Tax Compliance & Privacy Together: PPLI

Expanded Worldwide Planning (EWP) in Action

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

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

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

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

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

Notable Current Issues on This Topic

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

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

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

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

 

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