Private Placement Variable Universal Life Insurance (PPVUL)

Private Placement Variable Universal Life Insurance (PPVUL) -- A Better Way, for Some...

A life insurance policy that is U.S.-tax compliant, offered by an established carrier, presents a conservative and cost effective investment opportunity. Life insurance as a financial product has a long history in the U.S. as a tax-advantaged investment vehicle. Certain carriers who have well-established operations both inside and outside of the United States offer "private placement" or, more appropriately, "customized" policies that are fully compliant with U.S. tax rules; and, therefore, are fully entitled to the preferential tax treatment (tax free wrapper surrounding policy’s investment portfolio; ability to make distributions of cash values tax free; and, payment of death benefits income tax free) that life insurance enjoys. With proper policy design, an investor can place wealth in a tax-free investment environment at a low cost, achieve protection against future creditor risk and local economic risk, gain financial privacy, and enjoy superior flexibility with regard to the policy's underlying investments.

PPVUL insurance offers U.S. qualified investors the ability to select asset management beyond the predetermined asset management choices offered in retail variable life insurance products. This is attractive for high net worth investors who may have existing investment managers whom they would prefer to designate to manage policy investments. Due to the expense associated with regulatory pressures imposed by federal and state securities laws, and by state insurance boards, many domestic companies will agree to engage a policy owner's pre-selected investment manager only with a high premium commitment (typically greater than $5,000,000), or at a significant out-of-pocket cost to the purchaser. On the other hand, transactions involving only $5,000,000 of premium can be more cost-efficient in the offshore market. This is because offshore insurance companies are not subject to the same bureaucracy and regulations that are imposed in the U.S., and, therefore, are able to engage the policy owner's investment managers with a smaller premium commitment.

Generally, the motivation for investing in a PPVUL policy differ quite a bit from the reasons that U.S. persons typically purchase life insurance. Its value for the high net worth individual is as an investment vehicle, optimally used for the most tax inefficient components of an investor's portfolio. The purchas of death benefit is secondary. Usually, therefore, the core goals for acquiring a PPVUL insurance product are to take advantage of the income tax and possible estate tax savings, to maximize investment choices, and to incur as little cost as possible in doing so.

Melvyn L. Lieberman, J.D., CPA
Managing Member
CORE Wealth Group, LLC
Tax Law Consultants
“Designing Trust & Estate Solutions for Families”
Wealth Creation Planning Asset Protection Strategies