Using Private Placement Insurance Products to Achieve Tax Efficiency for High Net Worth Investors

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Originally published in Journal Of Taxation Of Investments - Summer 2012.

Although no one can predict what Congress will do at any point, it is quite likely we will see higher income tax rates in the near future, along with an increase in federal estate tax rates and a decrease in available income tax deductions. For high net worth investors, private placement insurance contracts could be the solution to tax planning in an unfriendly tax environment. These investment vehicles allow for investment customization and provide for the possibility of stronger and more consistent investment peiformance, while also offering attractive tax benefits. The author explains several options within the realm of private placement insurance, and analyzes the related investment and tax planning issues.

Introduction - This article is designed to provide an overview of the benefits of private placement life insurance (PPLI) and private placement variable deferred annuity products (PPVA) for ultra-high net worth investors. PPLI is an institutionally priced variable universal life policy designed for accredited investors and qualified purchasers as defined under federal securities law. The policy allows for customized investment options which may include alternative investments such as hedge funds. PPVA is an institutionally priced variable deferred annuity which allows for customized investment options as well.

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