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

 

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, @ Advanced Financial Solutions, Inc

Michael Malloy-CLU-TEP

 

 

 

#michaelmalloy #PPLI #privateplacement #lifeinsurance #advancedfinancialsolutions

 

 

 

 

 

Q & A – The Rainmaker Cometh

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

 

The Rainmaker Cometh

Professor PPLI’s Tanned Face

 Part 3

 

Get the book now!

See original article

Professor PPLI, there is the phrase to ‘hide something in plain site.’ Isn’t this similar to PPLI asset structures?

 Yes, you hit upon a key point, both geopolitically and in reference to PPLI. Seeking to hide assets from tax authorities is a thing of the past. The desire to seek legitimate privacy, tax efficiency, and asset protection is accomplished through the medium of life insurance with PPLI. ‘In plain site’ because life insurance is such a conservative and widely accepted financial instrument.

With the correct structuring it can achieve the six principles of Expanded Worldwide Planning (EWP):  privacy, asset protection, tax shield, succession planning, trust substitute, and compliance simplifier.

In this part we quote an extended passage by Charles Dickens on the effects of the wind through an English village. Professor PPLI, how is this analogous to PPLI?

 In nature the wind can be a disruptive force, especially when it blows very hard. Indeed, in the Dickens’ passage that we quote, the wind is a very disruptive force, much like a violent winter storm. To quote a more modern depiction of an emotional storm, here are the opening lines of  a song by Bob Dylan, Shelter from the storm:

‘Twas in another lifetime, one of toil and blood

When blackness was a virtue and the road was full of mud

I came in from the wilderness, a creature void of form

“Come in,” she said, “I’ll give you shelter from the storm”

PPLI is just such “shelter from the storm.” In this section of the book, we also present an article by Simon Gorbutt from the STEP Journal. The article describes in detail how PPLI can assist wealthy international families in cross-border situations.

We quote from the Conclusion of the article: “As families and their wealth gradually disperse, and business and personal relationships evolve, even established planning tools can be rendered inefficient or, worse, obsolete. While no structure will weather all eventualities, the flexibility inherent in life insurance and the breadth of its recognition make it an attractive candidate for completing a modern wealth and succession plan.”

Professor PPLI, one can travel almost anywhere in the world in 24 hours. I think you can say our world is the most widely traveled in history. How does PPLI make successful asset structuring more possible in this environment?

PPLI is a true cross-border structuring tool. Many wealthy families are spread out over the globe. At Advanced Financial Solutions we carefully research all aspects of each country where a family member may reside. We also must look into the laws and regulations surrounding each asset in the PPLI structure to ensure that all reporting requirements are being met. In many cases PPLI greatly simplifies the reporting requirements, because the insurance company becomes the beneficial owner of the assets inside the policy.

 

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

Michael Malloy-CLU-TEP

 

 

 

 

 

 

 

#michaelmalloy #PPLI #privateplacement #lifeinsurance #advancedfinancialsolutions

 

 

 

 

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

 

Get the book now!

See original article

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, @ Advanced Financial Solutions, Inc

Michael Malloy-CLU-TEP

 

 

 

 

 

 

 

#michaelmalloy #PPLI #privateplacement #lifeinsurance #advancedfinancialsolutions