The EWP Stories Video Series – Part 1 – Episode 2

Expanded Worldwide Planning: Insures: PRIVACY – 2

Welcome. The topic of our story is Privacy. You gain an immediate understanding of Privacy when you are deprived of it. What better example of this than the personal violation that you experience when someone you dearly love is kidnapped? In Part 2 of our story, we learn more of the emotional trauma that Carlos Gutierrez experiences when his daughter Lucinda is kidnapped by a Mexican drug cartel.

Privacy is one of the six principles of Expanded Worldwide Planning, or EWP for short. When assets are placed into a properly constructed Private Placement Life Insurance policy they are re-titled in the name of the insurance company. This is similar to the re-titling of real estate when it is transferred to another entity like an LLC. This has the effect of removing these assets from the prying eyes of those who seek to harm you, like the drug cartel in our story.

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Carlos weaved to the door of the warehouse, followed closely by his pilot. Carlos fumbled with the key and finally opened the door to the office warehouse. His long-time pilot also functioned as confidant and body guard, so he told him in Spanish what just occurred.

Carlos was educated mostly in the United States, having received a masters degree in electrical engineering from Columbia University in New York. But English was his second language. Like all of us in times of emotional turmoil, he sought some comfort. Presently the only solace available was to speak his native language.

The plight of his daughter was beyond devastating, but the next step he knew was only a phone call away. He would call his insurance broker. Carlos had purchased Kidnap and Ransom insurance for his family, since the Mexican drug cartels had recently moved into his native Michoacan state, seeking to legitimize their sources of income by terrorizing the local avocado growers. By means of intimidation and violence, they sought access to this lucrative agricultural industry. His family were third generation avocado growers.

What put Carlos into a state of emotional delirium was hearing the voice of Juan, his best friend at Columbia University. Juan had been a model student, an honor student like Carlos, and a kind and generous person. His involvement in his daughter’s kidnapping seemed preposterous. He would not have believed it, if it weren’t for hearing his voice.

Carlos was meticulous in his financial affairs. His company had the ability to assemble the most advanced and sophisticated electronic components. He had become a billionaire in his early 40s through his design of innovative electronics for medical devices. He abided by the aw, both in Mexico and the U.S. Carlos was proud to be a citizen of both the U.S. and Mexico, even though it cost him financially to do so.

The last time Carlos had been with Juan was after college at his family farm outside the city of Uruapan. They had climbed onto one of the old avocado trees, to drink beer together and eat avocados. They were looking forward to launching their careers after college. He remembered the solid branches supporting them, the ripe avocados at their fingertips, with the dappled sunlight making the tree a private world of their own. He remembered the light being soft and multicolored like the light coming through stained glass in a church. They exuberantly discussed their prospects. Joining a drug cartel was definitely not on their list of future possibilities.

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Conclusion

In our next episode, the scene shifts location to Mexico City where we learn how the same drug cartel that has kidnapped Carlos’s daughter, Lucinda, has bribed an official of the Mexican tax authority in order to publicly destroy the reputation of Carlos.

We will learn how this could have been avoided, had Carlos used a properly structured PPLI policy. The information that was obtained by bribing an official of the tax authority, would not have been available had Carlos used an EWP structure. All his assets would have been put in the name of an insurance company, thus, shielded from the illegal activities of the drug cartel.

If you enjoyed this video, please give us a like below, and click on the subscribe button. We look forward to connecting with you in our next video.

To learn how the wealthiest families in the world conduct their financial affairs, please call +1 530 692 1007, or email us at info@expandedworldwideplanning.com.

At your convenience, we can arrange a call to discuss how our unique blueprint can vastly enhance your asset structure.

Disclaimer

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.

 

by Michael Malloy, CLU TEP RFC.

CEO, Founder @EWP Financial

Michael Malloy-CLU-TEP

 

 

 

 

 

 

 

 

 

 

Expanded Worldwide Planning Stories-3

EWP Stories-Part 3-Tax Shield

Expanded Worldwide Planning
International Tax Planning

Stories
Part 3: Tax Shield

EWP adds tax deferral, income, estate tax benefits and dynasty tax planning opportunities. Assets held in a life insurance contract are considered tax-deferred in most jurisdictions throughout the world. Likewise, PPLI policies that are properly constructed shield the assets from all taxes. In most cases, upon the death of the insured, benefits are paid as a tax free death benefit.

The best comment made about the tax benefits of PPLI is from the October 1994 article in Offshore Investment by Professor Craig Hampton:

“I was visiting a gentleman at his home in the Piccadilly district of London. It was explained to me that his net worth exceeded $100 millionU.S. by a substantial margin. I noticed the presence of a computer terminal on a large desk in his den. It was surrounded by reams of paper dealing with offshore investing.

It soon became apparent that his affluence was due to his own efforts when he said to me:

“You’re a bright young man who obviously knows his craft. But what can you tell me that I don’t already know about finances?”

I leaned forward and made this simple statement:

“Through the creative use of international life insurance, your financial affairs can be arranged so that you will never have to pay income taxes for the rest of your life!” The gentleman took serious notice, and thus was born the Hampton Freeze.”

The Hampton Freeze is the name coined for the various PPLI designs developed by Professor Craig Hampton in the early 1990s. These designs were utilized in cases where the premium was over $100M, but can also be employed for PPLI policies with lesser amounts of premium.

