The PPLI Solution E-Book

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: Bloomberg Professional
• Sprache: Englisch

Seitenzahl: 559

Veröffentlichungsjahr: 2010

Beschreibung

Private placement life insurance (PPLI) was once the exclusive domain of wealthy investors willing to tackle the logistical challenges of the offshore insurance market. The investment portfolio, tax, and estate-planning applications, and ongoing investment potential of these policies made the effort worthwhile. In recent years, though, a number of U.S.-based insurance companies have developed similar policies that meet all U.S. insurance, investment, and tax regulations. PPLI is becoming a fundamental component of effective tax, trust, and estate planning, but few sources have been available to detail the best practices--until now. The PPLI Solution can serve as a resource for effective execution. Written by leading practitioners, the book will position advisers to capitalize as PPLI expands further into the high-net-worth market and becomes available to individuals with an investable net worth as low as $1 million. Few investors--whatever their net worth--will want to venture into the PPLI market without guidance. The PPLI Solution addresses the needs of investment managers, consultants, attorneys, and accountants who want to achieve the broad understanding of PPLI's applications required of those providing advice. It can serve as an authoritative source for anyone--including investors--seeking to know more about PPLI's nearly perfect tax efficiency, solid creditor protection, and powerful means of creating wealth.

Leseprobe

Table of Contents

Praise

Title Page

Copyright Page

Dedication

PREFACE

Acknowledgements

ABOUT THE CONTRIBUTORS

PART ONE - THE MULTIPURPOSE POLICY

CHAPTER 1 - An Introduction to PPLI

Life Insurance: Where It Starts

Private Placement Life Insurance

The Future of PPLI

CHAPTER 2 - Risk Management Redefining Safe Harbors

The Risk-Management Process

Risk Factors in Purchasing PPLI

CHAPTER 3 - Tax Management Building Wealth, Reducing Taxes

Tax-Efficient Investing

What Is PPLI?

Recent Developments

PPLI in the Overall Portfolio

CHAPTER 4 - Asset Protection Riches Out of Reach

Public Policy

Insurance Trusts

CHAPTER 5 - Estate Planning When Insurance Tames Taxes

Taxes and Estate Planning

Techniques for Reducing Estate Taxes

Estate Settlement Costs

A Versatile Tool

CHAPTER 6 - Trust Administration The Domestic Advantage

Premium Taxes

Trusts

Other Trust Techniques

CHAPTER 7 - Executive Benefits The Plan That Pays Its Way

Qualified Benefit Plans

Nonqualified Benefit Plans

PPLI

PART TWO - A VITAL INVESTMENT VEHICLE

CHAPTER 8 - Toward a More Powerful Portfolio

PPLI in the Investor’s Portfolio

Portfolio Construction Principles

Aligning PPLI with the Overall Portfolio

Building the PPLI Portfolio

PPLI Investment Portfolio Objectives

Investment Manager Characteristics

Portfolio Management Pitfalls

Core/Satellite Investment Structure

PPLI Funding Tactics

Execution Practices

A Portfolio for the Ages

CHAPTER 9 - Who’s Afraid of Hedge Funds?

A Burgeoning Industry

The Hedge Fund Edge

Insurance Rules and Investment Selection

Strategy and Manager Selection

Due Diligence

Appendix

CHAPTER 10 - In Search of Skilled Investment Managers

Traditional Analyses of the Nontraditional

Performance Evaluation

Performance Attribution

Appendix

PART THREE - UNDER THE HOOD—THE ESSENTIALS ON PPLI

CHAPTER 11 - Policy Structure The Good, the Bad, the Ugly

PPLI and Retail Products

The PPLI Investment

Determining the Proper Course

CHAPTER 12 - Getting It Right A Regulatory Overview

Tax Rules for Structuring PPLI and PPDA

CHAPTER 13 - Investment Due Diligence Beyond the Questionnaire

Shades of Gray

How Much Diligence Is Due?

CHAPTER 14 - Creating and Administering an Insurance-Dedicated Fund

Insurance-Dedicated Funds Defined

Who Should Set Up an IDF?

Marketing

CHAPTER 15 - Underwriting the Policy

What Is Underwriting?

