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Assets for a ‘Rainy Day’

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PPLI Keeps You Dry

Part 2

Our next series of articles will comprise an in-depth look at the five main components of our PPLI Concept Map: Professor PPLI to the Rescue.

“I understand it is raining on my assets.”

This Private Placement Life Insurance (PPLI) client is frustrated and resorts to a seemingly obtuse statement to his advisor. Let us examine his statement more closely. If something valuable would be left out in the rain, it might be spoiled. Indeed, even a PPLI asset can take a turn for the worse.

Perhaps he intended to use the colloquial phrase it is “raining on my parade.” Perhaps English is not this client’s first language, and he is using an idiom of his first language, and translating it literally into English. But whatever is occurring with the rain and his assets, IT IS NOT GOOD. At this point, it is doubtful whether PPLI is of any use to this dissatisfied client.

In the Introduction to her book on idioms, As Right As Rain, Caroline Taggart tells us:

“The Oxford English Dictionary describes it as ‘a group of words established by usage having a meaning not deductible by the meanings of the individual words’ (my italics); other dictionaries emphasize the same point. An idiom, by definition, doesn’t make sense.

Isn’t that fun? Or is it just baffling?

Take the book title, for instance. Why do we say ‘as right as rain’ rather than ‘as right as snow’ or ‘as right as wind’? Or why should rain, or any other climatic feature, be more right than anything else?

Why, to take another example, why do we cry over spilled milk rather than spilled wine or spilled tea? Why is a wild idea pie in the sky or a piece of surprising news a turn up for the books?

A foreigner learning English might well ask these questions and be told, ‘Because it just is, OK?’ That’s because a newcomer to the language has to learn the exact form of the idiom–nine times out of ten, if you translate it from one language to another, it means nothing, and if you alter a single word, it means even less. (To give someone the cold elbow? To bring home the pork? I don’t think so.) But if you want to delve deeper, to find out where these apparently absurd expressions come from in the first place, you might choose to pick up this book. It’s an attempt to reduce the bafflement, and increase the fun.”

The expression “as right as rain” offers a positive response to this phrase, but the client’s continence suggests this client is not happy. Enough of our conjectures. Let us give this client a persona.

We take the liberty of making him Gary Barnett, who “remade Manhattan’s skyline and spurred a supertall-tower boom with One57. In a faltering real estate market, he’s hoping to sell the ultra-rich on Central Park Tower,” according to an article in the Wall Street Journal, “The Man behind Billionaires’ Row Battles to Sell the World’s Tallest Condo,” by Katherine Clarke and Candace Taylor.

Mr. Barnett could use our services, as PPLI can provide excellent structures for real estate. As we have now made him our client, let us learn something about him from the Wall Street Journal article we mentioned previously.

“A self-described “poor boy from the Lower East Side,” Mr. Barnett grew up as Gershon Swiatycki, the son of a Talmudic scholar. His entry into the world of luxury goods came in 1980s, when he met his late wife Evelyn Muller, whose father owned a diamond business. Mr. Barnett traded precious stones in Belgium for over a decade before starting to invest in U.S. real estate.

Arriving at the sales office in a dark suit with black sneakers and a bold, flowered tie that he said is “probably 20 years old,” the 63-year-old developer is an unlikely purveyor of luxury homes. An observant Jew who largely eschews the flashy trappings of the industry, Mr. Barnett lived in Queens until moving recently with his wife and children to the heavily Orthodox suburb of Monsey, N.Y., about an hour’s drive north of the city. (He keeps a one-bedroom unit at One57 to make more time for work.)

Mr. Barnett’s refusal to give up the antiquated flip phone is a source of indulgent eye-rolling from colleagues. He often avoids computers, said a person who has worked with him; instead, his assistant prints out his emails and leaves them on his desk, where he annotates them in what one employee describes as “serial-killer scrawl” for staff to decipher.

He’s “a total nerd,” real-estate agent Nikki Field said affectionately. “He’s not a New York developer personality in any way.”

Other Manhattan developers thought Mr. Barnett was crazy when he started building One57 in 2010, the depths of the real-estate downturn. And after no major U.S. lenders would back him, he turned to the Middle East to obtain financing from two of Abu Dhabi’s wealthiest investment funds.

His gamble paid off handsomely. As One57 started sales, U.S. economic growth snapped back. As one of the few new luxury condo buildings on the market, One57 attracted billionaires from Russia, China and the Middle East. The condominium is the first ever New York City building to break the $100 million threshold for a single condo.”

Frequently, at the beginning of a discussion on a topic new to them, clients have an incomplete or erroneous understanding of the topic. An advisor does well not to trample on the client’s understanding. The process of understanding frequently needs to occur in an atmosphere where there is a respectful give and take.

In the end, unless a true mutual understanding is reached no meaningful understanding has been achieved at all between the client and the advisor, and the client usually does not become a client of the advisor. In the end, what is left is a topic or concept with two different understandings, and both understandings think that they are correct.

What if one of these understandings is actually false?

There have been many discussions of late on “fake news,” what constitutes it, and how it is created, and how it affects our lives. Let us examine the strange case of Claas Relotius.

With PPLI our company is careful to discern at the beginning of a discussion whether PPLI is in fact the right planning choice for the client. By analyzing the structure thoroughly, we insure a more successful PPLI outcome at the end of the process.

Here we have an award winning journalists, who evidently was the perpetrator of “fake news” for many years. We are grateful to another Wall Street Journal article, “Germany’s Der Spiegel Says Reporter Made Up Facts,” by Bojan Pancevski and Sara Germano.

“BERLIN—Europe faces its largest journalistic scandal in years after Der Spiegel, the continent’s biggest-selling news magazine, said one of its star reporters fabricated facts in his articles for years.

The magazine’s disclosure, which came after a colleague raised concerns about a recent piece on supporters of President Trump in rural America, was made as Europe’s established media faces attacks by populist forces at home and abroad.

Claas Relotius, an award-winning journalist, resigned from the magazine last week after admitting to making up parts of his reporting in the past decade, Der Spiegel said late Wednesday.

Mr. Relotius couldn’t be reached for comment.

According to the magazine, Mr. Relotius, 33, invented characters, dialogue and events in his coverage of subjects ranging from a Guantanamo inmate who no longer wanted to leave the prison to civil war orphans in Syria.

