Private Placement Insurance can serve as a strategic investment tool for ultra-affluent investors to minimize the income tax burdens associated with traditional and alternative investments. Because they can only be offered to individuals who are qualified purchasers and accredited investors (as defined by the Securities Act of 1933), private placement variable universal life (PPVUL) and variable annuities (PPVA) offer high net worth clients access to investment alternatives and customized product designs that are difficult to recreate in traditional retail or registered products. They can be an optimal tool to address a multitude of financial, income, and estate tax planning objectives.
Although the tax advantages are often the primary drivers for investing through private placement insurance products, there can be other benefits to investors, including elimination of K-1 reporting and additional creditor protection. Investors turn to PPVUL and PPVA products because the overall cost of insurance charges is generally less than the tax costs the investment would ordinarily create.
Because of its preferential treatment from an income tax perspective, insurance must be properly structured in order to assure it maintains its unique tax benefits. When considering private placement products, clients should work with brokers experienced in structuring policies for high net worth clients and in working with multiple insurers to help obtain the most favorable underwriting outcome. As a member firm of M Financial Group, Greenberg, Wexler & Eig has access to proprietary private placement products and additional insurance capacity. Our advisors have the experience and expertise to guide clients through the implementation of these complex tools as well as the commitment and infrastructure to provide high level long-term service.