPLI policy is opened in the name of the insurance company, not the policyowner. The policyowner has full access to the funds in the bank account in accordance with the assets inside the policy.
Part 1

The hot, dry night air seemed to smother the sleek, six passenger Cessna Citation XLS jet. The plane had just touched down on the tarmac of this isolated runway. Next to the gleaming white jet was a gigantic windowless warehouse. The eerie, yellow lights that protruded from the warehouse turned the body of the private jet the color of an overripe mango fruit.

As he emerged from the plane, Carlos Gutierrez felt the skin on his face tighten from the baking heat of the desert. He walked briskly to the newly completed warehouse and his cell phone rang.

He usually did not answer calls from unrecognized numbers, but he was expecting a call from his daughter, Lucinda.

“Hello,” he said. The voice on the other end was strangely familiar.

“Juan, is that you?”

“Yes.” said the now unmistakable voice of his best university friend. The voice was indeed Juan’s, but it had none of the joy and conviviality that he associated with it from university days.

“Carlos, we have your daughter, Lucinda.”

“What? I don’t understand. What do you mean?”

“Carlos, I now do the finances for one of the cartels that Lucinda wrote about in her article. We want ten million dollars for her release. We will not compromise. We want the money now. We will give you 48 hours to deliver it, and, if we don’t receive it, we will be forced to do other things to your beautiful daughter. I will call you in three hours.”

The line went dead.

The Privacy Paradox

In connection to privacy, there is a concept called the privacy paradox that was first discussed by Bedrick, Lerner, and Whitehead, The privacy paradox: Introduction, News Media and the Law:

“The privacy paradox is a phenomenon in which online users state that they are concerned about their privacy but behave as if they were not. While this term was coined as early as 1998, it wasn’t used in its current popular sense until the year 2000.”

The authors go onto to explain this in more detail:

“Some researchers believe that decision making takes place on an irrational level, especially when it comes to mobile computing. Mobile applications are built up in a way that decision making is fast. Restricting one’s profile on social networks is the easiest way to protect against privacy threats and security intrusions. However, such protection measures are not easily accessible while downloading and installing apps.”

Louis Menand excellently expresses the same thought in his New Yorker article, “Nowhere To Hide,” of June 18, 2018:

“How many of us are going to take the time to scroll through the new policies and change our data settings, though? We sign up to get the service, but we don’t give much thought to who might be storing our clicks or what they’re doing with our personal information. It is weird, at first, when our devices seem to “know” where we live or how old we are or what books we like or which brand of toothpaste we use. Then we grow to expect this familiarity, and even to like it. It makes the online world seem customized for us, and it cuts down on the time we need to map the route home or order something new to read. The machine anticipates what we want.”

Legal Challenges

There is also another type of privacy paradox pertinent to EWP in the reporting of data breaches and news reporting on wealthy families. This is aptly put by Filippo Noseda, partner at the Mischon de Reya law firm in London:

“It is somewhat curious that serious newspapers who have been covering both the private banking scandals and the erosion of privacy seem unable to make the connection between data protection on the one hand, and the Common Reporting Standard (CRS) and beneficial ownership registers on the other.”

CRS was initiated in 2014 by the Organization for Economic Co-operation and Development (OECD) with the goal of creating financial transparency between countries that have agreed to implement its directives. Beneficial ownership registers collate information about the beneficial owner of a financial entity in a registry for storage and use by enforcement agencies.

Mr. Noseda also draws our attention to published material by The European Data Protection Supervisor (EDPS) where he questions the OECD’s goal of total financial transparency.

Mr. Noseda writes: “As if they were living on planet Europa rather than in Europe, the European Parliament, the OECD, and politicians show complete disregard for the warnings raised by their own data protection bodies and instead appear hell-bent on introducing a system of total transparency.”

In October 2020, a client of the law firm Mishcon de Reya filed a claim with the district court in Luxembourg challenging beneficial ownership registers, and alleges that the ‘indiscriminate and generalized’ publication of personal details of individuals connected to family enterprises breaches their fundamental rights to data protection and privacy, and exposes them to ‘unnecessary and disproportionate’ risks.

We have grown accustomed to the idea that transparency is a good thing, something that supports the common good. Like many concepts, if taken to an extreme, it becomes its opposite—a weapon in the hands of governments hungry for wealthy citizens’ tax dollars. As proponents of EWP, we must question this overzealous approach to tax collection.

Part 2

Carlos weaved to the door of the warehouse, followed closely by his pilot and co-pilot. Carlos fumbled with the key and finally opened the door to the office warehouse. His long-time pilot and co-pilot functioned also has confidants and body guards, so he told them in Spanish what just occurred.

Carlos was educated mostly in the United States, having received a masters degree in electrical engineering from Columbia University in New York, but English was his second language. Like all of us in times of emotional turmoil, he sought some comfort. Presently the only solace available was to speak his native language.

