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Curated PPLI Policy Designs

You can trust that our team has the experience and knowledge to deliver, credible, tested and workable solutions to problems that are not always black and white.

Private Placement Life Insurance is a key component in a well thought out wealth management plan. Our team’s structures are carefully designed to ensure compliance of every necessary level to maximize income and estate tax advantages effectively.

Our goal is to provide the best structure for the management of a client’s investment portfolio. A private placement policy offers access to Insurance Dedicated Funds (IDF) and Separately Managed Accounts (SMA) that can hold a variety of assets which transcend traditional marketable securities. 

In working for counsel, we help provide these options and more to ensure the various assets that are included in a client’s unique portfolio are properly owned with maximum efficiency within their curated private wealth and insurance structure.

One of the few remaining mechanisms available to accomplish this goal is the use of life insurance products such as PPLI or PPVA. The federal tax laws permit the payment of death proceeds from a life insurance policy free from federal income taxes. 

Most state income tax statutes follow the federal model. This tax-favored treatment of life insurance proceeds has remained a constant for most of the existence of the income tax in America since the enactment of the Internal Revenue Code of 1928.

Bespoke Private Placement Life Insurance

Bespoke Private Placement Life Insurance is an advanced form of life insurance that can provide substantial advantages to policy holders above and beyond the life insurance policies that are sold by agents to the general public. The insurance benefits, application of tax favored status, and governing rules that apply to retail life insurance is also afforded to these curated policies.

A Private Placement Life Insurance (PPLI) policy is a type of variable life insurance policy. One of the chief tax benefits of a cash value life insurance policy is that the policy’s cash value accumulates free of income taxes.

The types of investments available in a retail or mass marketed variable life policy may include stocks, bonds, mutual funds, and alternative investments. However, the menu of available investments is nevertheless limited by the offerings of the issuing life insurance company. 

A bespoke policy is a variable life insurance policy wherein the menu of investments is not limited by the issuing life insurance company’s portfolio, thereby broadening the choices of cash value investments to an almost unlimited scope.

If the assets held in a PPLI policy’s separate account perform well, the policy’s cash value may substantially exceed the policy’s minimum death benefit. Upon the insured’s death, the beneficiary receives the greater of the minimum death benefit or the value of the assets held in the separate account. In either scenario, the death benefit will be free from all income taxes, regardless of the identity of the beneficiary.

Characteristics of Curated PPLI Policies

  • An Insurance Dedicated Fund (“IDF”) holds the majority of the policy investment assets. The IDF is a preferred vehicle to hold assets within a policy structure. Properly administered Separately Managed Accounts (“SMA”), are permissible.
  • The creation of the IDF and the manager you choose is client need driven.
  • Based upon performance and consultation with the insurance carrier.
  • Flexibility is built into the policy and the investment strategy, allowing changes when desired.
  • The IDF or SMA are designed to achieve a diversified portfolio.
  • The portfolio will become more diversified over time as earned dividends are re-invested without deductions for taxes.
  • In addition, the manager can sell appreciated assets without capital gains exposure.  This would be done confidentially due to the policy asset protection.
  • The policy structure is designed to both protect assets and maintain compliant anonymity.

Investing Through A Curated Policy

  • Customized PPL I policies, and the contract structure and terms, are customized to suit the client, their needs, and their situation.
  • Policy holders may nominate their trusted investment advisors to oversee and manage the cash value, and the liquid investments may be held in custody at the selected investment advisor's firm.
  • Policies can hold traditional bankable assets, as well as a variety of business interests, real estate, art, oil and gas holdings, and other holdings.
  • Complete transparency of costs on a pre-arranged term sheet. There are generally no commissions, only fully disclosed management fees charged by the PPLI Insurer, and the referring advisor is paid from the fee collected by the insurer.
  • The policies can be owned by trusts and other structures that are regulated by state law and provide valuable privacy and protection to policy owners and beneficiaries.
  • The policy Death Benefit may be acquired at a much-lower net cost, versus mass-marketed and retail insurance policies.
  • Policies may distribute life insurance proceeds “in-kind”. In-kind assets can include the actual stock or ownership interests in private equity and real estate.

Final Thoughts

THE LIFEBOAT PROVISION
Bespoke PPLI designs can be engineered to significantly reduce the exposure of unanticipated life insurance cost increases or a dramatic reduction in policy values. Our proprietary policy design includes highly efficient pathway to safety should there be an unexpected rise in expenses. This valuable provision is designed to work even if the insured experiences a loss of insurability. Such capability is unavailable with standard traditional life insurance and is generally not offered through the PPLI policies sold by brokers.

INSTILLING CLIENTS’ VALUES IN THEIR WEALTH PLAN
Advanced wealth planning often begins with calculations. Some advisors examine the bottom line and make suggestions based on spreadsheets. We understand that a full life is represented by more than points on a scoreboard. Each hand-crafted PPLI policy designs is fashioned to comport with the individual characteristics, needs and ambitions of our clients. No two solutions are identical because each client is unique.

1 § 72(e). Note that the policyholder will be required to recognize the taxable income and/or losses deferred under § 72 upon the occurrence of any one of a number of events, including sale, surrender, or lapse of the policy. All statutory references made herein are to the Internal Revenue Code of 1986, as amended (the “Code”), unless specified otherwise.
2 Contrast this use of the policy’s cash value with non-variable universal life insurance policies or whole life insurance policies, wherein the policy’s cash value is invested with the general account of the issuing insurance company. The general account of most major life insurance companies, especially the mutual companies, has historically performed well relative to the fixed-income investment markets.
3 § 101(a)(1). Note that the death benefit may be rendered taxable in the event of a “transfer for value,” a prominent exception explained in § 101(a)(2) and the Treasury Regulations thereunder.
4 For non-Modified Endowment (non-MEC) Contracts only. Non-MEC withdraws to basis are tax free. Loans may be obtained from the insurance policy on a tax-free basis. Clients should consult insurance counsel for further details. Certain advanced planning benefits that may be derived through a Private Risk policy can only be obtained through planning with expert counsel.