Oddly enough many of the tax benefits used for the sophisticated designs like the Hampton Freeze utilize the same tax benefits common to all life insurance policies.

Read Full Article

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by Michael Malloy, CLU TEP RFC.

CEO, Founder @EWP Financial

Michael Malloy-CLU-TEP

 

 

 

 

 

 

 

 

 

 

 

Expanded Worldwide Planning Stories-2

EWP STORIES-Asset Protection

Expanded Worldwide Planning
International Tax Planning

Stories
Part 2: Asset Protection

Our asset protection model is called The EWP Da Vinci Code. Our model is highly effective, yet conservative, and offers more asset protection than the recently invented options available to wealthy families. In today’s world of financial transparency, there is no hiding of financial assets. The EWP Da Vinci Code brings you peace of mind through a long-established and secure financial structure—life insurance, in the form of PPLI. We will share more with you on The EWP Da Vinci Code later in this Chapter.

Asset Protection is a prudent subset of financial planning. As we will read later in this article, some consider asset protection a deceptive, sleight-of-hand trick that deprives creditors from receiving what is lawfully due to them. The law is a double-edged sword that cuts both ways. Our article deals with both sides of this sharp blade.

We take an expansive approach to asset protection, which produces a simple and straightforward solution to this drama? What is the drama you correctly ask?

Read Full Article in Our Partner Site

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by Michael Malloy, CLU TEP RFC.

CEO, Founder @EWP Financial

Michael Malloy-CLU-TEP

 

 

 

 

 

 

 

 

 

 

 

Expanded Worldwide Planning Stories

Expanded Worldwide Planning, (EWP)
International Tax Planning

Stories
Part 1: Privacy

Expanded Worldwide Planning Stories-Privacy

Privacy is a key element. Wealthy families are looking for ways to keep their affairs private, and still be compliant with tax authorities worldwide.

What was once private and personal becomes public and accessible to all. Computers and other electronic devices are part of our lives, whatever our opinion of them. These devices can add convenience and efficiency to our lives, but at a cost.

At EWP Financial we embrace the Privacy Principle. The Privacy Principle is unique as it simply and legally shields wealthy families from unwished intrusions into their financial affairs. At the same time, the Privacy Principle is fully transparent and gives wealthy families a bespoke, compliant asset structure for all their holdings, wherever they might be throughout the world.

Read full article in our Partner Site

Download PDF

by Michael Malloy, CLU TEP RFC.

CEO, Founder @EWP Financial

Michael Malloy-CLU-TEP

 

 

 

 

 

 

 

 

 

 

EWP and Financial Architecture

Financial Architecture
The Comprehensive Blueprint

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Would you build a custom home without an architect?

Have you constructed your financial affairs without one?

How would you know?

You have constructed your financial home over time, using the best options available when opportunities presented themselves. This may inadvertently have created a house constructed by multiple architects, many different styles that may or may not fit together.

Why not take the designs that we have used with great success for the world’s wealthiest families to remodel your own house?

As financial architects, we can offer you an overreaching, comprehensive, and cohesive design optimized for privacy, tax efficiency, and asset protection.

We are not here to replace your trusted business or investment advisors. Our role is to take what you have already accomplished and place it into a structure that will create a unified design for all your interests, a method we have used for the world’s wealthiest families, families with a wide variety of assets and financial arrangements.


EWP FinancialAt EWP Financial our design basics are the six principles of EWP: privacy, asset protection, tax shield, succession planning, compliance simplifier, and trust substitute.
Read our White Paper for all the important details.

EWP Financial
Our firm, EWP Financial, serves wealthy families wherever they might reside.
We offer the most advanced financial planning tools available to assist them in making the six principles of EWP the building blocks of their asset structures.
As our outstanding track record has proven, the asset structures that we build have remained solid for multiple generations, bringing wealthy families financial security and peace of mind.

Company Background
Michael Malloy, CLU TEP RFC is the founding partner of the firm,who began his career over 30 years ago as a risk management consultant. He founded the Life Insurance Law Newsletter, and has written two books towards this end: The PPLI Papers and The Wit and Wisdom of Professor PPLI. EWP Financial was recently formed as the parent company for the several entities that currently serve wealthy families worldwide.

Distinguished Professor of Law
Serving as academic counsel to EWP Financial is Distinguished Professor of Law, Craig Hampton. Professor Hampton is highly regarded as a global authority in mattersinvolving fiscal privacy, financial and estate planning, asset protection, and sophisticated insurance structuring and analysis. An award-winning author, his written works include Survivorship Life Insurance, a best-selling publication by the American Bar Association.

Six Regional Representatives
Our bespoke approach to serving wealthy families worldwide includes our six regional representatives whose unique knowledge-based solutions provide individualized and highly personal service. The regional representatives bring not only in-depth technical knowledge, but as natives of the regions that they serve, they can tailor our structures to the cultural norms of wealthy families throughout the world.
The blueprint for your new, spectacular designer home is revealed in our White Paper, Expanded Worldwide Planning (EWP) At Its Best.

Expanded Worldwide PlanningWhat Is an EWP Asset Structure?
The authority of Expanded Worldwide Planning (EWP) has been firmly established. Wikipedia has recognized our knowledge-based solutions for wealthy families by including the concept of EWP in their article on International Tax Planning. On this Wikipedia page, the six principles of EWP are explained. EWP is defined as:
“An element of international taxation created to implement directives from several tax authorities following the 2008 worldwide recession.”