“We must see what control mechanisms failed, whether they did or whether we were negligent,” Steffen Klusmann, who will become the magazine’s editor in chief next year, said in a video interview posted on the magazine’s website.

Major news organizations have faced a number of crises in recent decades over reporting that was later determined to contain fabricated material.

In seven years writing for Der Spiegel, Mr. Relotius became one of Germany’s most highly regarded journalists, accumulating 10 coveted awards.”

How does one protect oneself from the rain? Usually by providing some cover, like a waterproof outer garment. Let us cast life insurance into the role of this protective outer garment. In our next article, we will divulge how PPLI provides this protection. Please let us know how we can keep your assets ‘as right as rain.’ PPLI can solve a myriad of asset structuring needs. Your suggestions and comments are very welcome. Please write them at the bottom of this article or Contact Us directly.

~ by Michael Malloy, CLU TEP RFC

#michaelmalloy #michaelmalloysolutions #advancedfinancialsolutions

The PPLI Papers

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Secure Wealth and Tax Compliance Through Private Placement Life Insurance

The PPLI Papers available on Amazon

During this past week Amazon selected The PPLI Papers as the No. 1 book in their Insurance Law section. Amazon is also running a special on my book from Saturday, February 9th, to Wednesday, February 13th. The PPLI Papers will be available for a free download during this period. The print version of the book is in process, and will be available in a few weeks.

Here is the Amazon link to the book: https://amzn.to/2SyMKpu

We hope you take advantage of this offer!
Your comments and suggestions are most appreciated.
Let us know how you like the book, (bottom of the page).

Thank you.

~Michael

Introduction

Were you concerned about the revelations of the Panama Papers and the Paradise Papers? If you are concerned about lack of privacy and want to structure your assets to enhance privacy, tax efficiency, and asset protection, look no further. Here you will find an approach that gives you all the privacy you seek to retain while remaining in full compliance with tax authorities worldwide.

We are talking about the use of a specialized life insurance policy–Private Placement Life Insurance (PPLI). Much more than just an insurance policy, it is a conservative approach that offers a trustworthy and reliable method of achieving these aims.

PPLI is unlike any other life insurance policy you may have encountered. To quote from Senior Consultant, The Voice of the Investment Management Consultant:

“Private Placement Life Insurance (PPLI) is much more than an insurance policy. PPLI represents one of the most powerful vehicles available to the high net worth investor in the marketplace today.”

The Wikipedia article, International tax planning, discusses the concept of Expanded Worldwide Planning (EWP), the overarching planning tool that emerged from the regulatory framework introduced by FATCA and CRS. This article tells us:

“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.”

The aim of this book is to give you a general knowledge of Private Placement Life Insurance and introduce wealthy international clients to the possibilities of structuring their assets to their greatest benefit in the wake of the Panama Papers and Paradise Papers. We will offer news stories, discussions by various authors on PPLI, and related topics such as tax planning. The book consists of my articles over the last several years, and will give you access to videos on PPLI. The diversity of the articles mirrors the diversity of PPLI structuring possibilities that are available throughout the world.

My sincere hope is that you come away with a structure that achieves your aims. For maintaining full privacy while maximizing tax savings, and asset protection, PPLI is one of the world’s best kept secrets.

~ by Michael Malloy, CLU TEP RFC

#michaelmalloy #michaelmalloysolutions #advancedfinancialsolutions #ppli

Fostering Discipline Is Paramount

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PPLI Joins ‘Two Sides of the Same Coin’

To be thorough and open to new possibilities at the same time requires discipline: embracing ‘two sides of the same coin.’ In the PPLI structuring of wealthy international families’ assets, Advanced Financial Solutions, Inc. strives to achieve this aim. For each new case we exam similar PPLI cases that we have handled in the past. For the specific knowledge that we will need for new cases which we might lack, we have an excellent resource of professional advisors worldwide that can be easily contacted to supply this missing knowledge for a successful PPLI structure to be created.

For our analogous examples we have one from the area U.S. tax planning and how it affects U.S. beneficiaries of Foreign Grantor Trusts, and strangely enough, one from high-fashion. This example shows us what happens when the ‘two sides of the same coin’ turn out to be the same thing, and–to change this analogy–the coin loses its luster by turning out to be a copy. In a humorous vein, you can view this also as social media bringing transparency to haute couture.

Before we share the above material, we are pleased to give you this description of PPLI from International Life Insurance edited by David D Whelehan, JD in the chapter, “International Life Insurance An Overview.”

“This product is for the wealthy, “accredited” investor. They are usually very large single premium structures. It is classified more as an institutional product, as the charges and fees are quite low in comparison to retail products described above. Another advantage is investment flexibility as they generally can be invested in things not permitted in a general account retail product, like hedge funds and private equity.

Premiums and benefits can also be paid in “kind,” as opposed to in cash. In addition, the policyowner can select his, or her, own Investment Manager for just the single policy to invest according to the policyowner’s general directions. The Custodian of the underlying assets in the fund can also be selected by the policyowner. Private placement products are tailored to meet specific objectives of the client, but are carefully designed to be compliant with local tax laws, so as to enjoy the tax treatment desired.”

In the STEP Journal Melvin A Warshaw and Lawrence M Lipoff discuss a key change to the US Tax Cuts and Jobs Act of 2017, and assess what it means for advisors to trustees of foreign grantor trusts. They conclude that due to recent changes in U.S. tax law that a properly structured PPLI provides an excellent solution for U.S. beneficiaries of foreign grantor trusts.

A Simpler and Safer Strategy

“In a previous two-part article,^[1] we presented US tax advisors with our highly technical analysis of a key change in the foreign tax provisions of the US Tax Cuts and Jobs Act of 2017 (the Act) impacting how trustees of foreign grantor trusts (FGTs) traditionally hold US-situs portfolio assets that potentially benefit both US and non-US heirs of a non-citizen, non-resident (NCNR) of the US.”

Trustees must analyze whether their existing single foreign corporation (FC) strategy is still viable and, if not, what steps they should take to address this US tax law change. Some advisors suggest a second FC and others a two-tier or three-tier FC structure. Leaving aside that planning variations relying on different entity structures may be one option, we believe that offshore^[2] private placement life insurance (PPLI) may offer a far simpler and safer strategy.

