Wealth is the product—the work product—of work itself. Whether the product is a wealth of money, especially if wealth refers to a specific amount of money, or a wealth of deeds for which money advances good deeds, protecting wealth from excess taxation is essential.
Private placement life insurance (PPLI) is the protection accredited investors with a minimum net worth of $1 million (excluding their primary residence), or income of at least $200,000 in each of the preceding two years, should have; that accredited investors, including married couples with income of $300,000 in each of the preceding two years, must have.
Requirements differ among foreign-based PPLI carriers, while modified endowment contract (MEC) regulations ensure that policies have the same tax advantages as U.S.-based life insurance contracts.
Without the protection PPLI offers, and based on the Biden administration’s plan to raise the estate tax, the wealth of generations—born of one and borne by many over the course of decades or centuries—will go to the government. With the protection PPLI offers, an accredited investor can buy a variable universal life insurance policy to safeguard or increase his wealth.
So long as the domestic investor can pay at least $1 million in annual premiums for four years, in addition to maintaining enough cash value to cover the cost of insurance, PPLI offers an investor a wealth of options, such as: tax-free death benefits to an heir(s), tax-deferred growth of cash value, and the possibility of tax-free growth of dividends.
Also, the insured often has the ability to remove funds, tax-free, through policy loans and withdrawals.
Because the insured assigns the ownership to another individual or to an individual life insurance trust (ILIT), the policy is not part of the taxable estate."
Provided the cash value is not zero, thus causing the policy to lapse, PPLI is a convenient and customizable source of protection for an accredited investor.
These advantages more than offset any administrative costs, because the insured can create a diversified portfolio of insurance dedicated funds (IDFs) charged with managing the assets of the policy.
For example, the cash value in a contract may be invested in an IDF that only manages money for life insurance policy cash accounts; while other IDFs offer private equity funds, commodity funds, funds of hedge funds, real estate investment trusts (REITs), and venture capital investments. The PPLI must, however, meet IRS rules pertaining to investor control, insurance, and diversification.
Working with an insurance adviser, the insured can have select money managers oversee individual investments within a portfolio. Choosing multiple managers can mitigate risk, just as having a diversified portfolio can reduce volatility.
See also: Innovation in Fraud-Detection Systems
Choice is the foundation of PPLI investing, because accredited investors want to maintain their financial freedom: giving them the means to perpetuate a legacy, promote a cause or preserve a lifetime of service; to do as they please, in accord with their ideals, on behalf of a universal ideal—that freedom is true and righteous altogether.
Protecting wealth protects the freedom of one to help many.
Protecting the few who are wealthy increases opportunities for the many to build wealth.
Protecting what wealth makes possible protects what the wealthy can make probable: charity for those who need it, education for those who crave it, culture for those who cherish it.
PPLI is the protection the wealthy deserve, so they can strengthen what they can give.