The six principles of EWP are: privacy, asset protection, tax shield, succession planning, compliance simplifier, and trust substitute.
We are taking a cue from Wikipedia. Our white paper features the six principles of EWP.
EWP has the six principles that matter most to wealthy families throughout the world today—no matter where they are located. They are the building blocks of any successful asset structure.

Is It Legal?
It seems every few months that there is another revelation of a tax dodger using offshore accounts to avoid U.S. taxes. Here is a recent newspaper headline:

                      “The IRS Reals in a Whale of an Offshore Tax Cheat—and Goes for Another.”

Is an EWP Structure just another one of these schemes?
Our EWP Structures have existed since the early 1990s with no issues of any kind either from the IRS or the families who have employed these asset structures.

Can They Steal My Money?
The answer is, “No.” Why is this so? Because all your assets are held in separate accounts by a trustee. This is a similar arrangement to having a trust account at a bank. The bank becomes the trustee of the asset, but ownership does not change hands—you retain ownership of all the assets held in an EWP Structure.

Will I Be Audited?
We will use a multi-lane motorway or freeway as our analogy to show how EWP Structures are ideally positioned to serve the needs of wealthy families worldwide.

Where are EWP Structures positioned on this motorway?
The fast lane is for those drivers who are the risk takers, traveling at ever faster speeds until they hear the sound of a patrol car chasing them down. In the slow lane are those drivers who wish to drive the speed limit, or wish to travel at a leisurely pace to reach their destination. In the middle lanes are those drivers who wish to blend into the flow.
Not be the fastest on the road, or the slowest. In the universe of financial planning tools, EWP Structures are traveling in these middle lanes.
These middle lane drivers are avoiding the newest innovations in planning techniques championed by those in the fast lane, and, also, staying away from strategies that accomplish little which are adopted by those in the slow lane. The drivers in the middle lanes will reach their destination safely with little risk of a confrontation with the authorities, who are concentrating on the drivers in the fast lane.
By using EWP Structures, the families driving in the middle lanes accomplish the maximum amount of privacy, asset protection, and tax efficiency, and are fully compliant with tax authorities worldwide.

Testimonials

“Passion, knowledge, transparency and a genuine interest in achieving the best for clients are
what makes a truly professional financial adviser. Michael Malloy has this and more. His
dedication to clients, business excellence and education sets him apart, and I would highly
recommend him to anyone wanting to receive outstanding financial advice.”
                                                                                            – Javier Gavito, Gaia Capital
                                                                                             Director General, Mexico City

“Have been looking for some time for a provider that really has the skill and sophistication
to ensure that family wealth flourishes across several generations. Many say they do, but
don’t. Advanced Financial Solutions, Inc. (AFS) does. AFS combines the expertise pertaining
to family wealth with a deep experience of working directly with wealthy families. I would
recommend them to anyone who wants to properly structure their assets to achieve the
maximum amount of asset protection, privacy, and tax efficiency.”
                                                                                         – Stephen Brent Wells
       – Senior Managing Director at Solaris Advisors, LLC a division of KF Group LP, New York City

“Michael Malloy has a profound knowledge of economic relationships, including their
international ramifications, as well as a keen sense of possible future developments. Together,
these two aspects enable him to have a highly accurate analysis of complex economic
situations. This in turn lets him carefully weigh the opportunities and risks of various
investment strategies.
On the basis of this, I feel I can highly recommend Mr. Michael Malloy’s professional
services. The above is not subject to my liability as per the German Civil Code (see section
675 paragraph 2 of the German Civil Code.). I have given this statement to the best of my
knowledge and belief.”
                                                – Ulrich Herrman
                                                – Presiding Justice of the Federal Supreme Court, Germany

 

by Michael Malloy, CLU TEP RFC.

CEO, Founder @EWP Financial

Michael Malloy-CLU-TEP

 

 

 

 

 

 

 

 

 

EWP At Its Best-2

EWP at its best 2

International Tax Planning (EWP) At Its Best

White Paper-Part 2

 The authority of Expanded Worldwide Planning (EWP) has been firmly established. Wikipedia has recognized our knowledge-based solutions for wealthy families by including the concept of EWP in their article on International Tax Planning. On this Wikipedia page, the six principles of EWP are explained. EWP is defined as “an element of international taxation created to implement directives from several tax authorities following the 2008 worldwide recession.”

The six principles of EWP are: privacy, asset protection, tax shield, succession planning, compliance simplifier, and trust substitute.

The Wikipedia article goes on to say, “EWP allows a tax paying entity to simplify its existing structures and minimize reporting obligations under the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS). These international assets can also comply with tax authorities worldwide.”

We are taking a cue from Wikipedia. Our white paper features the six principles of EWP. EWP has the six principles that matter most to wealthy families throughout the world today—no matter where they are located. They are the building blocks of any successful asset structure.

Compliance Simplifier

For most people a spider’s web is not a positive image. For this reason EWP uses a spider’s web as a symbol of an overly complicated asset structure with multiple entities and a confusing array of boxes and arrows. In its complexity, what we call a Spider Web Structure might look impressive to some, but the end result is summarized in three words: overcomplication, confusion, and uncertainty.

Our excellent alternative is an EWP Structure, which was born out of the necessity to achieve greater tax efficiency, privacy, and asset protection. The laws and regulations that govern an EWP Structure are made possible through a more stable and straightforward body of law than the more politicized tax laws and regulations worldwide.

