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Asset Preservation Advisors


State: GA

APA’s philosophy is to work closely with our clients to develop an in-depth understanding of their unique needs and objectives. We then customize a municipal bond portfolio that best meets their specific goals and needs. APA manages high quality municipal bond portfolios in four strategies: Short-Term, Intermediate-Term, High Income, and Taxable.

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Private Placement Life Insurance: A Powerful Estate Planning Tool

Tax advantages among many benefits of PPLI

Private Placement Life Insurance policies give ultra wealthy investors a powerful estate planning tool for growing and distributing assets tax free.

Premiums that start at $1 million and go way up from there exclude all but the wealthiest from investing in PPLIs, a type of variable universal life insurance. PPLIs began to emerge around 1996 when several small companies offered the product, said Lewis Schiff, the principal of Advanced Planning Group, in a blog on the American Institute of Certified Public Accountants website.

A few years later mainstream companies such as New York Life entered the market and the appeal of the product grew, Schiff said, and at the same time a large segment of the business moved offshore, where it operates in a less restrictive environment and lower-cost environment.

“Now PPLI solutions support wealth transfer, wealth creation, and philanthropic needs, by using the death benefit in tax-advantaged ways,” Schiff said.

Unlike variable insurance products, which are offered publicly and registered with state and federal securities agencies, PPLIs are traded privately and usually involve a hedge fund investment embedded within an insurance policy. To participate, policy holders must be “accredited” in the eyes of the SEC, which means they must have a net worth of at least $1,000,000 and received an income of at least $200,000 for the past two years.

The typical policy holder has a net worth of $15 million or more and has experience investing in hedge funds, Schiff said. Spectrem Group has found that 50 percent of investors with a net worth of $25 million or more – not including primary residence – own a private placement life insurance policy. Their average balance is nearly $3.4 million.

Private placement life insurance policies are complex and can take six to nine months to structure. They involve insurance underwriting, financial underwriting, and investment research and selection.

Poorly performing policies can realize losses, which cannot be deducted against income. Policy holders are also exposed to the risk of default by the insurance carrier.