Under pre-2018 US tax law, trustees of FGTs generally relied on a single non-US holding company to shield the NCNR grantor of an FGT from US estate tax on US-situs portfolio assets. Following the death of the NCNR, the trustees would effectively eliminate this FC by filing a post-death, retroactive (so-called ‘check-the-box’) election within 30 days of such death. Gain recognition would be avoided on the historical pre-death unrealised appreciation of the US portfolio assets, prior to elimination, i.e. liquidation, of the FC, as well as pre-2018 controlled foreign corporation (Subpart F CFC) passive income tax and related tax compliance. Plus, the US heirs would achieve a basis step-up in the underlying US portfolio assets equal to their fair market value (FMV) on the date of the election.

The Act repealed the 30-day retroactive election for tax years after 2017. Under current US tax law, a post-death ‘check-the-box’ election for the trust’s FC could cause US beneficiaries of the trust to inherit the historical pre-death unrealised appreciation in the US-portfolio assets and incur cumbersome US tax compliance. Further, if an FC is a CFC for even one day during the tax year, there could be potential phantom income for the US beneficiaries of the trust now encompassing the new US ‘global intangible low taxed income’ (GILTI) regime.

Continuing a single FC

The single FC structure continues to be effective in preventing imposition of US estate tax on the US portfolio assets held by the FC. If most of the NCNR’s trust beneficiaries are US persons (citizens or residents),^[3] the trustees and US advisors must anticipate that there will now be US income tax and US tax reporting on historical appreciation of the assets held in the single FC that would eventually be recognised by the US beneficiaries after the NCNR’s death. If most of the trust beneficiaries are not US persons, it may be possible that the single FC will lack sufficient beneficial ownership by US persons to qualify as a CFC.

Side-by-side FCs

Another approach suitable for families with both US and non-US persons as beneficiaries is to have the trustees of the FGT create a second FC, which would own only non-US-situs assets. The original FC would own only US securities. The non-US portfolio assets owned by the second FC would be earmarked to benefit solely non-US persons as trust beneficiaries after the death of the NCNR. The US portfolio assets owned by the existing FC would be earmarked for the US beneficiaries. There would be no US estate tax on the non-US assets owned by the second FC. A retroactive check-the-box election could be filed for this second FC effective on the day before the NCNR’s death.

Some US advisors advocate relying exclusively on entity structuring to convert a single FC into a multi-tier FC structure involving at least three FCs. Prior to the NCNR’s death, the trustees of the NCNR’s FGT would create two FCs. These two FCs would then together equally own the shares of a third lower-tier FC. The US portfolio assets would be owned by the lower-tier FC. Following the death of the NCNR, the lower- and upper-tier FCs would be deemed liquidated for US tax purposes (by filing check-the-box elections) in a carefully scripted sequence as follows.

First, the upper-tier FCs would each file a check-the-box election for the lower-tier FC, effective one day prior to the death of the NCNR. This results in a taxable liquidation of the lower-tier FC without current US income tax on the historical pre-liquidation unrealised appreciation inside the FC. However, the upper-tier FCs’ basis in the underlying US securities held by the former lower-tier FC will equal the FMV of such assets on the date of the deemed liquidation of the lower-tier FC.
Second, two days after the NCNR’s death, both upper-tier FCs will make simultaneous check-the-box elections. The inside basis of the US portfolio assets previously held by the lower-tier FC prior to its deemed taxable liquidation would be stepped up or down to the FMV of such assets on the day after the death of the NCNR.

Advocates of this highly complicated, carefully scripted entity structure and serial liquidation strategy for US portfolio assets indicate that, if successful, the results should be comparable to the results under prior law. However, this is not without some new tax and reporting risks, as noted above, nor does it address the question of what the independent significant non-tax business purpose for ‘each’ of the three FCs would be.

Offshore PPLI

Assuming the NCNR is insurable, advisors should seriously consider the possibility of their NCNR clients, with significant US portfolio assets, and US persons as potential beneficiaries investing in certain types of offshore PPLI policies that in turn invest in US assets.

Purchasing an offshore US tax-compliant PPLI policy will result in no US income tax recognition in the annual accretion in the cash value growth of the policy. Holding the policy until death is equivalent to receiving a US basis step-up at death on the death benefit that is payable in cash. In planning for the US beneficiaries of the NCNR, if the revocable FGT were named as owner and beneficiary of the PPLI, this trust could be structured to pour over at the death of the NCNR to a US dynasty trust organised in a low-tax jurisdiction with favourable state trust laws. This structure will ensure that the death benefit pours over to a US domestic trust that will not become subject to foreign non-grantor trust (FNGT) tax rules.

A non-admitted offshore carrier obviates CFC status for the policy and policy owner by making a certain special US tax code (s.953(d)) election to be treated as a US domestic carrier. Aside from avoiding CFC status for the policy and its owner, making this special election causes the carrier to absorb US corporate income tax and administrative costs to comply with US informational tax reporting. The hidden benefit of an offshore carrier making this special US tax election is that it enables such a carrier to claim a special deduction of reasonable reserves required to satisfy future death benefits. The offshore carrier simply absorbs the cost of US income tax compliance including its responsibility for CFC and passive foreign investment company (PFIC) reporting. There is no look-through of an insurance policy to its owner for the purposes of applying the PFIC rules. So long as the NCNR avoids any control over the selection of specific investments made by the policy owner for the policy, investor control should not be a concern.

Our conclusion is that current US tax law provides clear support for the proposition that the PFIC and CFC rules should not apply to a US tax-compliant policy issued by a foreign carrier that files a special (s.953(d)) election with the Internal Revenue Service. This will result in the tax-free inside growth in the PPLI policy that, if held until the death of the NCNR, will result in no income tax on the death benefit. We believe that purchase of an offshore PPLI policy by the NCNR through an FGT that pours over to a US dynasty trust is an efficient, safe and simple solution that allows an NCNR to invest in US portfolio assets, and leverages that investment and all subsequent growth tax-free into policy death benefit available to US beneficiaries after such death.”

From the Wall Street Journal, we share “Fashion Industry Gossip Was Once Whispered. Now It’s on Instagram” by Ray A. Smith.

“Shortly after designer Olivier Rousteing showed his fashion collection for Balmain in Paris last September, French designer Thierry Mugler posted on Instagram.

Mr. Mugler, famous in the 1980s and early ’90s for power suits and the George Michael “Too Funky” video, posted a series of side-by-side images comparing his past ensembles to Mr. Rousteing’s new looks. Next to a Balmain black, one-shouldered jacket-dress with white lapels, Mr. Mugler posted his own similar design from 1998 with the comment: “Really?”

