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Much of the conversation coming out of Washington recently has been centered around the potential $3.5 trillion infrastructure bill and the potential tax changes that will be enacted to help fund the package. This potential legislation, coupled with the recent stimulus packages passed since March 2020, have led many to believe there will be an increase in personal and corporate income tax rates. As a result, many affluent individuals are searching for strategies or techniques to mitigate income taxes. While there are certain investments that can offer tax-advantages (real estate, muni-bonds, etc.), one investment strategy that is relatively unknown is Private Placement Life Insurance (PPLI) and/or Private Placement Variable Annuities (PPVA).

 

PPLI made the news recently as a featured topic for Bloomberg. Click here (hyperlink to: https://www.bloomberg.com/news/articles/2021-09-02/richest-americans-have-tax-loophole-that-s-legal-easy-to-exploit-hard-to-close) to access the article for additional reading. In this article, Bloomberg describes the benefits of the strategy and the impact that it can have for wealthy taxpayers. Just by Congress threatening higher taxes for the top 1% has led to an increase in PPLI business. As with any strategy, PPLI does have requirements that need to be followed in order for it to remain effective and advantageous. There can be serious tax consequences if not followed properly; however, those consequences may seem minimal compared to the potential tax savings of the PPLI policy.

 

The authors of this paper are not providing legal or tax advice as to the matters discussed herein. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness. It is not intended as legal or tax advice and individuals may not rely upon it (including for purposes of avoiding tax penalties imposed by the IRS or state and local tax authorities). Individuals should consult their own legal and tax counsel as to matters discussed herein and before entering into any estate planning, trust, investment, retirement, or insurance arrangement

November 14, 2022 in Business Planning, Collaboration, Exit Planning, Family Business, Know your story, Succession Planning

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