Tax-Advantages

PPLI Tax Efficiency

When taxes are due in April each year, it’s a good time to consider the tax advantages of life insurance.  It is widely known that cash value inside a life insurance policy grows tax-free, and the death benefit of a life insurance policy can be tax-free to the beneficiary.  However, life insurance products offer more nuanced tax advantages that can be beneficial.

Private placement insurance products occupy a unique place in the spectrum of financial products. While having the same tax benefits, they offer policy structures and investment alternatives not found in traditional retail variable universal life (VUL) and variable annuity (VA) products.

Because they can only be offered to individuals who are qualified purchasers and accredited investors, private placement variable universal life (PPVUL) and variable annuities (PPVA) offer high net worth clients access to both investment alternatives and customized product designs that are difficult or impossible to obtain in traditional retail or registered products.

Private Placement Life Insurance (PPLI) can be a game changer for clients who have $1 million or more to allocate to alternatives and non-traditional investment strategies but are concerned about the substantial taxes they may incur.  PPLI is unique in its ability to allow policy holders to hold tax-inefficient alternative investments within a tax-favored insurance structure, and thereby incur no immediate income taxes. This also means that PPLI policy holders have no need to wait for a Schedule K-1 form from the investment fund to complete their annual tax filing.  Click here to read more about how to leverage Enhanced Tax-Efficiency with Private Placement Life Insurance.

Determining whether a PPLI policy is the right choice for a client requires carefully weighing the potential income and estate tax advantages of PPLI in light of the individual or business situation.  Contact us with any questions or opportunities to help you or your clients achieve identified goals.  This is what we enjoy doing for only a select number of families, businesses, and charitable institutions each year, and we look forward to hearing from you.