Along with Balmain’s dress featuring a graphic, webbed print, Mr. Mugler, who now goes by the first name Manfred, attached his own webbed design from 1990. “No comment!”

The episode surprised Mr. Rousteing. “Oh my God, I’m so sorry for him, seriously,” said 33-year-old Mr. Rousteing about 69-year-old Mr. Mugler in an interview. He denied copying the designer.

In the past, copycat allegations rarely reached beyond fashion industry gossip—or sometimes courtrooms—and rarely made it to the wider public. Now with Instagram, fashion’s favorite app, accusations spread much faster and to a wider audience. Eagle-eyed accusers can post comparison pictures and add arrows and circles to zero in on the alleged offense immediately after a fashion show, now that runway images are beamed out in real time.

High-end fashion labels are increasingly being called out on social media for copying other designers or designs, leading to back-and-forth exchanges, lawsuits and expensive apologies.

Instagram accounts, including Diet Prada, have formed to focus on designers and retailers whose creations some feel look too much like other designers’ past work. Since its 2014 launch, Diet Prada, which isn’t affiliated with Prada, has amassed more than 960,000 followers. The Fashion Law blog and CashinCopy Instagram feed also name and shame copying.”

If you are looking for a bespoke solution to your asset structuring needs, we welcome you to contact us. You will also benefit from our conservative and fully compliant methodology of using PPLI as the centerpiece of the structure. You will be pleasantly surprised to experience ‘two sides of the same coin.’

^[1] M. A. Warshaw and L. M. Lipoff, ‘How to Navigate the Choppy Seas for Foreigners With U.S.-Based Heirs: Part I’, Trusts & Estates (June 2018), and ‘Non-Citizen, Non-Resident Options for Life Insurance’, Trusts & Estates (August 2018)

^[2] All uses of ‘offshore’ and ‘foreign’ are given from the perspective of the US.

^[3] All references to ‘US persons’ in this article refer to citizens and residents only.

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

#michaelmalloy #michaelmalloysolutions #advancedfinancialsolutions #ppli

PPLI: Efficiency = Balance

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Harmonious Efficiency = Private Placement Life Insurance

When the elements of a transaction are balanced it produces Harmonious Efficiency. This is exactly what is achieved for the assets of wealthy international families in a properly constructed Private Placement Life Insurance Policy (PPLI). PPLI is a product that dates back to the 1980s, so you are not employing something that was invented yesterday. Life insurance regulations and laws are also well-established and relatively straightforward in most countries throughout the world. PPLI provides a balanced approach to structuring assets that does indeed produce Harmonious Efficiency.

We have chosen two examples of Harmonious Efficiency that are analogous to PPLI. The basic tenants of the Efficient-Market Hypothesis (EMH) are set forth below. From the world of retail sales we give you an example of how a novel approach to selling a product created Harmonious Efficiency.

Harmonious Efficiency implies that all parts of a structure fit together and work toward solving a client’s financial aims. These aims are stated most succinctly in the six elements of Expanded Worldwide Planning EWP. (Please see Wikipedia International tax planning for a complete explanation of the six elements). They are:

Privacy
Asset protection
Succession planning
Tax Shield
Compliance simplifier
Trust substitute

We quote from the Principles section of the Wikipedia article:

“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 the 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.”

Trying to understand the stock market has challenged many to produce come theories that explain its behavior. One of them is the Efficient-Market Hypothesis (EMH). We quote from the Wikipedia page on this subject.

“The efficient-market hypothesis (EMH) is a theory in financial economics that states that asset prices fully reflect all available information. A direct implication is that it is impossible to “beat the market” consistently on a risk-adjusted basis since market prices should only react to new information.

The Efficient Market Hypothesis (EMH) was developed by Eugene Fama who argued that stocks always trade at their fair value, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices. As such, it should be impossible to outperform the overall market through expert stock selection or market timing, and that the only way an investor can possibly obtain higher returns is by chance or by purchasing riskier investments. His 2012 study with Kenneth French supported this view, showing that the distribution of abnormal returns of US mutual funds is very similar to what would be expected if no fund managers had any skill—a necessary condition for the EMH to hold.

There are three variants of the hypothesis: “weak”, “semi-strong”, and “strong” form. The weak form of the EMH claims that prices on traded assets (e.g., stocks, bonds, or property) already reflect all past publicly available information. The semi-strong form of the EMH claims both that prices reflect all publicly available information and that prices instantly change to reflect new public information. The strong form of the EMH additionally claims that prices instantly reflect even hidden “insider” information.

There is no quantitative measure of market efficiency and testing the idea is difficult. So-called “effect studies” provide some of the best evidence, but they are open to other interpretations. Critics have blamed the belief in rational markets for much of the late-2000s financial crisis. In response, proponents of the hypothesis have stated that market efficiency does not mean not having any uncertainty about the future; that market efficiency is a simplification of the world which may not always hold true; and that the market is practically efficient for investment purposes for most individuals.”

At the outset the firm StockX did not have the goal of making market efficiency its top priority, but it has brought it to the secondary market for high-end sneakers. We quote from “This Website Is the Stock Market for Nikes and Rolexes” by Jacob Gallagher of The Wall Street Journal.

“It was Tuesday, Nov. 13, 2018. Though Josh Luber would rather it didn’t, in three days, Adidas was planning to re-release the Yeezy Boost 350 V2 “Zebra,” a black-and-white striped version of its Kanye-West-designed sneaker. Mr. Luber, co-founder of StockX, an online trading platform for sneakers, streetwear, handbags and watches, hates when companies disrupt his market strategy. Within a week, his hypothesis was confirmed: Yeezy Zebras were trading for about $270 on StockX, just $50 above retail and well below their peak of $2,000.

Tracking sneaker values has long been Mr. Luber’s obsession. In the late 2000s, he was a strategy analyst at IBM in New York who spent his nights trawling eBay for data on how much sought-after shoes were selling for on the secondary market. He compiled those figures into Campless, a sort of Kelly Blue Book for sneaker-resale value. But Mr. Luber wasn’t satisfied with eBay. His beefs weren’t limited to the bad photos that sellers posted or their habit of selling fakes. What really bugged him was the absence of price standardization. One dealer might peddle a pair of Nike Dunks for $100 and another might list the same shoes for $300. Mr. Luber envisioned a more orderly market, with a New York Stock Exchange-style ticker, that would make the value of a pair of sneakers transparent, in real time. When those Dunks sold for $100, everyone on the market would know about it, thus forcing other sellers to knock their prices down to the going rate.

