Cunning financial minds seem to be generating new ideas every day to shield wealth and income from the depredations of the IRS. One excellent idea involves life insurance.
Permanent life insurance policies pay a guaranteed benefit upon the demise of the insured and also build cash value over time. Whole life policies accumulate cash value through the premiums paid, but universal life policies generate greater cash values over time since they are linked to investment accounts. The most conservative options are indexed or fixed universal life policies since growth typically comes from a market index or other fixed rate investment. Variable rate policies involve more risk but offer the potential for more growth as they are linked to riskier investments.
Private placement life insurance (PPLI) is a customized variation on variable rate policies and is not available to any interested buyer. Typically offered by banks and hedge funds, these policies are available to only “accredited” investors based on their investable assets, income and investment experience.
Universal life insurance offers a number of tax benefits, including tax free growth of the policy cash value, tax free access to cash value through loans, and the opportunity to pass on wealth to heirs tax free through the death benefit (although the policy must be established in a trust separate from the insured’s estate).
One important fact to note is that investment options are more restricted for those wishing to avoid taxes. But PPLI offers a number of benefits over standard universal life policies, including institutional pricing, lower commissions and fees, and expanded investment options. However, once the policy is established the holder can no longer discuss investment options with the provider.
For more on how you might benefit from a PPLI policy, please visit:
Private Placement Life Insurance Explained | Wealth Management