Reinsurance and Retention

Underwriting Considerations

The Insurance Adviser

CHAPTER 16 - Understanding and Comparing Costs

Charges: Current versus Guaranteed

Key Expense Categories

PPLI’s Real Power

Cash Value and Associated Costs

CHAPTER 17 - Jurisdiction Home or Away?

Determining Jurisdiction

The Pros and Cons

The Adviser’s Role in Offshore Transactions

The Best Fit

PART FOUR - SETTING UP SHOP

CHAPTER 18 - Making a Place in Private Banking

A Natural Fit

Getting an Act Together

CHAPTER 19 - The Family Office A Perfect Fit

Serving the Family: The PPLI Evaluation

Continuing Education Exam

INDEX

ABOUTBLOOMBERG

PRAISE FOR

THE PPLI SOLUTION: Delivering Wealth Accumulation, Tax Efficiency, and Asset Protection Through Private Placement Life Insurance

Edited by Kirk Loury

“All serious practitioners should take the time to readThe Investment Think Tank. Harold Evensky and Deena Katz have done it again with a book covering topics important to our industry and critical to our clients’ financial success.”

CHARLIE HAINES, M.BA, CFP

President and CEO, Charles D. Haines, LLC

ALSO AVAILABLE FROM BLOOMBERG PRESS

Family Wealth—Keeping It in the Family:How Family Members and Their AdvisersPreserve Human, Intellectual, andFinancial Assets for Generationsby James E. Hughes Jr.

Creating a Private Foundation:The Essential Guide for Donors and Their Advisersby Roger D. Silk and James W. Lintott

The Investment Think Tank:Theory, Strategy, and Practice for Advisersedited by Harold Evensky and Deena B. Katz

Hedge Funds Risk Fundamentals:Solving the Risk Management andTransparency Challengeby Richard Horwitz

A complete list of our titles is available at www.bloomberg.com/books

ATTENTION CORPORATIONS

THIS BOOK IS AVAILABLE for bulk purchase at special discounts. Special editions or chapter reprints can also be customized to specifications. For information, please e-mail Bloomberg Press, [email protected], Attention: Director of Special Markets, or phone [phone].

© 2005 by Kirk Loury. All rights reserved. Protected under the Berne Convention. No part of this book may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher except in the case of brief quotations embodied in critical articles and reviews. For information, please write: Permissions Department, Bloomberg Press, 100 Business Park Drive, P.O. Box 888, Princeton, NJ 08542-0888 U.S.A.

BLOOMBERG, BLOOMBERG NEWS, BLOOMBERG FINANCIAL MARKETS, OPEN BLOOMBERG, THE BLOOMBERG FORUM, COMPANY CONNECTION, COMPANY CON-NEX, BLOOMBERG PRESS, BLOOMBERG PROFESSIONAL LIBRARY, BLOOMBERG PERSONAL BOOKSHELF, and BLOOMBERG SMALL BUSINESS are trademarks and service marks of Bloomberg L.P. All rights reserved.

This publication contains the authors’ opinions and is designed to provide accurate and authoritative information. It is sold with the understanding that the authors, publisher, and Bloomberg L.P. are not engaged in rendering legal, accounting, investment planning, business management, or other professional advice. The reader should seek the services of a qualified professional for such advice; the authors, publisher, and Bloomberg L.P. cannot be held responsible for any loss incurred as a result of specific investments or planning decisions made by the reader.

Library of Congress Cataloging-in-Publication Data

Includes index.

ISBN 1-57660-173-0 (alk. paper)

1. Insurance, Life--Variable policies--United States. 2. Variable annuities--United States. 3. Privately placed securities--United States. 4. Estate planning--United States. 5. Investments--United States. I. Title: Private placement life insurance solution. II. Loury, Kirk.

HG8850.5.P657 2005

368.32’5--dc22

2004023756

Acquired by Jared Kieling

Edited by Mary Ann McGuigan

To my wife, Brenda, whose faith inspires me and whose support fuels me

PREFACE

IS IT ANY SURPRISE that a product weighed down with a moniker like private placement variable universal life (PPVUL)—otherwise known as private placement variable life insurance (PPVLI) and private placement life insurance (PPLI)—has yet to be embraced by wealth advisers? Of course, a snappy name hardly ensures that a product will be considered a vital investment tool, but PPLI’s forbidding handle certainly mirrors the complexities that have plagued this investment from its earliest days.

