The PPLI Solution: Delivering Wealth Accumulation, Tax Efficiency, and Asset Protection Through Private Placement Life Insurance / Edition 1Hardcover (2024)

FAQs

What is the PPLI tax strategy? ›

The PPLI essentially converts a very tax-inefficient investment, such as a hedge fund, into a very tax-efficient one for a high-net-worth investor. This strategy offsets the impact of current income by placing the assets in a life insurance policy with tax advantages similar to a Roth IRA.

Private placement life insurance (PPLI) is a sophisticated life insurance product that offers death benefit protection while also providing access to a variety of registered and non-registered investments that are accessible solely within the life insurance policy structure.

Life Insurance can be defined as a contract between an insurance policy holder and an insurance company, where the insurer promises to pay a sum of money in exchange for a premium, upon the death of an insured person or after a set period.

Policyholders contribute premium payments, and the policy accumulates cash value over time. The cash value grows tax-deferred and can be accessed during the policyholder's lifetime. Additionally, PPLI offers a tax-free death benefit to beneficiaries upon the policyholder's passing.

1. The death benefit is generally paid out income tax free. That's a pretty straightforward benefit for your heirs or other beneficiaries. Life insurance policy payouts can be pretty hefty and avoiding a major tax bite can be consequential.

All these benefits do come at a cost, PPLI can be fairly expensive to administer (but cheaper than the taxes you save), creates some restrictions on when and how much of the assets you can access and is limited to accredited investors.

The interest rate charged for loans taken against PLI schemes is 10% per annum. Some of the important factors to note with regards to the payment of interest are: The policyholder has to pay the interest on a half-yearly basis at the prescribed rate.

What is Survival Benefit? Survival benefit is the amount that you will receive after you survive the policy's duration. Survival Benefit is mostly present in policies that offer to cover for your whole life (100 years) and money-back plans.

Life insurance is a contract between you and an insurance company. In exchange for your premium payments, the life insurance company will pay a lump sum known as a death benefit to your beneficiaries after your death, as long as your policy is in force.

What are the different types of PPLI? ›

Alternative Investments: PPLI policies can allow investment in alternative assets such as hedge funds, private equity, real estate, and commodities. Cash and cash equivalents: PPLI policies can hold cash and cash equivalents such as money market funds.

Personal protection insurance offers you various ways to protect yourself and your family should you die, suffer a critical illness or be unable to work due to long-term accident or illness. We can help you by reviewing your situation and suggest the best options available to you.

Marketing an issue may be more difficult for private placements, as these investments can be quite risky with lower liquidity than publicly traded securities.

IUL links its investment returns to a market index, offering a degree of market participation with caps on returns and some downside protection. In contrast, PPLI provides more flexibility and potential for higher returns, albeit with higher risk and complexity.

Private placement can be a cost-effective way for companies to raise capital. Private placement offerings are exempt from many of the regulatory requirements that apply to public offerings, which can significantly reduce the costs associated with offering securities.

Captive Insurance as a Tax Shelter

Captive insurance can have legitimate tax benefits for business owners. Premiums paid to a captive insurer can be tax-deductible if the arrangement meets certain risk-distribution standards. Thus, the business gets a current year write-off even though losses may never occur.

Whole life insurance can avoid taxes by building cash value. Your cash value savings grow tax-deferred, so you don't owe income tax as long as you leave the money in your account. In comparison, if you saved through a savings account or a bank Certificate of Deposit, you'd owe tax on your interest each year.