Could Private Placement Life Insurance be the "Perfect" Structure?

I don’t happen to think that’s true. Rather, the way we cover our topics is a choice.

Because although there are plenty of professionals out there happy to drown you with mostly incomprehensible technical jargon, I don’t think that serves you. Rather, presenting ideas as clearly and cleanly as possible is going to be the best use of your time.

Which brings me to a conversation last week with a colleague who works with us on what might be one of the most complex engagements we take on: Private Placement Life Insurance (PPLI).

PPLI is one of those topics where I could fill an article with technical jargon. But that would miss the point. Clients don’t work with us because we can recite the Internal Revenue Code; they work with us because we’re good planners with decades of experience in the trenches.

And when it comes to something like this, clients want to first understand what makes it useful. That’s exactly the sort of thing I try to communicate in articles like these.

In that vein…

#1: PPLI is one of the most effective asset protection structures available today. Arguably more effective than domestic asset protection trusts, international asset protection trusts and multi-tiered LLCs or LPs. In many cases, perhaps even more so than most retirement accounts.

#2: All gains within a properly structured policy are tax-deferred and can be received income-tax free under the right circumstances. With an extra piece, they can be structured to avoid estate taxes entirely. And, if done well, can even be “rolled over” to the next generation to create intergenerational wealth, arguably better than a dynasty or a generation-skipping trust.

#3: It’s amazingly flexible. You can hold all sorts of assets onshore and offshore – from equity portfolios in Switzerland to US and foreign real estate to private company shares.

But…

… obviously something this useful is subject to all sorts of rules and regulations and important planning considerations. It’s very easy to mess this up.

Advisors have to be aware of things like IRC 953(d), the Investor Control Doctrine, ILITs, cross-border jurisdictional regulatory burdens, 1035 exchanges, and comprehensive KYC and AML requirements.

Needless to say, this is all extremely technical. (Just run some of those terms above through your favorite AI model, ask for a comprehensive explanation, and you’ll see what I mean.)

And putting all the pieces together when there are multiple advisors involved is even harder.

So, needless to say, none of this is easy for someone who doesn’t live and breathe these topics every day. That’s why I try not to get too lost in the weeds in an email discussion like this.

Because the truth is, most readers don’t want to know how the sausage is made; they just want the meal.

(On the other hand, if you are interested in the details, here’s a painfully detailed article I wrote on PPLI policies a few years ago.)

If you’re wondering whether a Private Placement Life Insurance policy is right for you, feel free to get in touch. Please note that you:

• Must have at least $2 million to fund a domestic policy; international policies start at $3-$4 million and come with additional advantages not found on the domestic side.

• For regulatory reasons, the account is funded over time, so you don’t need to have all the money up front.

• On a case-by-case basis, it is possible to borrow against an existing asset to fund such policies.