A closer look Private Placement Life Insurance: A Potential Tool for Tax Efficiency and Wealth Transfer

In Brief

• Because of its potentially significant tax advantages, private placement life insurance (PPLI) has gained increasing attention and popularity among investors, institutions, insurance brokers, and alternative investment managers.
• PPLI is most commonly used to improve the performance of tax-inefficient investments.
• PPLI may also be a solution for individuals and families of significant wealth seeking to transfer wealth as tax efficiently as possible.
• PPLI may help amplify some of the advantages of lifetime gifts by shielding assets from estate taxes while at the same time offering a death benefit that acts as a “de facto step-up in basis” to mitigate potential future capital gains taxes when the assets are sold.
• At the same time, PPLI has certain costs and other potential drawbacks, and is not an automatic choice. The potential benefits must be carefully weighed for each individual client and situation.