Private Placement Life Insurance (PPLI) is a powerful wealth planning tool used by family offices and high-net-worth individuals to invest in a tax efficient manner and transfer wealth to future generations more effectively. PPLI offers significant tax advantages, including the avoidance of income taxation on internal income and proceeds at the death of the insured, making it an attractive option for domestic and international families seeking to optimize their financial strategies. Unlike traditional “retail” insurance, PPLI provides a unique opportunity to leverage insurance rules for enhanced tax efficiency. There is a focus on cash value accumulation and investment flexibility as well as transparent pricing, which is fully disclosed. In some cases, there are no surrender charges, depending on the insurance carrier.

One notable advantage of PPLI, particularly for clients in high-tax jurisdictions, is the opportunity to minimize tax liabilities by taking advantage of favorable state regulations. While most U.S. states have a state premium tax anywhere from 200-250 basis points, in South Dakota the insurance premium tax is only a percent (8 basis points) for the portion of the annual life premiums exceeding $100,000. Given that the majority of PPLI premiums are in the millions, opting to place PPLI policies in trust in South Dakota will result in compelling state tax savings.

Differences between PPLI and Retail Life Insurance:

• Policy owner has broader flexibility with regard to investments and many hedge fund investment choices are available (note: policy owner cannot exercise direct or indirect control over the policy investments).
• Policy purchasers must meet ‘qualified purchaser’ and ‘accredited investor’ guidelines under SEC rules.
• Policy fees are more competitive than retail insurance products as in most cases there are low front-end loads on premium payments and the annual charges against policy cash values are a small fraction of the annual tax cost associated with similar investments in a taxable environment.

PPLI is particularly beneficial for:

• Clients in high tax brackets or residing in high-tax states, seeking to maximize tax efficiency.
• Clients looking to allocate to tax-inefficient assets, leveraging PPLI’s tax advantages.
• Clients with grantor trusts, aiming to enhance wealth preservation and transfer strategies.
• Clients with charitable intent, especially applicable for U.S. clients looking to optimize philanthropic efforts.
• Clients with long-term investment horizons and wealth transfer goals for subsequent generations, benefiting from the wealth accumulation and preservation features of PPLI.

As a registered insurance agency in the state of Florida, Bridgeford Global is qualified to intermediate life insurance policies, including but not exclusively, Private Placement Life Insurance. If you have any questions or would like to speak to a member of our team, call (305) 347-5129 or contact us online.