Private Placement
Sophisticated Wealth Structuring
Private Placement Life Insurance is institutionally-priced variable life insurance, available only to qualified purchasers and accredited investors*, that offers the ability to allocate account values to both mutual and alternative investment funds in a tax-efficient manner.
How PPLI Works
If structured correctly, the values inside a PPLI account grow tax-deferred and a large percentage (approximately 85%) of the account value can be accessed income tax-free during the insured person’s lifetime. At the death of the insured, the remaining values not accessed during the insured’s lifetime are generally paid to the beneficiary(ies) as an income tax-free life insurance benefit.
The overriding advantage is that in most situations, the incremental cost of PPLI is significantly lower than the cost of income taxes that would otherwise be payable on investment gains.
Benefits of PPLI
When structured properly, Private Placement Life Insurance can provide high-net-worth purchasers with distinct benefits.
Optimized After-Tax Returns
Values inside a PPLI account grow tax-deferred, enabling the owner to customize the investment allocation strategy.
Tax-Advantaged Cash Access
A significant percentage of the account value can be accessed income tax-free during the insured’s lifetime.
Improved Wealth Transfer
The remaining values not accessed during the insured’s lifetime are paid to the beneficiary(ies) as an income tax-free life insurance benefit.
Lower Cost & Enhanced Creditor Protection
The incremental cost of PPLI tends to be significantly lower than the income taxes that would be payable on typical investment gains. These policies are protected from creditors in most states.
Simplified Tax Reporting
PPLI eliminates many of the annual reporting burdens associated with investments and reduces the reporting requirements for foreign institutions, protecting foreign wealth from U.S. income tax.
Enhanced Trust Planning
Income tax-free distributions to trust beneficiaries may be made from a trust allocated through PPLI, with an eventual income tax-free insurance benefit. Through strategic policy structuring, further improvements may be made to trust investments.
*Private Placement Life Insurance is an unregistered securities product and is not subject to the same regulatory requirements as registered variable products. As such, Private Placement Life Insurance (or Annuities) should only be presented to those that meet the definition of an accredited investor and qualified purchaser as described by the Securities Act of 1933. Qualified Purchasers are individuals with a minimum of $5,000,000 of investable assets. Accredited Investors are individuals having a net worth exceeding $1,000,000 or an annual income exceeding $200,000 for the last 2 years. The risks of a PPLI policy in connection with the investment accounts include the risks of investing in the underlying securities selected by the investment accounts. When a policy owner invests in the investment accounts, the policy owner is assuming the entire risk of an investment in the underlying securities, including the risk of loss of the entire principal. There is no guaranteed minimum account value. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation.
The risks of a PPLI policy in connection with the investment accounts include the risks of investing in the underlying securities selected by the investment accounts. When a policy owner invests in the investment accounts, the policy owner is assuming the entire risk of an investment in the underlying securities, including the risk of loss of the entire principal. There is no guaranteed minimum account value. Alternative investments involve risks that may not be suitable for all investors. These risks include (but are not limited to), the possibility that the investment may not be liquid, principal return and/or interest rate risk. Higher fees associated with alternative investments may offset any potential gains. Investors should consider the tax consequences, costs and fees associated with these products before investing. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation.
Fee Considerations: Insurance charges include mortality and expense charges, cost of insurance, depending on age, gender, health, etc., distribution charges, state premium tax charges, federal premium tax charges including any applicable federal DAC tax, policy loads and underwriting fees. In addition, there are investment management fees and other internal hedge fund costs associated with the policy. There may also be legal and/or advisory fees to establish the policy.
Delay in Payment of Death Benefit Risk: Payment of any amount of death benefit based upon an Investment Account may be delayed if any assets are subject to liquidity or withdrawal restrictions at the Investment Vehicle level.
Long-Term Investment Risk: The Policy is intended for investors who have sufficient liquid assets for living expenses and should be viewed as a last resort investment for liquidity purposes due to the underlying Investment Vehicle’s liquidity limitations within the Investment Account. This Policy should be viewed as a long-term investment. Early Withdrawals: Distributions from a PPVA account (and potentially PPLI contracts classified as modified endowment contracts or MECs) prior to age 59½ are subject to a 10% federal tax penalty on investment gains.
Strategies and investments mentioned herein may not be suitable for all investors. Private placements may only be presented to qualifying investors with whom a financial advisor has a pre-existing relationship. Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. This information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Past performance does not guarantee future results. Be sure to contact a qualified professional regarding your situation before making any investment or withdrawal decision. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.