The plight of his daughter was beyond devastating, but the next step he knew was only a phone call away. He would call his insurance broker. Carlos had purchased Kidnap and Ransom insurance for his family, since the Mexican drug cartels had recently moved into his native Michoacan state, seeking to legitimize their sources of income by terrorizing the local avocado growers. By means of intimidation and violence, they sought access to this lucrative agricultural industry. His family were third generation avocado growers.

What put Carlos into emotional delirium was hearing the voice of Juan, his best friend at Columbia University. Juan had been a model student, an honor student like Carlos, and a kind and generous person. His involvement in his daughter’s kidnapping seemed preposterous. He would not have believed it, if it weren’t for hearing his voice.

Carlos was meticulous in his financial affairs. His company had the ability to assemble the most advanced and sophisticated electronic components. He had become a billionaire in his early 40s through his design of innovative electronics for medical devices. He abided by the law, both in Mexico and the U.S. Carlos was proud to be a citizen of both the U.S. and Mexico, even though it cost financially to do so.

The last time he had spent time with Juan was after college at the family farm outside the city of Uruapan. They had climbed onto one of the old avocado trees, and to drink beer together and eat avocados. They were looking forward to launching their careers after college. He remembered the solid branches supporting them, the ripe avocados at their fingertips, with the dappled sunlight making the tree a private world of their own. He remembered the light being soft and multicolored like the light coming through stained glass in a church. They exuberantly discussed their prospects. Joining a drug cartel was definitely not on their list of future possibilities.

The Past Lacks Privacy

EWP and PPLI can further the aims of wealthy families seeking increased privacy, asset protection, and tax efficiency, but privacy, as we know it today, is a relatively recent phenomena.

We quote two eye-opening passages by Greg Ferenstein’s “The Birth and Death of Privacy: 3,000 Years of History…,” courtesy of Medium:

“Privacy, as it is conventionally understood, is only 150 years old. Most humans living throughout history had little concept of privacy in their tiny communities. Sex, breastfeeding, and bathings were shamelessly performed in front of friends and families.”

“Privacy-conscious citizens did find more traction with what would become perhaps America’s first privacy law, the 1710 Post Office Act, which banned sorting through the mail by postal employees.”

This last quote seems quaint in light of the large-scale, present-day concerns of unauthorized data sharing by social media sites. The Privacy Principle was created to give wealthy families enhanced privacy. Our firm can be confident of our success, because EWP asset structuring greatly simplifies the process, and in addition, gives you the privacy that you seek.

The Dangerous Mouse Click

An adroit insider in the world of data breaches gives us frightening insights into how easily our personal data can be exposed and made public.

Lucia Vazquez,’s “A Millionaire Hacker’s Lessons for Corporate America,” for the Wall Street Journal, October 3, 2020 tells us:

“Santiago Lopez started invading corporate computer systems at age 16, after he learned to hack from YouTube videos and like-minded friends.

Now 21, he says he never wanted to commit crimes. Rather, he is a bounty hunter, invited by companies to find holes in their business networks and burrow into their vulnerable data. The idea is that a company will then fix what’s wrong to harden itself against bad actors—“black-hat” hackers—looking to steal data, conduct espionage and disrupt business operations. Like others in a stable of “white-hat” attack experts associated with bug-bounty firm HackerOne, Mr. Lopez gets paid commensurate with the severity of the weaknesses he identifies. He and other members swarm applications and websites to look for security holes missed by customers that contract with the San Francisco-based firm. Big problems pay big money.”

In the same article, Ms. Vasquez asked these two important questions to Mr. Lopez:

You’re really effective at what you do. What does this say about corporate cybersecurity?

They’re not investing money or time or work in trying to grow their cybersecurity team. A lot of companies, if you report bugs to them, they don’t have the expertise to fix them. Software that they build themselves has more bugs but software generally is vulnerable, always. If software has access to important data, then encrypt it.

What kinds of technology changes are coming that will create cybersecurity problems?

Artificial intelligence has helped us a lot to optimize tasks, process data and make decisions much faster than a human being could. However, new technologies, including artificial intelligence, create big cybersecurity risks, as potential vulnerabilities are not fully understood when they are found. This means that with more organizations relying on machine learning to perform business-critical actions, AI systems are sure to become a major target for hackers.”

Part 3

Diego wondered how he was to receive his bribe. He was told by his contact to buy a burner phone on Wednesday, and throw it away that evening after he received a text. His contact had booked him a table for 7pm at the Bellini Restaurant, atop the World Trade Center on the 45th floor in Mexico City.

“Good evening, sir,” said the handsome young man in his well-tailored valet parking uniform.

His car door was politely closed, and Diego pulled away, feeling somewhat sheepish and out of place with his old Prius at this expensive restaurant in Mexico City. The Bellini was an uncomfortable experience for Diego. This showed in the perspiration draining down his shirt from below his armpits. In his highly excited state, he had forgotten to put on deodorant this morning.

