This Life Insurance Lets the Very Wealthy Invest in Private Markets and Defer Taxes

Estate planning has come a long way, adapting to the needs of wealthy individuals who face complex financial challenges. One innovative tool in this area is Private Placement Life Insurance (PPLI). Unlike regular life insurance, PPLI lets wealthy people invest their premiums in options like hedge funds and private equity. This makes PPLI a powerful tool for estate planning, helping to grow and preserve wealth for future generations while reducing taxes.

The biggest advantage of PPLI is its tax benefits. Investments within a PPLI policy grow without being taxed until they are withdrawn. Additionally, the death benefit is usually paid to beneficiaries without any income tax, which can save a lot of money compared to other investments. For the very wealthy, these tax savings can make a big difference, increasing the amount of money passed on to heirs. By using PPLI, individuals can manage their estate’s tax exposure more effectively, ensuring more wealth is preserved.

PPLI also offers asset protection benefits. The assets in a PPLI policy are usually safe from creditors, providing an extra layer of security for the policyholder’s wealth. This is particularly useful for people in high-risk professions or those with significant personal assets. PPLI policies can be customized to meet the specific needs and risk preferences of the policyholder, making them a flexible tool for estate planning. By using PPLI, the wealthy can manage their investments wisely, protect their assets, and optimize their estate plans, ensuring their financial legacy remains strong and secure.

For more information see Andrea Riquier "This Life Insurance Lets the Very Wealthy Invest in Private Markets and Defer Taxes", Barrons.com, May 14, 2024.

Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.