Around that same time, Dan Gilbert, the founder of mortgage lending company Quicken Loans, noticed that his teenage son was flipping sneakers on eBay for profit. Intrigued, Mr. Gilbert founded a research team on sneaker reselling who discovered what Mr. Luber was working on. Mr. Gilbert bought Campless in 2015 and the pair joined forces (along with COO Greg Schwartz), launching StockX, “the stock market of things,” based in Mr. Gilbert’s hometown of Detroit in February 2016.

Today, StockX employs nearly 550 people worldwide, and has added watches, handbags and streetwear (including widely hyped hoodies, T-shirts and even skateboards from brands like Fear of God, Off-White and Bathing Ape) to its marketplace. Mr. Luber explained that StockX only deals in rarefied products that balance liquidity and scarcity. A J. Crew gingham shirt will never be on StockX because it’s too common, nor will a Picasso painting, because it’s too rare. A variety of Nike Air Jordans of which only 1,000 pairs may exist is ripe for StockX’s marketplace.

Because of these items’ scarcity, fakes remain a major issue on the resale market. StockX only accepts new merchandise and employs over 100 authenticators to identify counterfeits. “When we started the business three years ago, we couldn’t go to LinkedIn and find sneaker authenticators,” said Mr. Luber. “We basically created that career.” It takes about 90 days to train authenticators who use scales, durometers (to measure density) and apps to spot fakes. Korre Jefferson, 20, a retail associate in Brooklyn, N.Y., said he liked knowing that someone had validated the authenticity of the sweater and pair of sneakers he purchased on StockX this year: “Sometimes on [resale marketplace] Grailed you might have someone selling something that’s clearly fake, so it’s nice to have that security with StockX.” Over email, Grailed co-founder Jake Metzger explained, “We have a team of experienced moderators combing the site every day looking for suspicious users and listings. Any user caught actively selling fake merchandise is banned from the platform.”

The aim is not to turn novices into sneakerheads willing to pay 11 times the retail cost for a pair of Nike’s Off-White Air Jordans. Rather Mr. Luber would like to create a destination for sneaker buyers of every ilk. He noted that a lot of items on StockX do sell for less than their sticker price: “Sometimes it’s just access. It’s a general-release shoe from three years ago, but it’s just not available on Nike.com so now you can get it on StockX.”

In further attempts to expand its reach, last month StockX opened an office in London and has its sights set on China. There are regional differences here and there—fewer basketball sneakers in Europe, more Nike Air Force Ones in New York—but by and large, users want the same sneakers and clothes whether they’re in Brussels or Brooklyn. Often these days, that means Yeezys, Off-White Nikes and Supreme.

For Lucio Nunes, 20, a student in Switzerland who has sold shoes on StockX for two years, using the London office has improved his selling experience. Shipping rates are cheaper, as he no longer has to send his shoes further abroad, and his money clears faster. Still he said, the one downside to StockX is that it has lowered prices throughout the sneaker flipping-world. “The prices are much more visible because everyone looks at StockX and takes it as the market price,” said Mr. Nunes. It’s harder to cheat the market when the ticker price is just a click away.”

The Efficient-Market Hypothesis (EMH) is brought to light in this last quote from Mr. Nunes. Like all theories EMH works up to a point. If EMH worked perfectly there would be no Warren Buffet or successful hedge fund managers like Steven Cohen.

PPLI structuring achieves Harmonious Efficiency through using the conservative vehicle of an insurance policy. Like a trust it is a structuring tool, but a more powerful one in that it has added tax and privacy benefits. The performance of the assets in the policy is managed by an asset manager, and the assets are kept in separate accounts for the policyholder. The performance of these assets is independent from the structure, but the tax benefits of PPLI do provide Alpha thus giving the asset manager an added advantage.

The Harmonious Efficiency we achieve for our clients brings them balance and makes them very satisfied. Please let us know how we can create Harmonious Efficiency for you.

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

#michaelmalloy #michaelmalloysolutions #advancedfinancialsolutions #ppli

Never Underestimate the Power of Persistence

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PPLI Delivers Persistence

At Advanced Financial Solutions, Inc. in our quest to solve difficult client issues using Private Placement Life Insurance (PPLI) structuring, we have found that being persistent is a great benefit. Since we have clients throughout the world in diverse financial environments, our problem solving expertise is key to a successful outcome.

By way of analogy we give you an example from science. Have you ever wondered how water can travel from the roots of a tree to the top? Consider the height of coastal redwood trees in California, reaching up to 379 feet (115.5 m) in height (without the roots). Part of the solution is a persistent chain of water molecules that travel skyward to the top of these giant trees.

First let us give you some examples of being persistent in our PPLI structuring for our clients.

Unique Solution #1

A Chinese family came to us for succession planning for offshore companies owned by the family. They wished to pass these offshore companies located in various parts of the world to their son, who is a green card holder residing in the U.S. Besides transferring the companies at the death of the wealth owner via a properly structured PPLI policy, the son wished to take the profits from the companies and invest them in real estate projects outside the U.S. We created a PPLI structure for the family that accomplished all of these aims. The PPLI structure also gave them tax-deferral on all the future revenue from the companies.

Unique Solution #2

An Israeli client who resides in Italy has a company where all the revenue is generated in Italy. He is also a U.S. green card holder, but spends very little time in the U.S. He had a Nevada company that did the processing of his customers orders which came from customers worldwide. The client wished to re-structure to lessen his U.S. tax burden which we accomplished for him using a 953(d) offshore PPLI policy.

Unique Solution #3

A young entrepreneur with worldwide holdings in sports, natural resources, gaming, and content management wishes us to check his compliance with FATCA and CRS. He is a U.S. green card holder as well as a UK resident, and citizen of an African country. He had created a dozen companies with excellent potential. We brought him into compliance with tax authorities worldwide with a PPLI structure. We gave his revenues a boost, because in the PPLI structure all the profits become tax-deferred. We protected his family with the low-cost death benefit of the PPLI policy.

We are grateful to Mark Vitosh of Iowa State University for his article in Scientific American which excellently explains how water can reach the top of the tallest trees in the world.