He had barely noticed the dazzling lights that lay below him, as he ate but did not taste the exquisite meal that was paid for by his contact. The restaurant magically revolved, but he might as well have been facing a blank wall. Diego only thought of one thing, and one thing only: “Will I get paid, or will they kill me instead.”

As he was traveling toward his small apartment, he received a text, Look in the glove box, then destroy your phone. I mean destroy it completely.

Diego opened the glove box to find a plain manilla envelope, which he tore open to find cash. Plenty of cash. 400,000 pesos, about $20,000U.S. The equivalent of his annual salary.

Why were 400,000 pesos put in his glove box? The reason was simple. Diego worked at the Servicio de Administración Tributaria (SAT). The SAT is the revenue service of the Mexican federal government. Diego had access to information that the cartel wanted to destroy Carlos Guittierez.

A new law had come into effect January 1, 2020, and stipulates that tax evasion will turn into a charge of organized crime if three or more people are aware of a scheme, which could result in companies being held criminally liable. Diego had access to salient information in Mexico’s Register of Beneficial Ownership. The cartel was going to use this information to charge Carlos under this new law.

How ironic that a successful businessman like Carlos could be discredited by an organized crime cartel when he went to great lengths to comply with all of Mexico’s laws. In a sinister way, the designs of Carlos’s intricate electronic components mirrored the devious, deceptive, and criminal practices of the cartel. One was used for good, and the other to destroy an innocent man.

Corporate Cybersecurity Amis

Large corporate data breaches have become almost commonplace in recent years. Here are a few courtesy of Dan Swinhoe from CSO, April 17, 2020:

Yahoo

Date: 2013-14

Impact: 3 billion user accounts

Details: Yahoo announced in September 2016 that in 2014 it had been the victim of what would be the biggest data breach in history. The attackers, which the company believed were “state-sponsored actors,” compromised the real names, email addresses, dates of birth and telephone numbers of 500 million users. Yahoo claimed that most of the compromised passwords were hashed.

LinkedIn

Date: 2012 (and 2016)

Impact: 165 million user accounts

Details: As the major social network for business professionals, LinkedIn has become an attractive proposition for attackers looking to conduct social engineering attacks. However, it has also fallen victim to leaking user data in the past.

Equifax

Date: July 29, 2017

Impact: 147.9 million consumers

Details: Equifax, one of the largest credit bureaus in the US, said on Sept. 7, 2017 that an application vulnerability in one of their websites led to a data breach that exposed about 147.9 million consumers. The breach was discovered on July 29, but the company says that it likely started in mid-May. The breach compromised the personal information (including Social Security numbers, birth dates, addresses, and in some cases drivers’ license numbers) of 143 million consumers; 209,000 consumers also had their credit card data exposed. That number was raised to 147.9 million in October 2017.”

These large corporate data breaches might seem impersonal and far off, unless you were one of the victims. We finish this section with a more sinister example, that highlights the vulnerable interfaces of our technologically dependent world. This example is again from Mr. Menand’s thoughtful New Yorker article quoted from earlier:

“An Oregon couple’s domestic conversation (about hardwood floors, they said) was recorded by Echo, Amazon’s “smart speaker” for the home, which sent it as an audio file to one of the husband’s employees. Amazon called the event “an extremely rare occurrence”—that is, not a systemic security issue.”

Part 4

One week later Carlos Gutierrez found it difficult to pursue life in his usual diligent and focused manner. His daughter Lucinda had been returned by the cartel, unharmed physically, but shaken to the core psychologically. Carlos was now flying back from San Jose to one of his homes near La Jolla in southern California.

He requested that they take a route directly south from Santa Barbara, over the Channel Islands, only veering west after San Clemente Island. It was the most common route when he flew commercially before he could afford to keep two jets. Carlos was attempting to re-establish some order in his life.

Before the kidnapping and the lawsuit, he and his family inhabited a sane and orderly world, cut off from the concerns of those outside this thin bubble. When it burst more illusions escaped than he had ever thought possible. He could repair things with money, but money alone could not repair his family’s current emotional devastation.

One of his business strengths was the ability to inspire those who could put his creative electrical engineering concepts into integrated circuits and the other components of his medical devices. In San Jose he had visited a shop owned by Koreans, who were excellent to work with, and could manage his sometimes maddening deadlines.

Carlos was spared the emotional distress of having to speak with Juan again. The insurance company that wrote his Kidnap and Ransom insurance took over the successful negotiations with the cartel so that his daughter could be freed. He still could not fathom how his best friend of twenty years ago could now be working for one of the most vicious and notorious drug cartels in Mexico.

