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PPLI OVERVIEW

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PPLI OVERVIEW

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Private Placement Life Insurance Overview

The ultra-wealthy confront a number of challenges as it pertains to tax inefficient investments. Among these challenges are how to eliminate income tax on high yielding tax inefficient assets, how to effectively address estate taxes and how to protect wealth from legal predators.

Private Placement Life Insurance is an instrument that can address all of these issues, plus provide additional benefits for portfolios and estate plans.

So what is Private Placement Life Insurance? Private Placement Life Insurance is a variable life insurance policy that invests in Hedge Funds and other alternative investments that generate large taxable income. This highly versatile product combines the greatest strengths of life insurance paralleled with alternative investments.

Private Placement Life Insurance is institutionally priced, which allows for a significant cost savings and allows the ultra wealthy purchaser to ability to select specific investment options without losing investor control. With Private Placement Life Insurance, ultra high net worth individuals can mitigate income taxes on their Hedge Fund investments and allow them to grow on a tax-deferred basis. The investment in these funds is not taxed during the lifetime of the insured investor.

With Private Placement Life Insurance, attractive but tax inefficient alternative investments are now made tax efficient, which in turn dramatically increases the overall financial return.

Depending on state law, a Private Placement Life Insurance policy and its underlying investment can be protected from litigants and other creditors. With respect to inter-generational wealth transfers, trust funds with Private Placement Life Insurance can make distributions to beneficiaries free of income and transfer taxes.

With all U.S. taxes clearly on the rise, the great majority of ultra high net worth investors have already realized that in the coming years we will see a substantial increase in all income, state, federal and estate taxes begin to be implemented. From this expected rise in taxes across the board, Private Placement Life Insurance is positioned to become the defacto investment medium for investors looking to minimize or defer their taxes on all their investment gains

Private Placement Life Insurance is also being deployed in deferred compensation plans for executive directors and Chief Investor Officers of significant single family offices. At the same time, a growing number of high net worth business owners are utilizing Private Placement Life Insurance as the foundation of a private pension.

Private Placement Life Insurance is ideal for complex situations faced by high net worth individuals. Going forward it will be critical for advisors to possess a detailed understanding of the mechanics of Private Placement Life Insurance to ensure optimal results for investment returns.

KEY CHARACTERISTICS OF A Private Placement Life Insurance Policy:

Wealth Creation

Wealth is created through the use of the Private Placement Life Insurance investment options. These include private hedge funds with various investment structures and strategies, including fund of funds, options, futures and commodities.

Asset Protection

The underlying investments, in conjunction with life insurance, may be afforded higher levels of asset protection through the effective use of trusts and other policy ownership structures both domestically and internationally.

Living Benefits

The underlying investments may be transferred between available investment options without creating income taxation. Additionally, certain withdrawals and loans may be taken from underlying investments on an income tax-efficient basis.

Wealth Transfer

The life insurance death benefit is distributed free of federal income tax to the beneficiaries, and depending on the tax planning structures used may be free of estate tax.

TYPICAL CLIENT

The typical Private Placement Life Insurance purchaser is an affluent individual interested in a product that provides income tax deferral in a cost efficient manner. In addition the typical client utilizes Private Placement Life Insurance within an asset protection strategy that may also include a wealth transfer strategy. Generally speaking the clients are between the ages of 40 and 70 with the average age somewhere around 50 years old. The net worth of the typical client is anywhere from $10 million to $1 billion and up and they typically allocate 5% to 10% of their net worth towards the Private Placement Life Insurance premium payments. Their investment portfolios are diversified and they tend to reallocate their most tax inefficient investment strategies to the Private Placement Life Insurance product.