“There are many different processes occurring within trees that allow them to grow. One is the movement of water and nutrients from the roots to the leaves in the canopy, or upper branches. Water is the building block of living cells; it is a nourishing and cleansing agent, and a transport medium that allows for the distribution of nutrients and carbon compounds (food) throughout the tree. The coastal redwood, or Sequoia sempervirens, can reach heights over 300 feet (or approximately 91 meters), which is a great distance for water, nutrients and carbon compounds to move. To understand how water moves through a tree, we must first describe the path it takes.

Water and mineral nutrients–the so-called sap flow–travel from the roots to the top of the tree within a layer of wood found under the bark. This sapwood consists of conductive tissue called xylem (made up of small pipe-like cells). There are major differences between hardwoods (oak, ash, maple) and conifers (redwood, pine, spruce, fir) in the structure of xylem. In hardwoods, water moves throughout the tree in xylem cells called vessels, which are lined up end-to-end and have large openings in their ends. In contrast, the xylem of conifers consists of enclosed cells called tracheids. These cells are also lined up end-to-end, but part of their adjacent walls have holes that act as a sieve. For this reason, water moves faster through the larger vessels of hardwoods than through the smaller tracheids of conifers.

Both vessel and tracheid cells allow water and nutrients to move up the tree, whereas specialized ray cells pass water and food horizontally across the xylem. All xylem cells that carry water are dead, so they act as a pipe. Xylem tissue is found in all growth rings (wood) of the tree. Not all tree species have the same number of annual growth rings that are active in the movement of water and mineral nutrients. For example, conifer trees and some hardwood species may have several growth rings that are active conductors, whereas in other species, such as the oaks, only the current years’ growth ring is functional.

This unique situation comes about because the xylem tissue in oaks has very large vessels; they can carry a lot of water quickly, but can also be easily disrupted by freezing and air pockets. It’s amazing that a 200 year-old living oak tree can survive and grow using only the support of a very thin layer of tissue beneath the bark. The rest of the 199 growth rings are mostly inactive. In a coastal redwood, though, the xylem is mostly made up of tracheids that move water slowly to the top of the tree. Now that we have described the pathway that water follows through the xylem, we can talk about the mechanism involved. Water has two characteristics that make it a unique liquid. First, water adheres to many surfaces with which it comes into contact. Second, water molecules can also cohere, or hold on to each other. These two features allow water to be pulled like a rubber band up small capillary tubes like xylem cells.

Water has energy to do work: it carries chemicals in solution, adheres to surfaces and makes living cells turgid by filling them. This energy is called potential energy. At rest, pure water has 100 percent of its potential energy, which is by convention set at zero. As water begins to move, its potential energy for additional work is reduced and becomes negative. Water moves from areas with the least negative potential energy to areas where the potential energy is more negative. For example, the most negative water potential in a tree is usually found at the leaf-atmosphere interface; the least negative water potential is found in the soil, where water moves into the roots of the tree. As you move up the tree the water potential becomes more negative, and these differences create a pull or tension that brings the water up the tree.

A key factor that helps create the pull of water up the tree is the loss of water out of the leaves through a process called transpiration. During transpiration, water vapor is released from the leaves through small pores or openings called stomates. Stomates are present in the leaf so that carbon dioxide–which the leaves use to make food by way of photosynthesis–can enter. The loss of water during transpiration creates more negative water potential in the leaf, which in turn pulls more water up the tree. So in general, the water loss from the leaf is the engine that pulls water and nutrients up the tree.

How can water withstand the tensions needed to be pulled up a tree? The trick is, as we mentioned earlier, the ability of water molecules to stick to each other and to other surfaces so strongly. Given that strength, the loss of water at the top of tree through transpiration provides the driving force to pull water and mineral nutrients up the trunks of trees as mighty as the redwoods.”

In some ways we are taught to see scientific processes like this as an inevitable result of something–something ordinary. But an inevitable result of what? That is the point. From another perspective, it is the inevitable result of something miraculous. Let us call it the miraculous persistence of nature.

Advanced Financial Solutions, Inc. enjoys being persistent in finding PPLI structuring solutions for our worldwide client base. Please contact us for a unique solution to your asset structuring needs.

We invite you to put our persistency to the test!

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

#michaelmalloy #michaelmalloysolutions #advancedfinancialsolutions #ppli

Targeting Wealthy international families

‘Home Is Where The Heart Is’

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PPLI Brings You Home

Updated

Wealthy international families can create a tax compliant and enhanced privacy Home for their assets using Private Placement Life Insurance (PPLI). The concept of Home is a powerful one for all of us.

At this point in the digital age, you could consider a smartphone to be a type of Home for information. A smart phone can organize and personalize different elements of our lives to bring them to a place that gives us a sense of security much like a physical Home does.

We all like to arrange our contacts, notifications, sounds, and other features to suit our personal taste. The key word here is personal.

“PPLI can do the same for the assets of wealthy international families that are spread throughout the world.”

Our featured news article uses personal in another sense. We are widening our concept of Home to include ‘Home Is Where The Heart Is.’ For Kris Goldsmith what spurred him into action was misinformation that was being spread over Facebook about U.S. Veterans. This emotional element of Home can be a strong force in our lives.

“PPLI is a welcomed unifying element for the assets of wealthy international families.”

Let us review all that can be included in the assets of wealthy international families by visiting the Wikipedia page on Assets:

“In financial accounting, an asset is any resource owned by the business. Anything tangible or intangible that can be owned or controlled to produce value and that is held by a company to produce positive economic value is an asset. Simply stated, assets represent the value of ownership that can be converted into cash (although cash itself is also considered an asset). The balance sheet of a firm records the monetary value of the assets owned by that firm. It covers money and other valuables belonging to an individual or to a business.

One can classify assets into two major asset classes: tangible assets and intangible assets. Tangible assets contain various subclasses, including current assets and fixed assets. Current assets include inventory, while fixed assets include such items as buildings and equipment.

Intangible assets are non-physical resources and rights that have a value to the firm because they give the firm some kind of advantage in the marketplace. Examples of intangible assets include goodwill, copyrights, trademarks, patents and computer programs, and financial assets, including such items as accounts receivable, bonds and stocks.”

“With proper structuring most all the assets mentioned above can be included in a PPLI policy.”