Read full article in our Partner Site

Read Part 1

Download White Paper, (full version)

 

by Michael Malloy, CLU TEP RFC, @ Advanced Financial Solutions, Inc

Michael Malloy-CLU-TEP

 

 

 

 

 

 

 

 

 

 

EWP At Its Best-1

EWP at its best 1

International Tax Planning (EWP) At Its Best

White Paper-Part 1

The authority of Expanded Worldwide Planning (EWP) has been firmly established. Wikipedia has recognized our knowledge-based solutions for wealthy families by including the concept of EWP in their article on International Tax Planning. On this Wikipedia page, the six principles of EWP are explained.

EWP is defined as:

“An element of international taxation created to implement directives from several tax authorities following the 2008 worldwide recession.”

The six principles of EWP are: privacy, asset protection, tax shield, succession planning, compliance simplifier, and trust substitute.

The Wikipedia article goes on to say,

“EWP allows a tax paying entity to simplify its existing structures and minimize reporting obligations under the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS). These international assets can also comply with tax authorities worldwide.”

We are taking a cue from Wikipedia. Our white paper features the six principles of EWP. EWP has the six principles that matter most to wealthy families throughout the world today—no matter where they are located. They are the building blocks of any successful asset structure.

Privacy

Privacy is a key element. Wealthy families are looking for ways to keep their affairs private, and still be compliant with tax authorities worldwide.

What was once private and personal becomes public and accessible to all. Computers and other electronic devices are part of our lives, whatever our opinion of them. These devices can add convenience and efficiency to our lives, but at a cost.

Electronic Privacy?

Andrew Grove, co-founder and former CEO of Intel Corporation, expressed this thought:

“Privacy is one of the biggest problems in this new electronic age. At the heart of the Internet culture is a force that wants to find out everything about you. And once it has found out everything about you and two hundred million others, that’s a very valuable asset, and people will be tempted to trade and do commerce with that asset. This wasn’t the information that people were thinking of when they called this the information age.”

EWP has the six principles that matter most to wealthy families throughout the world today–no matter where they are located. They are the building blocks of any successful asset structure.

The ancient Greeks called man, “a political animal.” In today’s world almost all so-called facts are politicized. It is no different with privacy. Certain groups consider the journalistic authors of the Panama Papers and the Paradise Papers heroes of a free press. Others say that these same journalists were thieves, who unlawfully stole private financial data. Whatever your opinion, these events did happen, and the targets were most decidedly wealthy families throughout the world.

How does the privacy afforded by an EWP Structure protect the families whose financial information was published for the entire world to see?

The privacy principle of EWP accomplishes its objective in several key ways:

  • Upon transfer into an EWP Structure, the asset is retitled into the name of the beneficial owner of the asset, similar to retitling property in a Limited Liability Company (LLC) structure.
  • If there is reporting to a tax authority for the EWP Structure, only one number is reported. This is the value of all the assets in the EWP Structure. The individual assets are not reported.
  • The bank account that is usually opened in connection with an EWP Structure is opened in the name of the new beneficial owner of the assets and not the policyowner. The policyowner has full access to the funds in the bank account in accordance with the assets inside the policy.

Asset Protection

Our asset protection model is called The EWP Da Vinci Code. Our model is highly effective, yet conservative, and offers more asset protection than the recently invented options available to wealthy families. In today’s world of financial transparency, there is no hiding of financial assets. The EWP Da Vinci Code brings you peace of mind through a long-established and secure financial structure.

Why bring Leonardo da Vince into this discussion? Because Leonardo said,

“Simplicity is ultimate sophistication.”

We have taken this as our model in implementing EWP Structures. We invite you to do the same.

When you purchase an automobile, you do not ask if it has turn signals. Of course, this is a standard part of the vehicle. Today you may pay extra for an enhanced audio package, but you might be able to do without it. Asset protection does not come as an extra feature with EWP Structures, it is part of the package, just like turn signals on a new vehicle.

The EWP Da Vinci Code Realized

Most asset protection trusts established by U.S. settlors are considered grantor trusts under U.S. income tax law, meaning that all income of the trust is reportable on the grantor’s (the settlor’s) individual income tax return. Asset protection trusts do not, in and of themselves, offer any tax advantages under U.S. income tax law.

So why not create a structure that not only gives you asset protection, but the whole formidable array of benefits that EWP provides? For wealthy families, in particular those families with a connection to the U.S., an EWP Structure is arguably the most efficient structure for the integration of tax-free investment growth and asset protection.

Tax Shield

Savvy, wealthy families today are employing EWP Structures in greater and greater numbers. A hallmark of the popularity of this asset structure is its conservative and straightforward nature. This ironically allows it to achieve spectacular tax savings.

Why strain to invent a structure that will very likely draw the attention of tax authorities, because of its convoluted and aggressive design? We counsel you to stop trying to be overly clever in the design of your asset structures. Why not use a financial structure that has been used successfully to structure hundreds of billions of dollars in assets for wealthy families throughout the world. This will give you the best tax shield available today bar none.

Who Pays the Most Tax Today in the U.S.?

The most recent IRS data, from 2016, shows that the top 10 percent of income earners pay almost 70 percent of federal income taxes.

Looking at all federal taxes, the Congressional Budget Office shows that the top 1 percent pay an average federal tax rate of 33.3 percent. The data show tax rates decline with income, and the poorest 20 percent of the population pays an average tax rate of just 1.7 percent.

