Specialty Solutions
Private Placement Life Insurance & Annuities
Despite all their attributes, hedge funds and other alternatives can prove problematic to investors in high tax brackets. Often, these investments generate gains that are short-term and taxed as ordinary income.
Private Placement Variable Annuities (PPVAs) and Private Placement Life Insurance (PPLI) are two products that offer high-net-worth investors a way to participate in hedge funds and other alternative investments without incurring current tax liability each year. PPLI and PPVAs are wealth planning tools used by family offices and high-net-worth individuals to invest in a tax-efficient manner and transfer wealth more effectively.
Key Features:
Access to U.S. private markets
Access to Alternative Assets
Exposure to a variety of investment managers and strategies
Access to a wide range of asset classes, e.g., Hedge Funds, PE, Real Estate, Private Credit, Litigation Financing
Freeing up of liquidity and facilitation of corporate wealth transfer, e.g., via reduction of estate taxes on business assets
Administrative and filing simplicity: single asset, single income stream
Individual Variable Annuity Overview
Individual Variable Annuities can be a key component in constructing financial portfolios for family offices, HNW and UHNW individuals.
Provides tax-deferred compounding in a simple, low-cost structure for the end client
Distributed gains above basis are taxed as ordinary income for individual beneficiaries
10% penalty on gains if withdrawn prior to 59 1/2 years old
Benefits of tax-deferral generally can outweigh the cost of annuity by year 7-8, depending on investor tax rate and portfolio turnover
Prospective policy owners must be an Accredited Investor (AI) & Qualified Purchaser (QP)*
Individual Variable Life Solution Overview
Individual Variable Life is a wealth planning tool used by HNW and UHNW individuals and family offices to invest in a tax-efficient manner and transfer wealth to future generations more effectively.
Complies with Internal Revenue Code Section 7702, which defines the net amount at risk that is necessary to qualify as an insurance contract
Medical underwriting is required, and costs associated with the death benefit coverage apply
Modified Endowment Contract (MEC) and non-MECs available
IDF & SMA Consultation
For asset managers, hedge funds and private equity firms, SMAs and IDFs allow managers to customize (within limits) the investments for each client based on their risk profile and investment goals (subject to the same governance and controls as IDFs). The firm may structure these holdings through a process to allocate assets inside of PPLI and PPVA products.
These structures must follow strict regulatory and IRS rules.