Since 2000, however, the affluent market’s need for more sophisticated tax-management, wealth-transfer planning, and asset-protection solutions has converged with an unprecedented demand for alternative investments. It is at this juncture that PPLI stands tall as a maturing, flexible platform able to address an array of complex needs cost-effectively.

Given the dramatic advancements in policy structure and investment options as well as validation by the Internal Revenue Service, it’s now clear that the time and effort an adviser expends to learn about PPLI’s applications will be fruitful. Toward that end, this book has a simple purpose: to be a reference and guidebook for any wealth adviser seeking the knowledge required to identify and articulate the difference PPLI can make in executing a wealth-management plan.

The contributors gathered here to share that knowledge offer not only their skills and understanding but their collective experience as well. This experience is born from the tough and grinding work of pioneers who have pursued PPLI with a fundamental belief that this platform holds great promise in its capacity to deliver the kind of value sought by sophisticated investors and their advisory teams. Indeed, the current policy designs arose as a result of the efforts to minimize unnecessary impediments to effective execution, and the insights reflected in each chapter were gained from handling tough questions and demanding situations. Now the entire wealth-management industry can benefit from the answers, because these pioneering efforts have culminated in a product that’s ready for the challenging task of simultaneously preserving and growing wealth.

Each contributor integrates the needed grounding on terminology, concepts, and approaches so that each chapter—whether it’s about tax deferral or policy structure or legal compliance—can convey an understanding of PPLI that’s accessible even to the novice. The book speaks frankly about past misconceptions, missteps, and misgivings that early adopters have had to overcome. To be sure, each contributor is a proponent of PPLI and its status as a powerful investment tool; nevertheless, important “best practice” boundaries are identified to prevent avoidable failure. PPLI may not fit into every wealth-management plan, but the benefits it can deliver are so substantial and have such broad applications that it’s clearly worth the trouble to find out if it does. These contributors believe—as do I—that PPLI will add substantially to the plan’s overall effectiveness.

Acknowledgments

I would like to acknowledge my colleagues at Spencer Trask, particularly our chairman, Kevin Kimberlin, all of whom have been tremendous supporters, giving me the freedom to help lead the charge in bringing PPLI into its own as a core wealth-planning tool. Next, it would be difficult to find another industry so widely populated with the kind of professionals I’ve found in PPLI. Not only are they sophisticated thinkers motivated by a drive to “serve the client”; they’re also willing to help neophytes achieve the understanding needed to be successful. The contributors herein exemplify the personal and professional characteristics that make involvement in the PPLI industry so rewarding.

ABOUT THE CONTRIBUTORS

Paul F. Berlin, CLU, is president of Executive Planning, a Chicago firm that specializes in sophisticated uses of life insurance, and he has more than 22 years of experience in the life insurance industry. In 2001, Berlin developed the product chassis—an intellectual property he later sold to MONY—that’s now used by hedge fund managers as well as banks in the private placement market. Over the years, he has been featured in numerous trade journals, including a February 1992 article in Life Association News titled “Ten Future Legends,” which predicted that Berlin’s expertise would eventually make him a legend in the industry. Berlin earned his BS degree in finance from Indiana University and his chartered life underwriter degree from the American College. Berlin may be contacted at [email protected]; the firm’s website address is www.executiveplanning.com.

Jeffrey S. Bortnick, Esq., is a tax partner of the general practice law firm of Kleinberg, Kaplan, Wolff & Cohen, in New York, and has more than 22 years of experience in a broad range of tax and estates matters. Bortnick frequently advises hedge funds, private-equity funds, and fund managers on tax issues related to fund formation, operations, and investments. He has written articles for industry publications and lectured on many tax issues related to hedge fund and private placement variable insurance. Bortnick earned his JD and LLM degrees in taxation from NYU School of Law and is a member of the Association of the Bar of the City of New York. He may be contacted at [email protected].

Richard Brindisi is an expert in the field of private placement life insurance and other structured insurance programs for wealthy individuals. He was the managing director of marketing for the private placement group at Sun Life Financial before leaving to pursue other interests in the insurance and wealth-management industries. Brindisi has been involved in all aspects of putting together privately placed insurance and annuity contracts for wealthy investors and institutions. Before joining Sun Life, Brindisi was a trust officer at Raymond James Trust and later a senior tax and estate-planning consultant for Raymond James Financial, where he built the private placement insurance program in his role as a consultant to financial advisers for their high-net-worth clients. Brindisi is a graduate of the T.C. Williams School of Law at the University of Richmond.