EWP Structure Benefits with Real Estate Investing

The benefits of using an EWP Structure for U.S. persons investing in real estate in the U.S. are substantial. For the Non-U.S. person it is even more important to employ an EWP Structure, as there are formidable obstacles faced by non-U.S. persons investing in U.S. real estate.

The primary tax impediments to foreign investment in U.S. real estate in general and in real estate funds specifically are U.S. income, capital gains and withholding taxes (30%), and even U.S. estate taxes. An EWP Structure is a well-established tax and estate planning tool that many qualified investors utilize to mitigate and manage these exposures.

Succession Planning

Many countries, primarily in civil-law jurisdictions, require forced distribution of assets at death according to strict laws and regulations. This usually takes the form of percentage shares of assets that will be distributed to spouses, children, and other close relations of the deceased. An EWP Structure executed outside the home country of the owner or policyholder is a method to mitigate these forced heirship rules.

Since an EWP Structure is executed outside the home country of the policy owner, the forced heirship laws do not apply, as the policy will be governed by the laws where the insurance company is domiciled.

This element of EWP provides a wealth holder an excellent method to enact an estate plan that conforms to his/her own wishes, and not be dictated by the forced heirship rules of his/her home country. To be successful this needs to be well-coordinated with all the aspects of an EWP Structure, as well as all the other elements of a wealth owner’s financial and legal planning.

International families can eliminate the vagaries of court decisions which hinge on details of the law like inter vivos transfers versus testamentary transfers by using an EWP Structure. This will secure their own estate planning wishes using a legally binding contract with no need of court decisions in any jurisdiction.

The laws governing these contracts are written specifically to accommodate international wealthy families. These laws enhance not only succession planning, but provide excellent asset protection, privacy, and tax efficiency.

by Michael Malloy, CLU TEP RFC, @ Advanced Financial Solutions, Inc

Michael Malloy-CLU-TEP

 

 

 

 

 

 

 

 

 

 

EWP & Trust Substitute-Part 2

International Tax Planning & Trust Substitute—Part 2

EWP (Expanded Worldwide Planning) and Trust Substitute

Private Placement Life Insurance (PPLI) in Action

A Stradivarius Violin Plays the EWP Super Trust

 

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In Part 1 we spoke about how a beginner’s violin knows nothing of the deep, rich, and more pleasing tone of the Stradivarius violin. We equated the Stradivarius violin with the more sophisticated uses of asset structures that employ PPLI to its full effect. In Part 2 we will learn about the EWP Super Trust, which indeed uses the deep, rich, and more pleasing tone of the Stradivarius violin.

Ironically, the most simple PPLI structure, a Frozen Cash Value (FCV) policy, offers wealthy families the most advanced structuring possibilities available in the world today. A family can place almost any asset class that is located almost anywhere in the world into a FCV policy, and still have it compliant with tax authorities worldwide.

The FCV PPLI structure almost eliminates the concept of cash value in the traditional sense. The growth element of the assets in the policy is paid out as a tax-free death benefit at the death of the insured person(s) in the contract. The amount of the death benefit to qualify as life insurance is just a percent or two of the total assets contributed to the policy, as there must be a risk shifting element to qualify as life insurance under the laws of the jurisdictions who issue the policies.

The maximum the owner of the policy can withdraw is the total value of the premium contributed to the policy. This includes in-kind premiums. The structures that we create for the world’s wealthiest families have sizable premium contributions, frequently in the hundreds of millions and multiple billions. Therefore, if withdrawals from the policy are wished, there is plenty to withdraw. More frequently there are no withdrawals, as these families can accomplish what they wish inside the existing FCV PPLI structure.

In essence, the policy is composed of a small amount of life insurance and the worldwide holdings of a family, offering them the maximum amount of privacy, asset protection, and tax efficiency that is possible. With its own three elements of owner, insured, and beneficiary, it goes far beyond the three elements of a trust: settlor or trustor, trustee, and beneficiary. How is this possible? How can it be fully compliant with the U.S. tax code for those families that have a connection to the U.S.?

The EWP Super Trust

FCV PPLI relies on §7702. Section 7702(a), in defining life insurance, states in part, “the term ‘life insurance contract’ means any contract which is a life insurance contract under the applicable law.”

The meaning of “the applicable law” in both §7702(a) and §7702(g) mean that life insurance policies issued under the laws of other countries are indeed life insurance contracts, even if they do not meet the various cash value tests mentioned in the §7702(a).

The insurance laws of these countries allow the death benefit of the insurance contract to be less than its cash value. In fact, within these countries, a life insurance contract is fully compliant with a cash value well in excess of the death benefit of the insurance policy.

The insurance companies that issue FCV PPLI policies design the policies to conform to the laws of the countries where these insurance companies are domiciled. You then have an insurance policy that is fully compliant under “the applicable law” of these countries. Most nations in the world, including the U.S., allow their citizens to purchase life insurance policies that are issued from countries outside their own.

Thus, the FCV PPLI is fully sanctioned for U.S. buyers, and buyers from other nations in the world who wish to avail themselves of this truly remarkable structuring tool: a Trust Substitute that we call an EWP Super Trust.

FCV PPLI asset structures have been in use by U.S. persons and non-U.S. persons for over 25 years without a challenge by the IRS. Our mission at Expanded Worldwide Planning is to make the most advanced asset structuring techniques available to wealthy families throughout the world.

