If you have heard of Private Placement Life Insurance, and want to learn more about how it can benefit your clients, this is the presentation for you. This webinar discusses:
This webinar discusses important planning issues and options that are often overlooked in a “typical” Spousal Lifetime Access Trust plan, including:
In this podcast Brandon Centula, Senior Vice President and Chief Fiduciary Officer of Peak Trust Company, discusses the Fundamentals of Private Placement Life Insurance with Matt Jones, President of Legacy Capital in Little Rock Arkansas. Below are highlights from the podcast.
What is a private placement life insurance policy (PPLI)?
As a life insurance policy, a PPLI meets all the statutory guidelines and regulatory guidelines under 7702 of the code. Qualifying under this code allows for beneficial tax advantages that not many other asset classes have, such as tax-deferred growth of your cash value and your investments. Insurance processes are received income tax-free and can be GST tax-free if properly structured and owned.
Who does private placement life insurance make sense for?
Families who have a liquid net worth of at least 25 million and those who have a desire to set up multigenerational wealth transfer planning.
Examples of families who incorporate private placement life insurance
Matt provides an example of a family who incorporated private placement life insurance into their planning. To shelter the money from income taxes as long as possible, it was recommended that they invest money in a private placement life insurance inside their trust. He explains how when traditional insurance is used as a way to pay estate taxes to provide liquidity for a highly liquid family, they want to give the insurance company as little as possible retain the rest of their assets, and get the maximum amount of death benefit. However, when implementing private placement insurance, the opposite approach is used by putting as much of the premium as possible into the policy with the minimum amount of death benefit to use this more of an income tax mitigation or elimination strategy. The larger your death benefit is when you design the insurance policy, the higher your mortality charges are (COI-Cost of Insurance).
How do private placement life insurance policies differ from traditional retail and what are some of the benefits?
Private placement life insurance is a niche with a limited amount of companies in this space. Both policies meet all the statutory and regulatory guidelines of life insurance, so they are afforded all the tax benefits of a traditional life insurance contract which includes tax, deferred growth of your cash value investments tax-free death benefit, and tax-free access through withdrawals and loans. Private placement products are structures with minimum death benefits, keeping all the COI costs down and they are institutionally priced so you’re getting much more attractive pricing than you do in a traditional retail policy. There are also minimum commissions for these products and these policies can also provide credit protection.
What are other investment asset classes within the private placement world?
Alternate investment spaces such as hedge funds, hedge fund of funds, private equity, private learning managed futures, real estate, etc.
What is the preferred jurisdiction for private placement life insurance?
Alaska, South Dakota, and Delaware are all preferred states to have private placement because these jurisdictions have created a probate and trust code that is much more generous to extremely wealthy families doing multi-generational planning.
What are the premiums associated with insurance policies?
Both state and federal taxes are levied on the premiums, starting between 2-3% depending on the state and its trust probate laws. Clients will have more of their dollars working in their favor due to lower state premiums versus the state they reside in.
What are the requirements to take advantage of private life insurance’s applicable premium tax in Alaska or Delaware?
There are four main harbor provisions. The first is a single or multi-member LLC, owning the policy here that the LLC would name Peak Trust as the manager. They would be responsible for signing the application and carrying out all the necessary wires, transactions, etc. Peak Trust can also be appointed as the trustee or the administrative trustee which would allow the trust to own the policy and Peak would carry out any specific duties related to that policy or potential transactions. The second harbor provision would be that as the manager of the LLC or trustee of the trust owning that policy, Peak Trust would sign the application in the state of Alaska or Delaware. The third harbor provision is to pay all the premiums from an account that Peak will set up in the name of the LLC or the trust owning that policy to pay all premiums. The final harbor provision is having that policy in the policy document delivered to the state of Alaska or Delaware.
Why isn’t private placement life insurance more common?
There are a variety of reasons for this common question. One factor has to do with the type of client due to a minimum liquid net worth of 25 million or more, which is a small portion of the population. Another reason is that private placement products are primarily distributed by financial advisors and there are a limited number of them within the networks. This requires a knowledge base and in-house expertise to manage private placement life insurance, such as an investment firm that works with the ultra-fluid and also has an understanding of alternative and complex investments. People are typically putting hundreds of thousands if not millions of dollars a year into something like this, so there is medical and financial underwriting that is required. Many financial advisers tend to be heavily concentrated on the investment side and don’t want to be involved in the complexities of medical underwriting.
