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Private Wealth continued from page 50

the death benefit for a PPLI policy is passed on to beneficiaries tax-free . When it ’ s used in conjunction with an irrevocable life insurance trust ( ILIT ), the value of the assets in a private placement life policy can be removed from the policy holder ’ s estate altogether , reducing the overall assets subject to estate taxes .

3 . It offers credit protection . Highnet-worth investors in a PPLI policy get added safeguards because life insurance proceeds are protected from creditors in case the policy holder faces bankruptcy or litigation .

While the policies can serve as effective growth and protection vehicles , they are geared to a very specific type of investor . People who purchase these policies typically have a net worth of $ 20 million or more , since they must be able to allocate approximately $ 1 million to $ 5 million in annual premiums for the first several years — and all premiums must be paid in cash , not in “ in-kind ” investments .

Additionally , private placement life policies are most effective when used as midto-long-range investment vehicles , since the main benefit is the compounding effect of tax-free performance . Although these policies offer myriad investment options , the investor must be comfortable relinquishing discretionary decisionmaking control to their advisors .

With private placement life insurance , investors can grow and protect their wealth in the most flexible , tax-advantaged manner . Though such policies are only appropriate for a small slice of the investment population , they ’ re a good option for wealthy families with the means and time horizon to take full advantage of their benefits to grow and transfer wealth while reducing their tax burdens .

JIM CARROLL is senior wealth advisor and portfolio manager at Ballast Rock Private Wealth .

ANDREW MESCON is CEO at Ballast Rock Private Wealth .

JULY / AUGUST 2024 | FINANCIAL ADVISOR MAGAZINE | 63