Why not take advantage of this exceptional opportunity which is supported by 100s of billions of dollars of successful structures that have been put in place over these 25 years?

We offer you another chart which shows what a properly structured PPLI policy can accomplish for non-U.S. persons who own real estate in the U.S. compared with structures that just use trust and other entities.

PPLI with IDF vs. Other Real Estate Structures

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A Safe Drive to the Ultimate Destination

We will use a multi-lane motorway or freeway as our analogy on how life insurance is ideally positioned to serve the needs of wealthy families worldwide. Life insurance is recognized throughout the world as a useful financial planning tool to address the retirement, financial planning, and estate tax needs of families. Where is life insurance positioned on this motorway?

The fast lane is for those drivers who are the risk takers, traveling at ever faster speeds until they hear the sound of a patrol car chasing them down. In the slow lane are those drivers who wish to drive the speed limit, or wish to travel at a leisurely pace to reach their destination. In the middle lanes are those drivers who wish to blend into the flow. Not be the fastest on the road, or the slowest. In the universe of financial planning tools, life insurance structures are traveling in these middle lanes.

These middle lane drivers are avoiding the newest innovations in planning techniques championed by those in the fast lane, and, also, staying away from strategies that accomplish little which are adopted by those in the slow lane. The drivers in the middle lanes will reach their destination safely with little risk of a confrontation with the authorities, who are concentrating on the drivers in the fast lane.

By using life insurance as its basic framework, the families driving in the middle lanes accomplish the maximum amount of privacy, asset protection, and tax efficiency. A PPLI life insurance based structure is indeed the best building block available to achieve the six principles of EWP, and be fully compliant with tax authorities worldwide.

Tax Avoidance vs. Tax Evasion

This brings us to the topic of the regulation of financial planning structures. One key distinction is the difference between what is termed tax avoidance and tax evasion. For some regulatory bodies there is little or no distinction between these two concepts. With our EWP approach to asset structuring, we see a large distinction between tax avoidance and tax evasion. On what grounds do we take this position?

Admittedly, our position is self-serving because our clients’ are the world’s wealthiest families. At the same time we challenge those who take the high moral ground of calling tax avoidance and tax evasion the same thing. Our view can be summarized in IRC v. Duke of Westminster, Baron Thomas Tomlin wrote:

“Every man is entitled if he can to order his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreciative the Commissioners of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax.”

Yes, there is some line between tax avoidance and tax evasion, but it is not as simple as saying that putting money in a tax-deferred retirement savings account is morally fine because these accounts are intended by the government. But it is immoral to employ tax avoidance such as—assigning low value to intangibles sold to corporate subsidiaries in order to assign profits to low-tax jurisdictions—because this behavior was not intended by legislators.

Defining the line between tax avoidance and tax evasion involves drawing a line that governments themselves have failed to draw adequately, and places blame squarely on the taxpayer for their behavior. This is all based on a rudimentary idea about what the politicians who wrote the law “intended.”

Conclusion

An EWP Super Trust is a unique vehicle for creating the maximum amount of privacy, asset protection, and tax efficiency for the world’s wealthiest families. We await the opportunity to create one for you!

by Michael Malloy, CLU TEP RFC, @ Advanced Financial Solutions, Inc

Michael Malloy-CLU-TEP

 

 

 

 

 

 

 

 

 

 

 

EWP & Trust Substitute

International Tax Planning & Trust Substitute—Part 1

EWP (Expanded Worldwide Planning) and Trust Substitute

Private Placement Life Insurance (PPLI) in Action

The Dangers of Over Reliance on Trusts

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The more sophisticated tools gravitate toward the most sophisticated users of these tools. A Stradivarius violin is used by a master violinist and not a beginner. When clients and advisors initially approach us about Private Placement Life Insurance (PPLI), they are confused about its uses.

For the most part, what these clients and advisors have read about are beginning uses of PPLI. They have not explored the upper reaches and more sophisticated uses of asset structures that employ PPLI to its full effect. To keep to our analogy, they have picked up a beginner’s violin, and know nothing of the deep, rich, and more pleasing tone of the Stradivarius violin.

We will now discuss the sixth principle of Expanded Worldwide Planning (EWP), Trust Substitute. We will of course speak of the obvious use of a PPLI asset structure in place of a trust structure in some civil law jurisdictions, but we will also expand our discussion to explore the very nature of trust and how they differ from the sophisticated structures that we use for the world’s wealthiest families. Our discussion will also touch on why a PPLI structure is a far better tool for the client who seeks both maximum privacy, asset protection, and tax efficiency, as well as full compliance with the world’s tax authorities.

Advisors Don’t Know What They Don’t Know

The confusion about the uses of PPLI structures that we mentioned in our opening paragraph is exacerbated by the system that educates attorneys, accountants, trust officers, and asset managers. There is virtually no mention of PPLI Structures in colleges, universities, law schools, and the other training grounds of these professionals.

For instance, attorneys spend time learning the various uses of trusts, so they produce these for their clients, even when they are not the best tool for the job at hand. They don’t know what they don’t know.

If we are going to use a PPLI structure as a substitute for a trust structure, or in combination with a trust. Let us ask ourselves the basic question: what is a trust and how did it come to be in existence in the first place.

Let us look at a chart that compares Trusts vs. Life Insurance for creating asset structures for wealthy clients.