If you have further questions about private placement life insurance after listening to the podcast or want to learn more about Peak Trust Company, contact us today.
This webinar discusses estate planning for clients who have blended or stepfamilies. Estate planning for clients who have blended or stepfamilies often presents significant and perplexing challenges for estate planners in the substantive planning. As if that was not difficult enough, estate planners may also encounter important ethical issues.
This webinar covers the often-counterintuitive ethical traps and landmines that estate planners face when working with blended or stepfamily clients, including:
This webinar sets the stage with a review of split-dollar life insurance planning. We follow prior cases that held against other taxpayers using similar techniques. Understanding what the taxpayer did right in the Levine case, and how that contrasts to what taxpayers did wrong in a prior case, Estate of Cahill, can be used to guide taxpayers contemplating such planning. But even better guidance is possible. A careful reading of the Levine case to identify steps the Levine Court found favorable, might be used to craft a roadmap of how to implement a similar plan.
Importantly, the lessons in the roadmap that are discussed should be considered by taxpayers undertaking almost any type of estate planning. While aspects of the Levine opinion are pretty narrowly limited to the split dollar insurance technique used in the case, many have broad applicability. The IRS arguments and Tax Court’s response regarding code sections 2036, 2038 and 2703 will be reviewed.
In this presentation, speakers Thomas A. Tietz, Esq., Jonathan G. Blattmachr, Esq. and Martin M. Shenkman, Esq. explore the following questions:
– How can practitioners (CPAs, wealth advisers, attorneys, insurance consultants) assist clients in the operation and administration of irrevocable trusts?
– What preliminary steps might be helpful to take to guide clients on proper trust administration steps?
– How can advisers help facilitate more accurate and efficient trust administration?
– Specific practical steps practitioners can use will be illustrated and explained.
– What should be done to improve the administration of grantor versus non-grantor trusts?
– How should swap and loan powers be administered?
– How should disclaimer and valuation adjustment mechanisms used in many irrevocable trusts be dealt with?
– What special considerations of 2021 planning should be reflected on 2021 gift tax returns?
– What ancillary documentation should be addressed to support various planning techniques?
Grantor retained annuity trusts (GRATs) provide an opportunity for your client to transfer assets that are appreciating in value to the next generation with little to no income, estate, or gift tax payments being owed. These are a type of irrevocable trust that comes with a common valuation challenge that arises for practitioners.
This presentation covers the critical impact on grantor retained annuity trusts (GRATs) based on CCA 202152018, which was released on December 30, 2021. The CCA addresses a common valuation challenge, what consideration should be given to potential sales in valuing an asset?
Often there is a long continuum from no sale, to discussions with potential buyers, to a letter of intent, to a binding contract, etc. Where the business is on the continuum will affect how an appraiser will evaluate the possible implications of the status. In the CCA the possible sale had moved too far along the continuum towards an actual sale to have been ignored in the valuation. As a result, the IRS applied the reasoning in the Atkinson, and held that the valuation was so wrong that the GRAT annuity was not qualified. This would result in a deemed gift of the entire value of the property involved.
Life Insurance is a ubiquitous asset that has unique features and is uniquely (and favorably) treated under many legal systems, including for bankruptcy and for tax purposes. It is also one of the least understood properties with which Americans and their advisors face.
In this webinar, the speakers will:
Peak Trust Company provides trust administration services for trusts holding fixed, variable, and private placement life insurance policies. Due to Alaska and Delaware’s flexible LLC laws and low premium tax, we serve as trustee for many life insurance trusts. Contact Peak Trust Company to learn more.
This webinar “Flexible Beneficiary Trusts” – covers a trust strategy for keeping assets protected from creditors and potential spendthrift beneficiaries while taking advantage of the generally lower income taxes if trust income can be taxed to beneficiaries.
In this webinar, the speakers discuss:
Have questions about flexible beneficiary trusts or non-grantor trusts? Contact Peak Trust Company’s team of experts.