Let us return to ‘Home Is Where The Heart Is,’ by following the trail of Kris Goldsmith in his search for disinformation as it related to the Vietnam Veterans of America. Our source is The Wall Street Journal article, “Army Veteran Wages War on Social-Media Disinformation,” by Ben Kesling and Dustin Volz. If you change the subject matter, Mr. Goldsmith’s search could be ours.

We all have topics that compel us to act in one way or another, if what we see on Facebook or in the media strike the right emotional cord for us. This emotional cord is ‘Home Is Where The Heart Is.’

Kris Goldsmith’s campaign to get Facebook Inc. to close fake accounts targeting U.S. veterans started with a simple search.

He was seeking last year to gauge the popularity of the Facebook page for his employer, Vietnam Veterans of America. The first listing was an impostor account called “Vietnam Vets of America” that had stolen his group’s logo and had more than twice as many followers.

Mr. Goldsmith, a 33-year-old Army veteran, sent Facebook what he thought was a straightforward request to take down the bogus page. At first, Facebook told him to try to work it out with the authors of the fake page, whom he was never able to track down. Then, after two months, Facebook deleted it.

The experience launched him on a hunt for other suspicious Facebook pages that target military personnel and veterans by using patriotic messages and fomenting political divisions. It has become a full-time job.

Working from offices, coffee shops, and his apartment, he has cataloged and flagged to Facebook about 100 questionable pages that have millions of followers. He sits for hours and clicks links, keeping extensive notes and compiling elaborate spreadsheets on how pages are interconnected, and tracing them back, when possible, to roots in Russia, Eastern Europe or the Middle East.

“The more I look, the more patterns I see,” he said.

Facebook’s response to his work has been tepid, he said. Company officials initially refused to talk with him, so he used a personal contact at Facebook to share his findings. Lately, the company has been more active.

Facebook didn’t respond directly to a list of questions about Mr. Goldsmith’s research, but a spokesman said the company had 14,000 people working on security and safety—double the amount last year—and a goal of expanding that team to 20,000 by next year.

In a statement, the spokesman said the company relied on “a combination of automated detection systems, as well as reports from the community, to help identify suspicious activity on the platform and ensure compliance with our policies.”

About two dozen of the pages Mr. Goldsmith flagged, with a combined following of some 20 million, have been deleted, often coinciding with Facebook’s purges of Russian- and Iranian-linked disinformation pages—including a separate crackdown by the company last week on domestic actors.

The determination and persistence of Mr. Goldsmith reminds us of how at EWP Financial, we pursue all available avenues to successfully place assets into a properly structured PPLI policy. The results include both a fully compliant structure, and one that also produces enhanced privacy for the family, as for reporting purposes, the owner of the assets inside the PPLI policy becomes the insurance company.

You have an open invitation to find ‘Home Is Where The Heart Is’ with us. We welcome your comments and questions on how to find the right Home for your assets with Advanced Financial Solutions, Inc. by using PPLI. Please contact us today for an initial consultation at no charge.

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

~ Your best source for PPLI and EWP

#michaelmalloy #michaelmalloysolutions #advancedfinancialsolutions #ppli

Tortoises Have Strong Shells

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PPLI’s Tax Shield Is Even Stronger

The tax savings element of Private Placement Life Insurance (PPLI) is impressive. We invite you to reflect on your own attitudes toward tax savings by offering two articles on tax that appeared this week in the media.

The tax codes of most countries are a maze of regulations that require professional assistance to extract the most salient tax saving points. PPLI is at the forefront of structuring techniques that take advantage of maximum tax savings, and at the same time, full compliance with the world’s tax authorities.

How does PPLI become the “leader of the pack” when it comes to tax savings?

This is summed up mostly in two words: Life Insurance. The life insurance laws in most countries are very tax friendly–one receives tax deferral for the investment component of a life insurance contract, and at the death of the insured person(s), the death benefit is passed tax-free to the beneficiary.

With PPLI you couple the life insurance component with an open architecture platform. What does this allow? This allows assets to be located almost anywhere in the world, and to have asset managers located in most jurisdictions in the world. PPLI structuring is a very powerful tool for wealthy international families, and is difficult to achieve with entity planning only–creating trusts, foundations, corporations, etc.

Now for our news articles that reveal interesting attitudes towards wealth and taxes. The first is from Bloomberg, Top 3% of U.S. Taxpayers Paid Majority of Income Taxes in 2016.

“Individual income taxes are the federal government’s single biggest revenue source. In fiscal year 2018, which ended Sept. 30, the individual income tax is expected to bring in roughly $1.7 trillion, or about half of all federal revenues, according to the Congressional Budget Office.”

Bloomberg looked into the 2016 individual returns data in detail for some additional insights illustrated in the chart below:

The top 1 percent paid a greater share of individual income taxes (37.3 percent) than the bottom 90 percent combined (30.5 percent).
The top 50 percent of all taxpayers paid 97 percent of total individual income taxes.”

Our next article is from The New York Times, How Jared Kushner Avoided Paying Taxes.

“Jared Kushner has a net worth of almost $324 million, and his company has been profitable. But Mr. Kushner, who is President Trump’s son-in-law and senior adviser, appears to have paid almost no federal income taxes for several years running, according to documents reviewed by The New York Times.”

The article goes on to detail Mr. Kushner’s real estate investments, and how they result in a zero tax bill.

Ironic Fact

When one combines the salient points of these two articles, it is ironic to reflect that the wealthy are the ones who both pay the most taxes, and seek to save the most taxes. When anyone prepares their income tax return, wealthy or poor, do they seek to pay the most tax or the least? Many commentators criticize wealthy individuals and corporations for not paying their fair share of taxes. But what is this fair share? Who decides what a fair share is?

Thankfully, we don’t have to answer this question. Our goal is to maximize your investment gains through strategies that minimize your worldwide tax burden. Please send us your tax concerns and questions, so we can structure a plan that gives you all the tax savings elements of PPLI. You can share your experience and inquiries at the bottom of the page. Thank you.

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

#michaelmalloy #michaelmalloysolutions #advancedfinancialsolutions #ppli

McDonalds and Stray Dogs

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PPLI Gives Tax Relief

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

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

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

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

The six principles of EWP

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

#michaelmalloy #michaelmalloysolutions #advancedfinancialsolutions #ppli

PPLI and wealthy international families.

Rarity and Value

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PPLI Will Take You Home

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Private Placement Life Insurance (PPLI) is a refuge in today’s stormy sea of compliance and tax regulations. When we are distraught and confused our home becomes a safe haven. This is exactly what PPLI does for the assets of wealthy international families.

