Have You Considered PPLI As A Tax-Shelter?

July 14, 2016

Robert Katz, CFP®


Tax-deferred growth is the “holy grail” of wealth accumulation for individual investors. What’s the catch?

  • Retirement plans have strict annual contribution limits, and
  • Income taxes are payable once funds are disbursed.

An often overlooked tax-deferral, and possible tax elimination strategy, is available to high net worth investors in the form of a Private Placement Life Insurance policy…

What is Private Placement Life Insurance?

Private Placement Life Insurance (PPLI) is like an IRA on steroids – it provides for maximum growth on the cash-value/ investable portion of the policy by deferring, and potentially eliminating, income taxes with the added appeal of a death benefit when the insured passes.

At a high level, PPLI is a type of variable universal life insurance policy. Unlike traditional retail life insurance where policies are designed to have the largest amount of death benefit for the lowest price, the primary purpose of PPLI is as an investment vehicle due to the potential for tax-free accumulation of investment earnings and tax-free access to policy assets through cash-value withdrawals or loans.

Benefits of PPLI –

  • Establishes a tax-free investment wrapper
  • Eliminates certain tax reporting complexities and administrative burden
  • Fully transparent institutional pricing structure
  • Wide array of investment options and flexibility to change managers
  • Can withdraw/borrow from policy at minimal cost
  • The potential for enhanced IRRs as a result of favorable tax treatment
  • No surrender charges
  • Ability to pass the death benefit tax-free to heirs
  • Continuous and extensive oversight and service of policy by insurance broker and your investment advisors to ensure adequate performance

Planning for the complexities –

As with any financial decision, there are variables that must be considered and planned for when implementing a PPLI policy:

  • Costs
  • Income taxes
  • Estate taxes
  • Investment discretion
  • Asset protection

Interested in learning more?

A properly structured PPLI policy can offer unique income tax, estate tax, and investment benefits to high net worth individuals and trusts. Consider whether this structure may make sense in the context of your individual financial situation and discuss with your estate attorney, insurance broker, and accountant.

As always, feel free to contact Robert and/or Seth in our Wealth Strategies group if we can be of any assistance as you navigate whether this strategy may work for you, or any of your clients.

Content Disclaimers

This commentary/ article has been published or selected for distribution by Bainco based on current events and/or topics of interest. It contains the current opinions of the authors as of the date of publication. All opinions are subject to change at any time. This material has been distributed for informational purposes only and is not meant to convey a current or past recommendation, investment advice of any kind, or a solicitation of an offer to buy or sell securities or investment services.

Material in this publication, including market forecasts and forward-looking statements, is original and/or derived from proprietary and non proprietary sources Bainco deems to be reliable; Bainco does not, however, warrant the completeness, accuracy or timelessness of the information obtained from these sources. The opinions and statements set forth do not consider the investment objectives or financial situation of any particular individual or group of individuals. Readers will need to consider their own circumstances before making an investment decision and are cautioned to consult their own tax and investment professionals with regard to their specific situations.

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