EWP PODCAST with Michael Malloy CLU TEP RFC

Expanded Worldwide Planning Interview with Michael Malloy

Joe Robert Podcast

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Michael Malloy CLU TEP RFC  –What is Expanded Worldwide Planning (EWP)?

–Expanded Worldwide Planning or EWP for short was born out of a desire for the world’s wealthiest families to have a more secure and tax efficient way to structure their assets.

–Frankly, in the early part of this century the planning for ultra high net worth families had just become too complicated, and was not accomplishing its goals.

–Families wished something simpler and more straightforward, so firms like ours asked this question: what are the main principles of planning for ultra high net worth families? We came up with six:

–We asked ourselves: what financial product already has most of these in place by its very nature, and is recognized worldwide as a viable financial vehicle? The answer is—life insurance.

–But not your garden variety of life insurance. A specialized form of life insurance that dates from the 1970s–Private Placement Life Insurance.

–This form of life insurance is available to those who the SEC calls Qualified Purchasers, those who have investable assets of $5M or more.

EWP is unique in that it brings together disciples that most people take separately, but when put together in one package are much more powerful; they are:

  • financial planning
  • asset protection
  • estate planning
  • and life insurance planning.

Here’s what Bloomberg said in a recent article on PPLI:

“Athletes, celebrities, and family offices are embracing private placement life insurance, or PPLI, as a way to preserve wealth for their heirs. It’s a strategy that’s perfectly legal and has existed for decades.”

Bloomberg is so excited about PPLI because it delivers these benefits:

  • all cash value in the policy grows tax-deferred, and is paid out as a tax-free death benefit;
  • there are no income taxes for assets held in the policy, and this includes capital gains tax;
  • one can access the cash value through tax-free distributions from the policy;
  • one receives asset protection and enhanced privacy;
  • there is limited reporting to tax authorities;
  • the ability to avoid estate taxes;
  • and there are no surrender charges.

An outstanding feature that catapults PPLI above any other life insurance policy is that all asset classes can be placed in a policy:

  • real estate
  • physical assets like timber, oil, and mining
  • private equity
  • intellectual property
  • art and collectibles
  • yachts and private jets
  • and alternative currency denominations like bitcoin.

Let’s hear what Wikipedia has to say on the six principles of EWP in their International Tax Planning article. We will follow these Wikipedia descriptions of the six principles of EWP with our own Commentary.


EWP gives privacy, and compliance with tax laws. It also enhances protection from data breaches and strengthens family security. EWP allows for a tax compliant system that still respects basic rights of privacy. EWP addresses the concerns of law firms and international planners about some aspects of CRS related to their clients’ privacy. EWP assists with the privacy and welfare of families by protecting their financial records and keeping them in compliance with tax regulations.

Our commentary—

In today’s world, there is no more hiding of assets in complicated structures offshore; it just doesn’t work. So how do you achieve both compliance with tax laws and privacy at the same time? This is what EWP does so well, and we will explain in greater detail as we go on.

Major data breaches are almost a commonplace event today. Besides data breaches, wealthy families are also threatened by aggressive journalistic groups, whose mission is to expose the financial dealings of wealthy families. EWP structures are a way that families can have both full compliance and privacy.

Asset protection

EWP protects assets with segregated account legislation by using the benefits of life insurance. This structure uses asset protection laws in the jurisdictions of residence to shield these assets from creditors’ claims. A trust with its own asset protection provisions can still receive additional protection with the policy.

Our commentary—

Throughout the world, life insurance is recognized as an asset that has great societal value. Death benefits alleviate governments from the burden of protecting families from financial ruin, when an unexpected death occurs in the family. Segregated accounts are mentioned here. These are specialized accounts set up by custodians that protect assets. In segregated accounts the assets are set aside for the families that own them. This makes them independent from both the custodian, a life insurance company, and most importantly from unwarranted attempts by creditors to seize them.

The insurance companies that we use at EWP Financial are headquartered in jurisdictions that have excellent asset protection laws, like Bermuda and Barbados. These laws are specifically written, so that these policies give families maximum protection from creditors’ claims.

