Pre Immigration Tax Planning – Trust+PPLI structure

Many of our clients moving from Asia to the US, tend to split their family in two. Some family members (especially the father) remain in Asia and others (particularly the mom and kids) make the move to the US.

Regardless, it is important for them to understand the definition of residency from a tax perspective.  I previously wrote on this here – 


PPLI or Private Placement Life Insurance is emerging as a great tax planning tool for pre-immigration planning

Here are some more thoughts on how it works –




The potential tax benefits are three-fold:

1. The insured person doesn’t pay taxes on investment gains,
2. the beneficiary may avoid taxes when the death benefit is paid out, and
3. if structured a certain way, the insured’s estate may not have to pay taxes.

There are risks though

1. First, PPLI is not something for just the pretty well off who are concerned about an increase in the capital gains tax rate. The policies typically require at least $1 million (and generally closer to $5 million) as an upfront premium.

2. Even if someone has attained that level of wealth, there are other reasons why PPLI isn’t ideal. Many investors are initially attracted to PPLI because if it’s set up a certain way, they can still have access to the money they’ve put in without incurring taxes; they can either withdraw premium contributions they’ve made or borrow against the account. But there’s a cap on how much the insured person can withdraw or borrow, so those looking to tap all of it won’t be happy.

3. PPLI’s fees can also be a turnoff. They can amount to 1% annually on average of the policy’s cash value, and may include management fees, upfront sales charges and recurring administrative fees.

4. Don’t assume the IRS isn’t watching. In a case decided several years ago, an investor was ordered to pay a big tax bill because he was ultimately deemed to be controlling the account despite the façade of using an investment manager.

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