Insurance and Trust Comparison

Insurance Trust

◆ Contractually based and used by millions

◆ Tax deferral

◆ Insurance Company is beneficial owner

◆ Simplified or limited reporting

◆ Tax-free asset transfer

◆ No capital gains taxes

◆ Asset protection

◆ Provides some asset protection

◆ Sometimes seen as tool for the rich

◆ More stringent reporting requirements

◆ Tax filings for trust and possibly beneficiaries required by some jurisdictions

◆ No tax deferral

What Is a Trust and Where Did It Come From?

In its most basic form, it is a three-party relationship in which someone, the trustor or settlor, transfers assets to a trustee, for the benefit of a beneficiary.

A trust establishes the distinction between a legal and a beneficial owner. The legal owner was referred to as a “trustee” (because he was “entrusted” with property) and the beneficial owner was the “beneficiary”.

Roman law had a well-developed concept of the trust (fideicommissum) created by wills. However, these testamentary trusts did not develop into the inter vivos (living) trusts which apply while the creator lives. This was created by later common law jurisdictions. The waqf is a similar institution in Islamic law, restricted to charitable trusts.

In England during the time of the Crusades in the 12th century, the law of trusts was constructed as part of “equity”, a body of principles made by the Courts of Chancery, which sought to correct the strictness of the common law. The trust was an addition to the law of property, in the situation where one person held legal title to property, but the courts decided it was fair, just or “equitable” that this person be compelled to use it for the benefit of another.

When a landowner left England to fight in the Crusades, he conveyed ownership of his lands in his absence to manage the estate and pay and receive feudal dues, on the understanding that the ownership would be conveyed back on his return. However, Crusaders often encountered refusal to hand over the property upon their return. Unfortunately for the Crusader, English common law did not recognize his claim. As far as the King’s courts were concerned, the land belonged to the trustee, who was under no obligation to return it. The Crusader had no legal claim.

The disgruntled Crusader would then petition the king, who would refer the matter to his Lord Chancellor. The Lord Chancellor could decide a case according to his conscience. At this time, the principle of equity was born. The Lord Chancellor would consider it “unconscionable” that the legal owner could go back on his word and deny the claims of the Crusader (the “true” owner). Therefore, he would find in favor of the returning Crusader. Over time, it became known that the Lord Chancellor’s court (the Court of Chancery).

PPLI Structure vs. Trust Structure

Just as a Trust Structure has three elements: trustor or settlor, trustee, and beneficiary, a PPLI, and, indeed, every life insurance policy has three elements: owner, insured, and beneficiary. Using this three party relationship successfully makes many of the advanced structuring possibilities of EWP possible.

As we discussed in our chapter on Succession Planning, some civil law jurisdictions do not recognize trust in the same light as in most common law jurisdictions. In some asset structuring situations, a PPLI asset structure can be a viable substitute for a trust. Upon death of the insured person(s), the value of the assets in a PPLI policy plus any death benefit is paid directly to the beneficiaries listed in the policy. This can facilitate the transfer of wealth and eliminate the need for a trust.

Conclusion

Trusts serve an essential purpose in planning for the world’s wealthiest families, but over reliance on them is a grave mistake. If done correctly, the marriage of a trust with a properly structured PPLI policy can indeed be a happy one. Please contact us today to find out how you can benefit from this happy marriage, which has served the most sophisticated clients worldwide for over 25 years.

by Michael Malloy, CLU TEP RFC, @ Advanced Financial Solutions, Inc

Michael Malloy-CLU-TEP

 

 

 

 

 

 

 

 

 

EWP & Compliance Simplifier-Part 2

International Tax Planning & Compliance Simplifier—Part 2

EWP (Expanded Worldwide Planning) and Compliance Simplifier

Private Placement Life Insurance (PPLI) in Action

Inside a Deadly Spider Web Structure

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Depending on the planning needs of international families, two types of trusts are generally used, Foreign Grantor Trust and Foreign Non-Grantor Trust. These trusts can accomplish some of the aims of the six principles of EWP, but they can do nothing in terms of tax efficiency. For this a trust must own a properly structured PPLI policy. An EWP structure uses the six principles of EWP to give families the optimum amount of tax efficiency, privacy, and asset protection.

Foreign Grantor Trusts

A foreign trust is considered a grantor trust for U.S. income tax purposes when a U.S. grantor makes a gratuitous transfer to a foreign trust that has one or more U.S. beneficiaries or potential beneficiaries of any portion of the trust. The trustee of a foreign grantor trust with a U.S. owner is required to file Form 3520-A, Annual Information Return of Foreign Trust with U.S. Owner, with the IRS each year. Such form includes an accounting of the trust’s activities for the year.

The Form 3520-A is due on March 15th and a six-month extension may be requested.

The trustee should also provide a “Foreign Grantor Trust Owner Statement” to each U.S. owner of a portion of the trust and a “Foreign Grantor Trust Beneficiary Statement” to each U.S. beneficiary who received a distribution during the taxable year.

The U.S. owner of the foreign grantor trust is subject to U.S. income tax on the portion of the trust income he or she is considered to own. In addition to the Form 3520-A, the owner must file a Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts, to report any transfers to the foreign trust. Form 3520 must also be filed each year to report ownership of the foreign trust even if no transfer is made. Form 3520 is required to be filed by the due date of the individual’s Form 1040 including extensions.

