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
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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