Although not currently a churchgoer, he was raised a Roman Catholic. He reflected on the forbidden fruit of the Garden of Eden. Just one week ago, they had lived in a similar paradise. But like Adam and Eve, they could now not return to this peaceful and predictable world.

The moist, soft, delicious avocado fruit was his last link to Juan. After all, the fruit that Eve ate was called the fruit of good and evil. How strange it turned out to be good for Carlos and evil for Juan.

His jet gently sloped down to the runway. He promised himself to protect the privacy of his affairs ever more vigilantly. Yes, the former bubble had burst, but he could construct a more solid one going forward. All he could be sure of was that Juan had taken his path in life, and he had taken another. Carlos’s new path would have to include a new, creative design, presently unknown, but one he vowed to find. After all, that is how he had amassed his billions.

Conclusion

As we are learning, the danger of data collection by online companies is not that they will use it to try to sell you stuff. The danger is that that information can so easily fall into the hands of parties whose motives are much less benign. A government, for example.

EWP and PPLI are employed by our firm to not only give you enhanced privacy, we also keep you compliant with tax authorities worldwide. This is something that other asset structures can’t accomplish. The Privacy Principle is integral to our successful asset structures.

EWP has the six principles that matter most to wealthy families throughout the world today—no matter where they are located. They are the building blocks of any successful asset structure.

If an EWP Structure Had Been Used….

Can an EWP Structure prevent kidnapping and extortion? While an EWP Structure can’t prevent the nefarious deeds of organized crime, it can go a long way in securing the privacy that can prevent these acts of physical and emotional violence. Had Carlos Gutierrez had a properly executed EWP Structure, it is doubtful that his story would have unfolded in such a painful way. Since an insurance company becomes the beneficial owner of the assets in an EWP Structure, the reporting requirements to government agencies are very limited.

If the drug cartel wished to secure details about the private financial matters of the Gutierrez family, they would be hard pressed to find them. As it was, the details that they needed to kidnap Lucinda and begin their frivolous lawsuit were readily available to them using the Gutierrez’s present asset structure. The precise, pin-point accuracy of the planning that led to the kidnapping of Lucinda would not have been possible with an EWP Structure in place. The information that the cartel used would simply have not been available to them.

Please Contact Us for any questions you may have.

 

by Michael Malloy, CLU TEP RFC.

CEO, Founder @EWP Financial

Michael Malloy-CLU-TEP

 

 

 

 

 

 

 

 

Q & A – Nothing Is Impossible

Questions and Answers from the book “The Wit and Wisdom of Professor PPLI: How to Achieve Exceptional Asset Structuring with Private Placement Life Insurance”

~ by Michael Malloy, CLU, TEP RFC

 

Get the book now!

See original article

Nothing Is Impossible

PPLI: Under Higher Laws

 Section 3, Part 3

 

Professor PPLI, attitudes toward a subject are a powerful force in how people perceive the subject. These attitudes are also sometimes hard to change. How does this relate to PPLI?

If you study the history of science, you can readily see how once a long held belief or attitude is changed, it becomes a new paradigm that awaits another future paradigm shift. What was thought impossible becomes possible.

A similar phenomenon exists in sports with world records. Take Roger Bannister breaking the four minute mile record. In a sense, once the barrier is broken, others are given permission to accomplish the same feat. Again, the impossible becomes possible.

In the world of PPLI, I see a paradigm shift coming for professional trustees’ attitudes towards PPLI asset structuring. Professional trustees can be distrustful at first hearing of these structures, because they think they will lose control of the assets. Exactly the opposite is the case.

When assets are placed in a PPLI structure, the insurance company takes over the administration of these assets, but leaves the trustee in ultimate control. This relieves the trustee of many routine tasks, but the trustee retains their role as the ultimate decision maker, since they are the owner of the policy. They are even free to switch insurance companies, if the administration of the assets is not to their liking.

In a Wealthmanagement.com article, “Private Placement Life Insurance Primer, Recent tax law changes make for a particularly interesting time to explore PPLI,” Brian Gartner and Matthew Phillips explain why some trustees are particularly attracted to PPLI.

“Trustees are attracted to PPLI in the context of multi-generational trust planning for three main reasons: (1) assets within a trust allocated through PPLI grow on an income tax-deferred basis; (2) the trustee can make income tax-free distributions to trust beneficiaries from PPLI without having to consider the income tax consequences of liquidating assets; and (3) the trust will eventually receive an income tax-free insurance benefit, which will serve to effectively step-up the basis of the assets within the trust that are allocated through PPLI.”

Lastly, assets within a PPLI structure are frequently held for the long term, usually until the death of the insured person, thus, the trustee can be assured of controlling the assets for a long time period.

The title of this section is “Nothing Is Impossible.” This is a big statement. What relevance does this have to PPLI?

To solve issues in the world of international asset structuring, it is sometimes necessary to ask the simple, yet sometimes profound, questions that come from children: why is the sky blue? And where was I before I was born?

