Private Placement Life Insurance: Avoiding Income and Transfer Tax for High Net Worth Taxpayers

Meeting IRS Ownership, Diversification, and Insurance Guidelines

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Thursday, May 12, 2022

Recorded event now available

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Course Materials

This webinar will explain private placement life insurance (PPLI), including structuring considerations, asset selection, and meeting IRS requirements for tax practitioners working with high net worth taxpayers.

Description

PPLI allows high net worth individuals and family offices to purchase alternative investments that grow tax-free in insurance dedicated funds (IDFs) and can be distributed tax-free upon the death of the insured. Since earnings on comparable investments held personally would be subject to federal tax at ordinary or capital gains rates and state income tax, individuals residing in states like New York and California can reap tax savings of nearly 50 percent.

Along with tax savings, owners can access the funds tax-free by withdrawing original contributions or borrowing from the policy. PPLIs, however, are subject to stringent IRS guidelines. Insurance standards, diversification, and owner control requirements must be satisfied; otherwise, the policy could be disqualified, resulting in significant tax obligations and penalties.

Listen as our panel of life insurance experts discusses the benefits and caveats of PPLI. Tax advisers working with wealthy clients in high income tax brackets, and particularly those in high taxed states, need to understand PPLIs in order to take advantage of this powerful tax planning tool.

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Outline

  1. PPLI: background
  2. Benefits
    1. Income tax
    2. Transfer tax
    3. Other
  3. Caveats
  4. Structuring considerations
  5. Asset selection
  6. Best practices

Benefits

The panel will cover these and other critical issues:

  • What restrictions are placed on an investor's interactions with the PPLI?
  • Meeting the diversification of asset requirements
  • Establishing and funding an IDF
  • How does the owner withdraw funds tax-free?
  • What steps can be taken to minimize the risk of disqualification?

Faculty

Foley, Kenneth
Kenneth Foley

Managing Director, Wealth Management and Strategic Partnerships
Spearhead Capital

Mr. Foley brings 20+ years of financial services and insurance industry experience. Prior to joining Spearhead, he...  |  Read More

Lipkind, William
William D. Lipkind

Partner
Wilson Elser

Mr. Lipkind, Chair of the firm’s Tax Planning and Controversies Practice, concentrates his practice in the areas...  |  Read More

Warren, David
David A. Warren, JD

Co-Founder and Chairman of the Board
Bridgeford Trust Company

Mr. Warren is an attorney with over 15 years of professional experience practicing law and working in the financial...  |  Read More

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