Leslie N. Brockhurst is president of Clark Consulting’s Executive Benefits Practice and has been with the firm since 1995. He specializes in the design of executive benefit programs and the funding of benefit-related corporate liabilities. He was previously managing director of the Northwest Region, responsible for the firm’s executive compensation and benefit consulting for the region. Brockhurst has more than 20 years of experience in public and private business sectors. Before joining Clark Consulting, he held senior executive positions in human resources at McDonnell Douglas and Arizona Public Service, the state’s largest investor-owned utility. Brockhurst’s experience includes the design and implementation of executive and employee benefits, installation of strategically driven compensation and performance enhancement systems, and restructuring and subsequent redeployment of human resources. Brockhurst received his BS degree in physics and mathematics from Bishop’s University in Lennoxville, Quebec, and received postgraduate degrees in education and business from McGill University in Montreal and Webster University in St. Louis.

Susan Bruno is a principal of Beacon Wealth Consulting, LLC. She specializes in providing tax-, estate-, and financial-planning counseling to high-net-worth individuals. She is a certified financial planner, CPA, and personal financial specialist (PFS). Bruno has developed and delivered seminars on topics such as managing stock options for maximum value, wealth-transfer techniques, and private placement life insurance for individuals of ultra high net worth. Bruno was appointed to the faculty for the American Banking Association Private Wealth Management School to speak on life insurance topics, and was also selected as speaker for the Private Wealth Management MBA program at Columbia University. Bruno is also the finance chair and an executive board member of the Lance Armstrong Foundation as well as a board member of the Lance Armstrong Foundation Endowment. Before forming Beacon Wealth Consulting, LLC, Bruno was a principal of Winged Keel Financial Advisors and a senior tax manager at Price Waterhouse in Stamford, Connecticut. She graduated magna cum laude from Fairfield University in 1984, where she received a BS in accounting. Bruno may be contacted at [email protected].

Mike Chong leads the Law Practice Group for MassMutual’s Private Client Group and Large Corporate Markets business. He has been with MassMutual since 1994 and has 20 years of experience in the areas of securities, tax, and insurance law. Before joining MassMutual, Chong served as counsel to Travelers Insurance Company, Home Life Insurance Company, and CIGNA. Admitted to the Pennsylvania Bar in 1983 and the Connecticut Bar in 1984, Chong is a 1980 graduate of Fairleigh Dickinson University and a 1983 graduate of Pennsylvania State University Law School.

Keven de la Cruz is vice president of ICMG, the private placement division of Hartford Life, the sixth-largest life insurance group in the nation based on assets and a subsidiary of the Hartford Financial Services Group. As an innovator in this field, ICMG has become one of the leaders in the private placement insurance market, with more $20 billion in separate-account assets. De la Cruz is responsible for high-net-worth private placement sales and has guided both the implementation of alternative assets within the PPVUL product structure and the development of distribution relationships. Before joining Hartford Life/ICMG, de la Cruz worked as a consulting actuary for Navisys, a systems-development subsidiary of Met Life, and at Transamerica Occidental Life in Los Angeles, where he was responsible for illustration software development and Internet marketing support. He began his career at MCG Northwest in Portland, Oregon, as an associate actuary providing funding and benefit analysis in support of large COLI transactions. A fellow of the Society of Actuaries and a member of the American Academy of Actuaries, de la Cruz holds a BA in mathematics/philosophy from Reed College.