At Advanced Financial Solutions, Inc., we ask ourselves one simple question at the beginning of each client engagement:

How can we achieve the maximum amount of tax efficiency, asset protection, and privacy for this family?

Our picture in the book is telling for the answer to this question. Nobody has told the mountain goats in this picture that what they are doing is extremely dangerous and they can fall to their peril at any point.

Our task at Advanced Financial Solutions, Inc. is not so dramatic, but we do endeavor to achieve what might seem impossible by conventional structuring methods. How do we accomplish this? By engaging you with simple questions that bring about the answer to the important question posited above.

Ironically, our international PPLI structuring techniques are usually far more conservative than the complex trust structures that clients frequently bring us to review. Sometimes they have spent weeks pondering over this overly complex structure and still do not understand them.

We treat each of our cases as a blank canvas that confronts each painter at the beginning of a painting project. Our goal is to paint, read structure, a picture that gives a family all they desire in the realm of tax efficiency, asset protection, and privacy.

Professor PPLI, how is PPLI similar to the popular phrase, “to hide something in plain sight?”

The key to this question lies in two words–life insurance. Most all life insurance policies in most jurisdictions throughout the world offer all or some of these benefits:

  • Tax-deferred growth of internal cash value
  • Tax-free death benefit
  • No capital gains taxes
  • No income taxes
  • Ability to access Cash Value through tax-free loans
  • Ability to manage or mitigate estate taxes

PPLI now adds these benefits:

  • Invest in almost any asset class
  • Increased asset protection as insurance company becomes beneficial owner of assets in the policy
  • Simplified reporting and privacy as only total cash value is reported
  • Policy can hold CFC’s and PFIC assets on a tax-deferred basis
  • Excellent vehicle to hold real estate
  • Provided a stable, globally recognized structure for tax authorities

Most attorneys, asset managers, trustees, and accountants have received no formal education in PPLI international asset structuring, and their professional societies have scant knowledge on the subject. After they drop their frequent preconceived prejudices against life insurance, and study the subject of variable life insurance, and the tax code that supports it, they usually have two reactions.

One, is they are astounded that they have not been using this simple and conservative method from the beginning of their practice. Or, two, they think it is too good to be true and reject it, because it does not conform to the methods that most of their peers use in the field of international asset structuring.

At Advanced Financial Solutions, Inc. we encourage you to take the path of the first reaction. To that end, we appreciate your questions and comments. Please give us your thoughts on PPLI international asset structuring.

 

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

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Q & A – The True Value of Zero = Privacy

Questions and Answers from the book “The Wit and Wisdom of Professor PPLI: How to Achieve Exceptional Asset Structuring with Private Placement Life Insurance”

~ by Michael Malloy, CLU, TEP RFC

 

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Professor PPLI Explains Zero

 Section 3, Part 1

 

Professor PPLI, in this Part we define the concept of zero in a mathematical sense, then, compare this concept to a PPLI asset structure. How are these two related in a practical way?

 We quote from Brian Resnick’s article,

“The mind-bendy weirdness of the number zero explained,” on Vox: “Imagine a box with nothing in it. Mathematicians call this empty box: the empty set.” It is 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 [Robert Kaplan, a Harvard math professor] 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.”

Consider the first box described above as the PPLI policy that is owned by a trust. When a family’s assets are transferred into the policy, like the numbers described by Kaplan, they still remain as assets of the family, but now the beneficial owner of the assets has changed. The beneficial owner of the assets is now the insurance company. The assets do not change, but how they are structured changes.

The taxation of the wealthy and income equality are now hot topics in the popular press and academic circles. Professor PPLI, how do PPLI asset structures fit into this discussion?

Wealthy families are an easy target for some political parties seeking votes by promising new social programs funded by taxes on the rich. The entire discussion is so politicized that it is difficult even in academic circles to obtain objective information.

At Advanced Financial Solutions, Inc. our job is to provide families with the six elements of Expanded Worldwide Planning (EWP): privacy, asset protection, tax shield, compliance simplifier, succession planning, and trust substitute. Our attention is on these six elements, and this is where we focus our energy.

We accomplish bringing the six elements of EWP to our clients through the medium of a conservative and fully compliant PPLI asset structure. We can deliver because the insurance laws worldwide are much simpler than the ever changing tax laws. Tax laws are also more subject to being politicized. This makes planning for wealthy families even more difficult, which is why we mention the political debate in the paragraph above.

In contrast, insurance laws in most jurisdictions throughout the world have, in part, the aim of relieving governments from the burden of collecting even more taxes to provide social programs for their citizens. Life insurance provides death benefits to protect the economic well being of families, and with policies that include a cash value, provide funds for retirement through the accumulate of the cash value of the policies. This makes their citizens less reliant on government programs to provide these important benefits.

