Private placement Life Insurance
What is it?
PPLI is an internationally recognised life insurance product that allows for a variety of instruments to be held within its structure, also referred to as open architecture. It is a form of Variable Universal Life insurance that allows for the investments to be enveloped in a legal structure that offers various wealth planning benefits.
Benefits
- Tax - It depends on the policyholder's and beneficiaries' tax jurisdiction(s) they are subject to, but there are considerable tax benefits to be taken advantage of. The investment gains are accrued tax-deferred or tax-free within the policy, which leads to a considerably different investment outcome. Also, there are tax benefits to withdrawals of the original capital and substantial inheritance tax and succession benefits. The pre-emptive tax benefits are one of the major draws of this scheme.
- Asset Protection - Due to the way the policy is legally structured, the assets within are no longer at risk of bankruptcy proceedings or other forms of claims or seizure.
- Privacy - There are greater freedoms in investment choice that are otherwise restricted by a number of factors. Furthermore, there is far greater confidentiality due to fewer or no reporting requirements. In many cases, the policyholder remains anonymous and invisible to the public.
- Trusts - These policies can be very effective when used in conjunction with trust structures. Many jurisdictions have anti-avoidance rules seeking to look through trusts to tax investments on an annual basis and sometimes at punitive rates. Combining a trust with a PPLI combines the estate-planning benefits with tax neutrality, simplified tax reporting and tax-efficient exit strategies.
Structure
The client is the policyholder, while the insurance provider is the legal owner of the policy assets. JS Wealth is responsible for the management of the policy assets, both parties working for the benefit of the policyholder and/or the beneficiaries.
There are financial thresholds, investment profiles and liquidity requirements that must be met, such as diversification parameters with no more than 55% in any one holding, and at least 5 investments held. The premiums paid into the policy are flexible as to the amount and timing.
The premiums are held in a separate account linked to the policy. This means that the assets are segregated from the general account of the insurer and all other separate accounts of the insurer. So, the assets are not subject to the credit risk of the insurer.