Anne Melissa Dowling joined MassMutual in 1996 as head of its Large Corporate Markets group, a collection of several insurance businesses serving the corporate, banking, law firm, and ultra-high-net-worth markets. At MassMutual, Dowling created a stand-alone business entity with its own product-development, legal, sales-support, client-service, and systems-development and support units, as well as investment-strategy, operations, and due diligence units. Her division’s revenue grew from $85 million in 1996 to more than $1 billion, becoming one of MassMutual Financial Group’s most profitable units. The division is known in the marketplace for the creativity of its product design balanced by strict underwriting guidelines. In 2002, Dowling spearheaded the MMFG Wealth Management strategy as a new business focus and created the Women’s Markets Initiative to capitalize on the enormous opportunities to market to and recruit from a largely underserved market in financial services. She came to MassMutual from Connecticut Mutual, where she was chief investment officer, and from Travelers and Aetna, where she focused on securities, derivatives, and currency management. She serves as a trustee on a number of not-for-profit boards, including Amherst College, the University of Connecticut Foundation, Metro Hartford Chamber of Commerce, Wadsworth Athenaeum (Board of Electors), and First Book-Hartford (literacy program), and is a senior fellow of the American Leadership Forum. Dowling is a chartered financial analyst and received her BA in fine arts and French literature from Amherst College and her MBA from Columbia University.

Daniel T. Hayden is managing director of the Client Advisory Group at Van Hedge Fund Advisors International (VAN) and portfolio manager for certain VAN managed fund of funds. VAN, a research-focused hedge fund advisory firm specializing in institutional and retail clients, offers customized portfolio consulting and manages a range of in-house products. Hayden joined VAN in 2001 as a member of the sales and consulting team and subsequently served as the firm’s director of research. Hayden had been senior vice president and manager of portfolio services in the Capital Markets Division of a large regional bank. Before entering the investment-banking business, he spent 10 years in public accounting and was a senior manager with KPMG. A certified public accountant, Hayden holds Series 7, Series 3, and Series 63 licenses and earned a BBA from the University of Notre Dame. He may be contacted at [email protected].

Brent Kinetz has been providing design and implementation services to private and corporate clients for more than 15 years. He joined Winged Keel Group as director of design services in January 1997 and became a principal in January 1999. Kinetz holds a chartered life underwriter (CLU) designation and is a graduate of New York University.

Al W. King III is co-founder, co-chairman, and co-chief executive officer of South Dakota Trust Company, a state-chartered trust boutique and financial-advisory company for the wealthy, doing business in all 50 states. King was managing director and national director of estate planning for Citigroup and was co-founder and vice chairman of Citicorp Trust, South Dakota. He is a member of the editorial board of Trusts and Estates magazine, and his articles on estate planning have been published by several industry publications. King frequently addresses professional organizations, special interest groups, and general audiences on estate and financial planning. He received a BA cum laude from Holy Cross College, a JD from Syracuse University Law School, and an LLM in tax law from Boston University School of Law. King may be contacted at www.sdtrustco.com.

John B. Lawson has amassed a broad range of experience in financial, estate, business, insurance, and investment planning. He is a certified financial planner licensee and a chartered life underwriter (CLU); holds licenses for Group I Individual Life, Variable Life, NASD Series 6, 7, and 63; and is a member of the Association for Advanced Life Underwriting (AALU). Lawson has a life insurance brokerage license in Bermuda and carries a Bermuda work permit during the facilitation of offshore transactions. He has lectured on the subject of private placement variable life insurance planning and products to various groups, including the Thirty-Seventh Annual Philip E. Heckerling Institute on Estate Planning (2003), M Financial Group (2003), and American Bankers Association (2004). Lawson also participates in private briefings with asset managers and brokerage firms, and addresses numerous insurance conferences on the subject of private placement life insurance.

Kirk Loury is president and chief investment officer for Spencer Trask Asset Management, a wholly owned registered investment adviser of Spencer Trask & Co. Spencer Trask is a venture capital firm catering to the private-equity needs of high-net-worth individuals and investment advisers. As chief investment officer, Loury directs the investment analysis of hedge funds and venture capital as asset classes, sets investment policy and practices, oversees portfolio administration, manages due diligence activities, and maintains the firm’s external investment and distribution relationships. As a champion of private placement life insurance, Loury has taken on a broad industry role as an educator and portfolio adviser. He received his BS from the University of Colorado, Boulder, and his MBA from the Harvard Graduate School of Business Administration. Loury may be contacted at [email protected].

Pierce H. McDowell III is the co-founder, co-chairman, and co-chief executive officer of South Dakota Trust Company, a state-chartered trust boutique and financial-advisory firm for the wealthy, doing business in all 50 states. McDowell is a member of the South Dakota Bar Association’s Real Property, Probate & Trust Law section and serves on its Probate and Trust Committee. He has been quoted by Forbes and other publications and has been published on the advantages of South Dakota trust law. McDowell received a BS from Arizona State University and a JD degree from the University of South Dakota. He may be contacted at www.sdtrustco.com.