Professor PPLI, privacy rights and the concept of zero are discussed in this Part. Please explain how these two things can be linked.

 We use an example from Caroline Garnham of Garnham Family Office services in London, where she discusses how the debate about the Common Reporting Standard (CRS) is playing out in Great Britain in relation to the privacy of beneficial owners of trusts.

In this Part, Doctor Ian at the Math Forum demonstrates how multiplying any number by zero equals zero. “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:

  • How many steps you’re going to take
  • 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 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.”

Zero in this context is defined as something powerful, but in a sense fundamental, since multiplying it by any number gives the same result, zero. Privacy also has an element of the fundamental, as privacy is enshrined in the constitutional documents of many countries worldwide.

At Advanced Financial Solutions, Inc. we strive to provide clients the maximum privacy that the laws of the various jurisdictions supported by our policies allow. The majority of our policies are issued by companies domiciled in Barbados and Bermuda. These countries have crafted their laws to give wealthy families great benefits in terms of privacy and asset protection. Please let us know how we can assist you in creating an asset structure that does the same for you.

 

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

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Q & A – PPLI Combines Beauty and Utility

Questions and Answers from the book “The Wit and Wisdom of Professor PPLI: How to Achieve Exceptional Asset Structuring with Private Placement Life Insurance”

~ by Michael Malloy, CLU TEP RFC

 

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PPLI Combines Beauty and Utility

 Let Us Learn from a Master Thinker

 Section 2, Part 4

 

Professor PPLI, in this Part the influential 20th century thinker, George Santayana, gives us his famous definition of beauty, and concludes:  “Beauty is therefore a positive value that is intrinsic; it is a pleasure.” How is this related to a PPLI asset structure?

His use of “intrinsic” reminds me of the nature of life insurance in a PPLI asset structure. Life insurance is the intrinsic element that makes this possible. Life insurance is a basic financial planning tool that is used in almost all countries throughout the world. PPLI is one variety of this well- recognized and accepted financial instrument. PPLI can become the intrinsic instrument to organize a families worldwide assets into a conservative and easy to understand structure.

At Advanced Financial Solutions, Inc. we are proud to be mentioned in the Wikipedia page for “Private Placement Life Insurance.” This is in the section entitled “Expanded Worldwide Planning.”

“There exist a number of structures that provide clients’ security from data breaches, erroneous government reporting, and the “blanket and indiscriminate nature of automatic exchange under CRS”. Among these structures, Expanded Worldwide Planning (EWP) is a concept that has emerged. It offers international families a framework that enhances privacy and asset protection within a flexible, open architecture platform.

For example, Advanced Financial Solutions, Inc. is one proponent of EWP. It is an element of international taxation created to implement directives from several tax authorities following the 2008 worldwide recession.

EWP gives privacy and compliance with tax laws. It also enhances protection from data breaches and strengthens family security. It allows for a tax compliant system that still respects basic rights of privacy. EWP addresses the concerns of law firms and international planners about some aspects of CRS related to their clients’ privacy. EWP assists with the privacy and welfare of families by protecting their financial records and keeping them in compliance with tax regulations.”

Advanced Financial Solutions Inc-Wikipedia

The 953(d) election is a major topic in this Part of the book. What are the essentials of this section of the U.S. tax code, and why is it significant for wealthy international families today?

The 953(d) election refers to Section 953(d) of the U.S. Internal Revenue Code (IRC). This is the section that allows a non-U.S. Insurance Company to make the election to be treated as a U.S. taxpayer. This election provides some very material benefits to both the insurance company and policyholders.

For the policyholder and beneficiaries, the insurance structure itself can be used to optimize income, capital gains and estate tax planning. Additionally, there is no withholding tax on U.S. investments as the company is U.S. person with a completed W-9 form.

The “953(d)” insurance company is treated as a domestic corporation by the U.S. government for tax purposes. The insurance company (not the policyholder) completes and submits the W-9 form to the bank, facilitating compliance with U.S. domestic custodians and paying agents. This makes the 35% withholding tax under FATCA a non-issue. The company is not subject to state or federal insurance law being an offshore provider. Finally, there is no requirement to file and maintain form 720.

Professor PPLI, we begin this Part with a famous line from Leonardo da Vinci, “Can’t beauty and utility be combined?” How does this relate to PPLI? 

Probably at least a few of you have taken the back off your laptop computer. At first sight, it is a confusing array of wires and computer chips that confounds the mind of one who knows nothing about computer hardware. This inside look into the device is in sharp contrast to the outside which is a sleek looking case of plastic with a keyboard.

To the uneducated advisor a PPLI asset structure might look like the inside of the laptop in our analogy. To the experienced advisor the finished asset structure is every bit as clean and well-order as the outside of the laptop, because all the various components in the structure function like a computer that is operating at peak performance.