U.S. beneficiaries of a foreign grantor trust who receive any distribution during the taxable year must also file Form 3520 to disclose the amount and source of the distribution. In addition, the Form 3520 discloses the amount of taxable income that is includible on his or her income tax return. The U.S. beneficiary is also required to disclose the fact that a distribution was received on Form 1040, Schedule B, Part III.

Foreign Non-Grantor Trusts

Foreign non-grantor trusts generally are not subject to U.S. income tax unless the trust earns U.S. source or effectively connected income. Such income is taxed at graduated rates applicable to domestic trusts. Depending upon the investments that the trust holds as well as treaty considerations, the Trusts may be subject to non-resident withholding. Foreign information disclosures may be required as well.

The trustee should provide a Foreign Non-Grantor Trust Beneficiary Statement to a U.S. recipient that received a distribution which reports the amount of the distribution as well as a breakdown of the character of the income. The U.S. beneficiary is required to report the distribution received on Form 3520. In addition, the U.S. beneficiary must pay income tax on the current year trust income included in the distribution and may also be subject to an additional tax (“throwback tax”) to the extent the distribution includes undistributed income from a prior year, termed undistributed net income (UNI). Further, in order to deter trusts that do not distribute income currently, an interest charge may be imposed.

Don’t Trust in Trusts Alone

The strands that form a spider’s web are sticky, and cling to you when touched. Likewise, a Spider Web Structure clings to tax authorities in very unwelcomed ways and binds you and your family to them through the overcomplication, confusion, and uncertainty of the asset structure.

We have chosen a Spider Web Structure that involves non-U.S. persons, who are neither U.S. citizens nor residents of the U.S.(NCNR). These families have both U.S. beneficiaries and non-U.S. beneficiaries, and have created two Foreign Corporations (FC). The Spider Web Structure begins simply enough, but as you will read, the ending is not so simple.

The trustees of the Foreign Grantor Trust (FGT) then created a second Foreign Corporation, which would own only non-U.S.-situs assets. The original FC would own only U.S. securities. The non-U.S. portfolio assets owned by the second FC would be earmarked to benefit solely non-U.S. persons as trust beneficiaries after the death of the NCNR. The U.S. portfolio assets owned by the existing FC would be earmarked for the U.S. beneficiaries.

There would be no U.S. estate tax on the non-US assets owned by the second FC. A retroactive check-the-box election could be filed for this second FC effective on the day before the NCNR’s death.

Some US advisors advocate relying exclusively on entity structuring to convert a single FC into a multi-tier FC structure involving at least three FCs. Prior to the NCNR’s death, the trustees of the NCNR’s FGT would create two FCs. These two FCs would then together equally own the shares of a third lower-tier FC.

The US portfolio assets would be owned by the lower-tier FC. Following the death of the NCNR, the lower- and upper-tier FCs would be deemed liquidated for US tax purposes (by filing check-the-box elections) in a carefully scripted sequence as follows.

  1. First, the upper-tier FCs would each file a check-the-box election for the lower-tier FC, effective one day prior to the death of the NCNR. This results in a taxable liquidation of the lower-tier FC without current US income tax on the historical pre-liquidation unrealised appreciation inside the FC. However, the upper-tier FCs’ basis in the underlying US securities held by the former lower-tier FC will equal the FMV of such assets on the date of the deemed liquidation of the lower-tier FC.
  2. Second, two days after the NCNR’s death, both upper-tier FCs will make simultaneous check-the-box elections. The inside basis of the US portfolio assets previously held by the lower-tier FC prior to its deemed taxable liquidation would be stepped up or down to the FMV of such assets on the day after the death of the NCNR.

Now you understand why we call it a Spider Web Structure? In reading through this structure, do you get an eerie feeling that something might go wrong if something unexpected happens in the web? Perhaps these check-the-box elections might not be done in precisely this manner? Do you think we have an alternative? You are right!

PPLI: An Elegant Solution

An EWP structure is easily produced if the FNGT purchases a PPLI policy none of the above convoluted planning of the Spider Web Structure need occur. The PPLI structure satisfies the needs of both the U.S. beneficiaries and the non-U.S. beneficiaries, as assets in the policy can be located in any jurisdiction worldwide, and distributions can be made to both sets of beneficiaries in a properly structured policy without any taxation.

Once investments are part of a properly constructed PPLI policy none of the following are treated as taxable income:

  • The income and investment returns inside the policy;
  • Withdrawals up to premium;
  • Policy loans, and;
  • Death benefit proceeds.

Pre-immigration Planning

The strategy of funding a FNGT with PPLI is even more successful when applied prospectively, prior to the accumulation of any UNI in the trust, for example before a non-U.S. person establishes U.S. residency. By funding the FNGT with PPLI when the trust is first established, U.S. beneficiaries can remove UNI complications altogether. All the assets that are placed in this PPLI policy are effectively placed outside the U.S. tax system, and can be passed onto beneficiaries tax-free. Timing is crucial for this PPLI structure to be the most effective, as it needs to be established before the U.S. person has entered the U.S. tax system.

At the Heart of EWP Is PPLI

Why engage in complex trust and entity planning that just produces overcomplication, confusion, and uncertainty–yes, Spider Web Structures? You can definitely accomplish much more with a more simple and straightforward EWP Structure that uses PPLI as its core element. We invite you to inquire today to find out how we have helped families worldwide achieve privacy, tax efficiency, asset protection, and, of course, compliance simplification.

 

by Michael Malloy, CLU TEP RFC, @ Advanced Financial Solutions, Inc

Michael Malloy-CLU-TEP