Unveiling Our Expanding Global PPLI & EWP Case Studies Series – Episode 4

Case Study: Transforming Wealth Management for a UHNW U.S. Family with a PPLI Asset Structure

Does your present asset structure seem barren and unproductive?

Let us take you to a place of abundant, new possibilities.

We are unveiling our new series, PPLI and EWP Comprehensive Case Studies! Join us as we dive into EWP Financial’s unparalleled expertise in Private Placement Life Insurance (PPLI) asset structuring across global jurisdictions. Discover the power of PPLI’s unmatched adaptability, tailored to thrive in diverse financial landscapes. At EWP Financial, we’re dedicated to illuminating the unique opportunities each region offers, crafting bespoke PPLI solutions that align seamlessly with your financial vision and aspirations.

Introduction

The Franklin Family, a U.S.-based ultra-high-net-worth (UHNW) family with a net worth exceeding $250 million, holds a diverse portfolio spanning real estate, stocks and bonds, cryptocurrencies, and collectibles. Facing challenges in managing their complex wealth, they sought a solution to enhance tax efficiency, protect assets, ensure privacy, and simplify tax reporting. By implementing a Private Placement Life Insurance (PPLI) asset structure, they effectively transformed their wealth management into a streamlined Private Family Office framework.

Family Profile and Asset Composition

The Franklin Family’s wealth is distributed across multiple asset classes:

Real Estate: $120 million in commercial and residential properties across the U.S., including a Manhattan office building, a California vineyard, and vacation homes in Florida and Colorado.
Stocks and Bonds: $80 million in publicly traded equities and fixed-income securities, managed through multiple brokerage accounts.
Cryptocurrencies: $30 million in Bitcoin, Ethereum, and other digital assets, held in secure wallets and through crypto exchanges.
Collectibles: $20 million in rare art, vintage cars, and wine collections, stored in secure facilities and private residences.

Their existing structure involved multiple advisors, fragmented reporting, and significant tax inefficiencies. High-profile assets also raised concerns about privacy and liability risks.

Challenges

Tax Inefficiency: Capital gains from real estate and stock sales, along with crypto trading, incurred substantial taxes. Collectibles faced a 28% federal capital gains tax rate.
Asset Protection Risks: Real estate and collectibles were exposed to potential lawsuits, given the family’s high visibility.
Privacy Concerns: Public records of real estate holdings and crypto wallet transparency risked unwanted scrutiny.
Complex Reporting: Managing tax filings across diverse assets was time-consuming, with multiple advisors creating inefficiencies and inconsistencies.

Solution: PPLI as a Private Family Office Framework

The Franklin Family engaged a wealth management firm specializing in PPLI to create a tailored solution. PPLI, a customizable life insurance product for UHNW individuals, was structured to serve as a Private Family Office, consolidating their assets into a single, tax-advantaged vehicle.

How PPLI Was Implemented

Policy Setup:
- A PPLI policy was established with a reputable offshore insurance carrier in Bermuda, known for robust privacy laws and flexible investment options.
- The policy was funded with a $200 million premium, structured to hold and manage the family’s diverse assets.
Asset Integration:
- Real Estate: Ownership of properties was transferred into a trust, with the PPLI policy as the beneficiary, maintaining control while shielding assets from creditors.
- Stocks and Bonds: Equities and fixed-income securities were allocated to the PPLI policy’s investment account, managed by a third-party investment advisor under the policy’s tax-advantaged wrapper.
- Cryptocurrencies: Crypto assets were held in a sub-account within the PPLI, with secure custodial arrangements to ensure compliance and safety.
- Collectibles: High-value art and cars were titled to a trust structure linked to the PPLI, with insurance covering physical risks.
Legal and Tax Structure:
- The PPLI was structured as a compliant, IRS-approved variable universal life insurance policy, ensuring tax deferral on investment gains.
- An irrevocable life insurance trust (ILIT) was created to own the policy, removing it from the taxable estate and enhancing asset protection.

Benefits of the PPLI Structure

Tax Efficiency:
- Investment gains within the PPLI grow tax-deferred, eliminating annual capital gains taxes on stocks, bonds, and crypto trades.
- Upon the policyholder’s death, proceeds pass to beneficiaries free of income and estate taxes, reducing the family’s estate tax liability (potentially 40% on assets above the 2025 exemption of $13.61 million per individual).
- Collectibles held within the PPLI avoid the 28% capital gains tax upon sale, as gains accrue within the policy.
Asset Protection:
- Assets within the PPLI are shielded from creditors and lawsuits, as life insurance policies in most jurisdictions, including Bermuda, enjoy strong legal protections.
- Real estate and collectibles held in trusts further insulate the family from liability risks.
Privacy:
- The offshore PPLI structure ensures confidentiality, as Bermuda does not require public disclosure of policy ownership or asset details.
- Crypto assets, often traceable on public blockchains, are held within the policy, reducing exposure to public scrutiny.
Streamlined Tax Reporting:
- The PPLI consolidates all assets into a single reporting entity, reducing the need for multiple tax filings.
- The family receives one annual statement from the insurance carrier, simplifying oversight and coordination with their advisors.

Implementation Process

Year 1: The family worked with a PPLI specialist to select the carrier, structure the ILIT, and transfer assets. Legal and tax advisors ensured compliance with IRS regulations, including proper premium funding to avoid modified endowment contract (MEC) status.
Year 2: The PPLI policy began generating tax-deferred returns. The family’s investment advisor actively managed the portfolio within the policy, rebalancing stocks and crypto holdings without triggering taxable events.
Ongoing: Annual reviews with the wealth management firm ensure the policy aligns with the family’s evolving needs, including liquidity for new investments or distributions.

Outcomes

Financial Impact: Over five years, the PPLI structure saved an estimated $15 million in capital gains and estate taxes, based on projected asset growth and sales.
Operational Efficiency: The family reduced their advisory team from five fragmented providers to a single coordinated firm, cutting administrative costs by 30%.
Peace of Mind: Enhanced privacy and asset protection allowed the family to focus on philanthropy and new ventures, knowing their wealth was secure.
Legacy Planning: The policy’s death benefit ensures tax-free wealth transfer to the next generation, aligning with the family’s long-term goals.

Conclusion

For the Franklin Family, the PPLI structure serves as a Private Family Office, unifying their diverse portfolio into a tax-efficient, protected, and private framework. By addressing their key concerns—taxes, asset protection, privacy, and reporting complexity—PPLI has provided a scalable solution that supports their wealth management and legacy planning objectives. This case study illustrates how UHNW families can leverage PPLI to streamline and safeguard their financial future.

For a complete explanation on how this question pertains to your own unique situation, please contact us directly at +1 530 692 1007 or info@ewp-financial.com.

The opinions expressed in this video are for general informational purposes only, and are not intended to provide specific advice or recommendations for any individual on any financial structure, investment, or insurance product.