Succession planning

EWP includes transfers of assets without forced heirship rules directly to beneficiaries using a controlled and orderly plan. This element of EWP provides a wealth holder a method to enact an estate plan according to his/her wishes without complying with forced heirship rules in the home country. This plan must be coordinated with all the aspects of a properly structured PPLI policy together with other elements of a wealth owner’s financial and legal planning.

Our commentary—

In many parts of the world, one simply can’t dictate how one’s assets will pass to the next generation; these are the forced heirship rules. Many European countries have these laws. In the U.S., Louisiana has forced heirship laws. These laws came about to protect certain close families members like children and spouses, but they can severely limit how a wealth owner distributes their estate.

An EWP structure is enacted outside the home country of the wealth owner, so if done properly the laws of the home country do not apply, and he or she is free to distribute their estate in a manner of their own choosing.

Tax shield

EWP adds tax deferral, income and 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.

Our commentary—

This is what occurs in a regular IRA or 401(k) plan, while money is kept in these accounts there are no taxes until the money is withdrawn. In an EWP Structure there is never a tax, because it either passes to the next generation as a tax free death benefit, or one makes distributions from the life insurance policy which also are not taxable.

Compliance Simplifier

EWP adds ease of reporting to tax authorities, administration of assets, and commercial substance to structures. In addition, the insurance company is considered the beneficial owner of the assets. This approach greatly simplifies reporting obligations to tax authorities, because assets in the policy are held in segregated accounts and can be spread over multiple jurisdictions worldwide.

Our commentary—

For most people a spider web is not a positive image. For this reason we use a spider 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.

We propose an alternative asset structure that we call an EWP Structure. At the heart of an EWP Structure is a PPLI policy which was born out of the necessity to achieve greater tax efficiency, privacy, and asset protection in one low cost structure with institutional pricing. A PPLI structure is made possible through the laws and regulations of life insurance. A much more stable and straightforward body of law than the more politicized tax laws and regulations worldwide.

Trust Substitute

EWP creates a viable structure under specific insurance regulations for civil law jurisdictions. In most civil law jurisdictions, trusts are poorly acknowledged and trust law is not well developed. As a result, companies with foreign trusts in these civil law jurisdictions, face obstacles.

Our commentary—

Some civil law jurisdictions do not recognize trusts in the same light as in most common law jurisdictions. In some asset structuring situations, an EWP Structure can be a viable substitute for a trust. Upon death of the insured person, 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.

Interview Highlights – Part 1


Interview Highlights – Part 2




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

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












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.


“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-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 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 & 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










EWP & Succession Planning-Part 2

International Tax Planning, (EWP), and Succession Planning

Part 2

Private Placement Life Insurance (PPLI) in Action

PPLI: The Best Tool for the Job—Part 2

A PPLI policy is not a uniquely civil-or common-law creation. Its treatment in law is more uniform than planning solely with entities like trust, foundations, and LLCs. The unique design of a PPLI policy can greatly assist in a move between civil-and common-law jurisdictions.

This can be done without the requirement of a will or trust. Upon death of the insured person(s), the value of the PPLI policy plus any death benefit is paid directly to the beneficiaries listed in the policy, and separate from probate.

If a PPLI policy is held by an entity, such as a trust, that is compliant in the beneficiary’s country of residence, tax deferral and investment flexibility can still be preserved, even if the trust is disregarded as a foreign entity.

Gift and estate planning for life policies frequently involves establishment of a specially structured insurance trust for the benefit of a spouse and/or children and descendants. The trust acquires the policy with the premiums being contributed to the trust by the settlor/insured. In this manner, the death benefit would be paid to the trust free of estate taxes rather than going outright to the surviving family members after the payment of estate taxes.

PPLI policies also could invest in PFICs without creating adverse tax consequences. From a US perspective, US persons should generally be aware that most non-US collective investment vehicles will be classified as PFICs for US purposes and subject to adverse tax charges upon generating income and gains.

Unwelcomed Complexities by Country

The laws of succession and inheritance vary widely by country. By reviewing the laws of France, China, Russia, and Saudi Arabia, we give you a sampling of the complications faced by wealthy international families throughout the world. Image a family that might have family members and assets in several of these countries, and the daunting task of settling their estate.

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

Michael Malloy-CLU-TEP




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