The rarity of an item tends to give it value. When this item becomes the subject of theft, it can produce more interest, and, even, greater interest if the item is later recovered. This was the case recently with the ruby slippers in the American musical, fantasy film The Wizard of Oz. In the film the ruby slippers have the magically property of taking you Home.

Let us first explore how PPLI creates a safe haven for the assets of wealthy international families. This is best done by diving into the stormy sea of compliance and tax regulations. One understands a subject by the way it is framed. In this case we are speaking about intellectually framing. Let me explain further.

When we wish to go into more depth about a subject, we must first choose a source. How this source of our new knowledge presents the topic becomes part of our new understanding of the topic. This is what I mean by intellectual framing.

Politics gives us a clear example. When we read about a political event from one news source, and, then, read about the event from another news source that has a very different political perspective the two stories can sound very different indeed.

Filippo Noseda of the Mischon de Reya law firm in London is an attorney who is active in privacy issues for wealthy international families. In Trusts & Trustees, “CRS and beneficial ownership registers—what serious newspapers and tabloids have in common,” we think his framing of the privacy vs. transparent issue is excellent. We will express his viewpoint in excerpts from the article.

“The European Data Protection Supervisor (EDPS) published a damning opinion in which he decried the unclear objectives pursued by the AMLDs and, more generally, the invasive nature and lack of proportionality of the proposed registers.”

“As if they were living on planet Europa rather than in Europe, the European Parliament, the Organisation for Economic Co-operation and Development (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.”

“Data protection has moved to the forefront of people’s minds, prompting the EU to overhaul the existing data protection rules and has also led to a number of ground-breaking decisions by the European Court of Justice which confirms that the pendulum has started to swing back towards greater protection of privacy and data protection.”

“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 CRS and beneficial ownership registers on the other.”

In structuring assets for wealthy international families, the insurance company of the PPLI policy becomes the beneficial owner of the policy’s assets. This structure gives compliance simplification, as what is reported to tax authorities is the total of the assets inside the PPLI, and not the individual assets inside the policy. At the death of the insured life in the PPLI policy, the assets pass as a tax-free death benefit to the beneficiaries.

Let us return to The Wizard of Oz and the ruby slippers. These magic, ruby, slippers had the property to take you Home once you clicked your heals together three times. The slippers were stolen thirteen years ago from the Judy Garland Museum in Grand Rapids, Minnesota. They were recently recovered by the FBI and returned to the Museum. Of course, this publicity gave the slippers added value, and increased their rarity as something unique.

With PPLI you don’t need the ruby slippers to take you Home. You gain protection from the stormy seas of tax compliance by having your assets inside a PPLI policy, so you are Home from the beginning. You also won’t have your assets taxed, since they are inside a tax-free environment.

We invite your participation in our quest to take you Home to a truly unique structuring tool that has rarity and value. Please write your thoughts and questions at the bottom of the page. If you want to communicate privately with me don’t hesitate to drop me a line: michael@michaelmalloy.solutions

Thank you.

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

#michaelmalloy #michaelmalloysolutions #advancedfinancialsolutions #ppli

The Beauty of The Integrated Circuit

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PPLI: The Computer Chip of Wealth

Private Placement Life Insurance (PPLI) is a type of integrated circuit, read computer chip, in planning for wealthy international families. Both of these remarkable structures remain in the background, and what is visible is the amazing things that they accomplish.

If you have ever opened up the inside of a laptop computer, you see a bewildering array of small devices connected by tiny wires–the world of integrated circuitry This is similar to the PPLI flow charts that are firm produces to model the worldwide investments, hard assets, real estate holdings, and companies of the wealthy international families that we serve

Courtesy of Sparkfun we have this definition,

“Integrated circuits (ICs) are a keystone of modern electronics. They are the heart and brains of most circuits. … An Integrated Circuit is a collection of electronic components – resistors, transistors, capacitors, etc. – all stuffed into a tiny chip, and connected together to achieve a common goal.”

Let us look at a typical flow chart for a PPLI policy. Now isn’t our analogy making more sense? Just imagine the boxes to be computer chips.

Andy Kessler in his recent Wall Street Journal article, “The Chip That Changed the World,” describes how essential integrated circuits are in our lives today.

“Integrated circuits are the greatest invention since fire—or maybe indoor plumbing. The world would be unrecognizable without them. They have bent the curve of history, influencing the economy, government and general human flourishing. The productivity unleashed from silicon computing power disrupted or destroyed everything in its path: retail, music, finance, advertising, travel, manufacturing, health care, energy.”

Noted tax attorneys David Neufeld and Grant Markuson give us excerpts from, “Keeping It All Using Private Placement Life Insurance To Achieve Tax Free Investment Returns.” We thank them for their insightful remarks on PPLI.

“Few financial choices are more critical than protecting an investment portfolio from taxes. One of the most powerful but little known and under-used tools to achieve this is a private placement life insurance (PPLI) policy. By placing an investment portfolio within this life insurance vehicle, investors can convert an otherwise taxable portfolio into one in which no income or capital gains taxes accrue, ever.

PPLI can be especially relevant to angel investors who have a wide range of investments — including private equity — that have the potential to produce sizable capital gains. As a service to our readers, Angel Investor asked David Neufeld and Grant Markuson, tax attorneys at Markuson & Neufeld, to introduce our readers to this important investment vehicle.

Using PPLI as a Component of an Estate and Income Tax Plan Standing alone, PPLI offers powerful income tax planning opportunities. The gains and income earned on the investments forming the underlying funding of the policy do not incur federal or state income tax. Equally important, this tax saving is permanent, not simply a deferral to some future date. Once the insured dies, the insurance proceeds — reflecting the then-current value of the investments plus the insurance component — should be received by the beneficiaries income tax free.

The PPLI does not only benefit the beneficiaries upon the death of the insured; it also can benefit the policy owner during his or her life, by permitting loans of the cash value without triggering any income tax on the realized gain. Interest payments simply go back into the policy value.”

In today’s world attempting to hide assets from tax authorities only draws more attention to them. Why not use a “background structure” like PPLI to not only shield assets from tax but also gain enhanced privacy. Please let us know how we can assist you in these planning aims.

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

#michaelmalloy #michaelmalloysolutions #advancedfinancialsolutions #ppli