For advisors to take a trust and marry it with many asset classes and beneficiaries, both of which may be spread out over many tax jurisdictions throughout the world, is a daunting task. Much like the inside of our laptop to the untrained eye. For those willing to learn, the benefits to wealthy international families are outstanding in comparison to the learning curve of international PPLI asset structuring.

Returning to Leonardo da Vinci, Yes, beauty and utility can be combined with PPLI into a single well-working structure that is compliant with all the tax jurisdictions that the policy supports. At Advanced Financial Solutions, Inc. this is our specialty.

 

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

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Q & A – PPLI for Wealthy International Families

Questions and Answers from the book “The Wit and Wisdom of Professor PPLI: How to Achieve Exceptional Asset Structuring with Private Placement Life Insurance”

~ by Michael Malloy, CLU TEP RFC

 

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PPLI for Wealthy International Families

– Including Wealthy U.S. Families

PPLI’s Beautiful Architecture

 Part 3

Professor PPLI, in this Part we have a discussion of light and dark from different perspectives. How can this be relevant to PPLI asset structuring?

Imagine a typical flowchart that is used to depict a PPLI asset structure. On most flowcharts of this type, the PPLI policy box is located in the middle.  Usually the owner, most often a trust, is above the PPLI policy box, and below are the various assets and holding companies necessary to complete the structure.

Let us now hear from physicist, Julian Scudder

“Stars form light as a byproduct of the incredible pressures at their centers…. New stars only unveil themselves to our eyes by using the light they give off to burn away the dust and gas that hid them in darkness.”

Now back to our flowchart. Think of the PPLI policy box as a star at the center of the asset structure. The pressure in our analogy is the well-established insurance laws and regulations throughout the world which make these structures possible.

 This PPLI policy box, now a newly formed star, gives off light to the other elements of the structure like the trust, assets, and beneficiaries so they can shine forth. All the elements then have the light they need to make the entire structure successful. This brings to mind the subtitle of our Part, PPLI’s Beautiful Architecture.

Professor PPLI, why did you include U.S. families in the title along with international families? Aren’t there domestic U.S. policies that can serve their needs?

If all a family’s assets are located in the U.S., they might consider using a U.S. product, but most often this would not work if they had unusual asset classes. Domestic U.S. PPLI companies structure their products as extensions of the standard retail Variable Universal Life products.

In most cases, a family is much better off using an offshore insurance company with a 953(d) election. Not only are fees lower, but the entire structure will put most families closer to their ultimate goal–to achieve the six elements of Expanded Worldwide Planning (EWP): privacy, asset protection, tax shield, succession planning, compliance simplifier, and trust substitute.

In our first answer we made an analogy between PPLI and the physical aspects of a star as it relates to light. Many advisors would find this analogy far fetch as most international tax advisors have little or no knowledge of the asset structuring possibilities of PPLI. Professor PPLI, please expand on this fact for us.

Quite true indeed. Attorneys, trust officers, and accountants are not offered any courses in PPLI asset structuring in their formal education, so they must encounter this outstanding tool later in their practices. Even when they do, they frequently reject it, because they are unaware of this variety of life insurance and equate PPLI with retail products.

This is not helped in the U.S. where a few major insurance companies do offer PPLI, but it is more of an extension of their retail products, as we mentioned in the second answer.

It takes a creative partnership between the various disciplines involved in a PPLI structure to accomplish the magic. When attorneys, asset managers, trust officers, accountants, and insurance advisors truly understand the dynamic asset structuring elements of PPLI, they can ride the exciting wave of what we call in the book the Unifying Factor.

Currently, when the very concept of wealth seems under attack from political parties, governments hungry for tax dollars, and worldwide governing bodies like the OECD, why not embrace the Unifying Factor. Families then can avail themselves of the six principles of Expanded Worldwide Planning (EWP) that we mentioned earlier. At Advanced Financial Solutions Inc., we endeavor to secure the Unifying Factor for each of our clients.

 

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

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Q & A – Inside and Outside PPLI

Questions and Answers  from the book “The Wit and Wisdom of Professor PPLI: How to Achieve Exceptional Asset Structuring with Private Placement Life Insurance”

~ by Michael Malloy, CLU TEP RFC

Inside and Outside PPLI

Academics Teach Us a Lesson

Section 1, Part 4

 

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Professor PPLI, a key element in this discussion is magic. Give us more insight into how PPLI makes some things disappear and others appear.

This is a good way to view the topic. When we consider the six elements of Expanded Worldwide Planning (EWP), they can be grouped into these two categories. Elements that disappear and those that make things appear.

These categories are somewhat arbitrary, but allow you to collect certain thoughts around these six elements of EWP. We can place privacy, asset protection, and tax shield in the Disappearing Category.