Maureen Nelson is an attorney with the international law firm Skadden, Arps, Slate, Meagher & Flom, in Washington, D.C., where she advises insurance companies, fund managers, insurance brokers, investment advisers, and their clients on a variety of federal and state tax issues relating to the structure, sale, acquisition, management, and ownership of insurance products, including variable insurance and annuity policies and corporate-owned life insurance. She also assists clients in developing alternative risk-management solutions and financial structures incorporating insurance products and advises insurance companies on tax planning and controversy issues arising from routine business operations, mergers, demutualizations, privatizations, and restructurings. Nelson regularly represents taxpayers before the Internal Revenue Service on a variety of compliance and controversy matters affecting corporations, partnerships, and individuals. Before joining Skadden, Arps, she was with the National Office of the Office of Chief Counsel, Internal Revenue Service, where she worked primarily on audit and tax litigation matters affecting life insurance and property-and-casualty insurance companies and their products and served as the coordinator for both the Life Insurance Industry Specialization Program and the Property and Casualty Insurance Industry Specialization Program. Nelson also served as National Office counsel to the Corporate Owned Life Insurance issue specialist. She is a speaker and panelist at many conferences for private bar, industry, and government professionals, including the American Bar Association, Section of Taxation (Committee on Insurance Companies and Products); Federal Bar Association Insurance Tax Seminar; Hartford Institute on Insurance Taxation; and National Association of Independent Insurers. Nelson is admitted to the bar in the District of Columbia and Maryland.

Jeremiah Riddle is an independent consultant specializing in advice and product solutions for affluent clients and their advisers both international and domestic. These solutions often involve private placement life and annuity policies. Riddle was managing director in the Life Practice of Marsh Private Client Services, a unit of Marsh & McLennan Companies. He was partner in charge of Deloitte & Touche’s Actuarial, Benefits and Compensation Consulting group’s New York office before joining Marsh. Riddle received his BBA from Baruch College (CUNY) and is an associate of the Society of Actuaries, a member of the Society of Pension Actuaries, and an enrolled actuary under ERISA. He may be contacted at [email protected].

Gideon Rothschild is a partner with the New York law firm Moses & Singer, where he is co-head of the Private Client Services Group. He is a fellow of the American College of Trust and Estates Counsel and a member of the editorial advisory boards of the Bureau of National Affairs’s Tax Management, Trusts & Estates, and Practical Accountant. Rothschild is the co-author of the BNA Tax Management portfolio on Asset Protection Planning, published by Tax Management, and the chair of the American Bar Association’s International Estate Planning Committee and past chair of the ABA’s Committee on Asset Protection Planning of the Section of Real Property, Probate and Trust Law. Rothschild is an adjunct professor at New York Law School and the University of Miami Law School Graduate Program and is licensed as a certified public accountant. He may be contacted at [email protected].

Daniel S. Rubin is a partner with the New York law firm Moses & Singer and a member of the firm’s Private Client Services Group. He earned a bachelor’s degree from the Elliott School of International Affairs of the George Washington University; a JD degree, cum laude, from Brooklyn Law School; and an LLM, in taxation, from the New York University School of Law. Rubin concentrates his practice in domestic and international estate and asset-protection planning for high-net-worth families. He is also a frequent lecturer to professional groups and is the author of numerous articles on estate and asset-protection planning matters for various professional and scholarly publications. He may be contacted at [email protected].

Ronald J. Surz is president of PPCA, an investment-technology firm in San Clemente, California, specializing in performance evaluation and attribution. He serves on various boards and councils, including the Investment Management Consultants Association (IMCA) Board of Directors; the IMCA Monitor Editorial Board; IMCA Standards of Practice Board Chair; FinanceWare.com Advisory Board; AIMR Investment Performance Council; AIMR After-Tax Performance Subcommittee; Risk Controlled Growth (RCG) Absolute Return Fund LLP Advisory Board; Capital Markets Consultants Advisory Board; Optivisor Advisory Board; President of the Southern California Financial Consultants Society. Surz is published regularly in Pensions and Investments, Senior Consultant, HorsesMouth, and the IMCA Monitor. He earned an MBA in finance at the University of Chicago and an MS in applied mathematics at the University of Illinois and holds a CIMA (certified investment management analyst) designation. His firm’s web address is www.PPCA-Inc.com.