Legitimate privacy allows wealthy families to conduct their affairs outside the prying eyes of those who do not have a rightful interest in their financial affairs. The tax shield in a properly structured policy eliminates taxes in most jurisdictions throughout the world. Asset protection keeps assets outside the reach of ex-spouses, and those seeking easy access to wealth without proper legal authority. This is accomplished using the correct asset protection trust in tandem with the PPLI policy, which adds another layer of protection to the trust.

In the Appear Category, we place trust substitute, compliance simplifier, and succession planning. In some civil law jurisdictions, trusts are not recognized or do not function as well as they do in common law jurisdictions. Using a PPLI policy in the structure can, in some cases, simplify and enhance the planning. PPLI is definitely a compliance simplifier. Since the insurance company becomes the beneficial owner of the assets inside the policy, reporting obligations are greatly simplified and in some cases eliminated. Since the life insurance death benefit passes directly to the designated beneficiaries, it can deliver the death benefit outside the forced heirship laws that exist in some jurisdictions.

One magical aspect of PPLI is that although it is classified as a life insurance product, it functions more like a trust. Since most policies are owned by trusts, you might say that PPLI and trusts join together and become a successful and secure asset structuring marriage. Professor PPLI, please tell us how this is possible. 

The PPLI policy provides elements which are not possible with a trust alone. A trust can accomplish many useful things such as putting into legal language the aims and goals of the wealth owners. A trust also creates an entity that can live beyond the lives of the wealth owners. The following comparison tells the story.

Trust and Insurance Comparison 

Insurance

  • Contractually based and used by millions
  • Tax deferral
  • Insurance company is beneficial owner
  • Simplified or limited reporting
  • Potentially tax free
  • No capital gains taxes
  • No trustee
  • Asset protection

Trust

  • Provides some asset protection
  • Sometimes seen as a tool for the rich
  • Requires “trustee” with full control
  • More stringent reporting requirements
  • Tax filings for trust and possibly beneficiaries required by some jurisdictions

Professor PPLI, you use two very different academic articles in this Section to illustrate a point. Please explain more fully how these two articles relate to PPLI.

Wealthy families are looking for simple and straightforward methods to structure their assets. In part, these two articles illustrate that the financial, political, and governmental aspects of our lives are in constant change. Laws are enacted which sometimes have the opposite effect than was intended by their creators, as one article proves.

Governments are seeking more ways to tax wealthy families, and this is seen by some as a societal good, and by others as governmental overreach. Once assets are properly structured inside a PPLI policy, they are somewhat isolated from these forces, and can pass to future generations according to the wishes of the wealth owners.

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

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Q & A – Assets for a ‘Rainy Day’

Questions and Answers  from the book “The Wit and Wisdom of Professor PPLI: How to Achieve Exceptional Asset Structuring with Private Placement Life Insurance”

~ by Michael Malloy, CLU TEP RFC

 

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Assets for a ‘Rainy Day’

PPLI Keeps You Dry

 Part 2

 Professor PPLI, the client in our dialogue is upset about the condition of his assets. How might PPLI assist him?

 A properly structured PPLI policy functions somewhat like a trust in that it can hold multiple asset classes. To name them individually, the policy can hold:

  • Real Estate/Physical assets;
  • Hedge Funds/Alternative Asset classes;
  • Private Equity;
  • Intellectual Property;
  • Art;
  • Yachts and Private Jets;
  • Alternative Currency denominations.

The insurance company becomes an excellent “home” for multiple asset classes in that:

  • The insurance company is beneficial owner of assets held in the policy;
  • The insurance company is listed as beneficial owner on bank accounts;
  • Transactions are done in the name of the insurance company;
  • There is no look through to policyholders (certain structures).

The discussion in this Part turns to how a client understands or fails to understand an explanation by an advisor. Professor PPLI, how would you explain PPLI to a client in simple, introductory terms?

 I usually begin by saying that PPLI an extension of the retail version of PPLI, Variable Universal Life Insurance, but it functions more like a trust. With proper structuring it can hold almost any asset class. The assets are not subject to taxation once inside the policy, and pass as a tax-free death benefit in most jurisdictions. Most policies are owned by a trust, and the insured life can be any family member or members who have an insurable interest in the policy.

The fees are very low, usually less than one percent of the assets inside the policy. The policy set up fee is usually around one percent of the assets value. The cost of the life insurance is priced institutionally.  The cost is only the wholesale reinsurance company charge with nothing added by the insurance company. These charges are a fraction of the cost of a retail insurance product. The policy also provides excellent asset protection coupled with a correctly written trust.

A paragraph in this Part mentions the function of life insurance in a PPLI policy. Professor PPLI, can you please elaborate on this?

 The life insurance component largely depends upon the family’s aims. If estate planning is paramount, we would use certain policy designs. If access to cash value is key, other policy designs would work better. We can even design a policy where the death benefit is only 5% of the total asset value inside the policy. The death benefit is very much a bespoke element of the policy.

 

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

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