George Van is chairman and founder of Van Hedge Fund Advisors International, LLC, and its affiliates (VAN). VAN is a research-focused hedge fund advisory firm focusing on institutional and retail clients. The firm offers customized portfolio consulting and manages a range of in-house products. Since 1992, Van and his associates have been involved in portfolio construction and research on alternative investments, and he directed the first research on reward/risk characteristics of hedge funds, using a large statistical sample. Van is internationally recognized as an authority on hedge funds, has been interviewed frequently by the international media, and has published numerous articles on hedge funds. Van is frequently asked to speak to professional investors at hedge fund symposiums. Before he began working on alternative investments, Van managed his family’s portfolio, following a career as founder and manager of large health-care companies. Over the years, Van has served as a director of various national and international organizations and held teaching appointments at the University of Alberta. He received a BA degree from McGill University, Montreal, Canada, in 1961; a DHA degree from the University of Toronto in 1963; and various academic honors. He may be contacted at [email protected].

Mark Watson is a vice president with Asset Management Advisors (AMA), a multifamily office that provides customized, objective wealth-management solutions for high-net-worth individuals and their families. AMA, an affiliate of SunTrust Banks, is headquartered in Palm Beach, Florida, and maintains local offices in Atlanta, Charlotte, Greenwich, Miami, Orlando, and Washington, D.C. Before joining AMA, Watson was a tax partner with KPMG, where he specialized in estate planning. He is a certified public accountant, a certified financial planner, and a personal financial specialist. Watson received an undergraduate degree in finance and a master’s degree in taxation from Texas A&M University. He is based in AMA’s Orlando office and may be contacted at mark.watson@ amaglobal.com.

Peter M. Williams is founder and president of Peter M. Williams and Company, a member firm of M Financial Group. With more than 25 years of experience, Williams has become a recognized leader in the design and marketing of sophisticated wealth-transfer strategies for individuals of ultra high net worth. He has considerable expertise in offshore/onshore private placement life insurance, premium financing design, and loan negotiation. Williams has participated in numerous forums, assisting insurance companies in private placement product design and product pricing. He is a frequent lecturer on private placement life insurance and premium financing to advisers of ultra-high-net-worth individuals. He has earned chartered life underwriter and chartered financial consultant designations from the American College, is a member of the American Association for Life Underwriters, and is a licensed securities principal. He earned his BBA from Stetson University. He may be contacted at [email protected].

PARTONE

THE MULTIPURPOSE POLICY

In wealth management—as in any professional-services business —there’s really only one performance standard: Do the solutions executed truly meet client needs? If so, business grows; if not, business shrinks.

That’s why the chapters in this section don’t merely address how private placement life insurance (PPLI) works; they describe the wide range of benefits it can deliver. As John Lawson explains in the opening chapter, PPLI’s initial success arose from a problem-solving approach to a client’s needs for tax management and asset protection.

It’s safe to say that every affluent client is likely to have financial concerns that require personalized solutions for risk management, tax management, asset protection, estate planning, and trust management. PPLI can play a role in all of those areas. And for corporate executives, an extremely valuable PPLI application has emerged in executive benefits. The chapters in this section map the territory and provide clear direction on how PPLI functions to address critical wealth-management needs.

CHAPTER 1

An Introduction to PPLI

JOHN B. LAWSON

The road private placement life insurance (PPLI) has traveled to t come into its own has been a bumpy one and hardly straight. But what was once a shadowy side business is now a legitimate market, with a foundation solid enough for growth. PPLI is the most recent innovation within the life insurance industry for superaffluent investors (individuals with $10 million or more in liquid net worth). It is a variable universal life (VUL) insurance transaction that occurs within a private placement offering. Private placement adds the flexibility to VUL’s product construction, pricing, and asset-management offerings. Because the product is sold through a private placement memorandum (PPM), every transaction can be individually negotiated and custom designed for the investor. The tax benefits it offers to policy owners are available from few other investment vehicles, particularly since they accrue without the need for complex trust structures.

To fully understand PPLI policies and the advantages they make possible, we must look to the basics of life insurance itself.

Life Insurance: Where It Starts