Taxes, Crypto and PPLI

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Taxes, Cryptocurrency and Private Placement Life Insurance

Taxes, Crypto and PPLI

Cryptocurrency is a trending topic and many wealthy individuals find it as a solution for investment gains. We will discuss in this article if Cryptocurrency can be used in conjunction with PPLI for tax savings and to obtain other financial benefits.

We, at EWP Financial, customize solutions using mainly Expanded Worldwide Planning, (EWP) and Private Placement Life Insurance (“PPLI”) to meet the complex needs of our clients.

PPLI is a versatile type of insurance policy used by super wealthy individuals, sometimes termed a unit-linked policy. The premium can be paid in cash or with a portfolio of bankable assets, but it is also possible to pay with non-traditional asset classes such as art, precious metals or cryptocurrency.

It’s worth noting that even where cryptocurrencies are considered bankable assets, the acceptance and valuation may be subject to certain conditions and requirements. Banks and lenders may have specific criteria, such as the type of cryptocurrency accepted, the liquidity and stability of the market, and the value of the cryptocurrency relative to the loan amount. EWP Financial can advise if you can use cryptocurrency as a bankable asset depending on your particular situation.

What is the role of PPLI?

It’s called Private Placement because each contract is issued under its own private placement memorandum – the policyholder’s assets are segregated from other policyholder’s assets under the same insurance carrier.

Whilst the legal ownership of the assets passes to the insurance carrier, the policyholder retains at all time full rights to request a partial or full surrender of the policy, and change the beneficiaries.

Why is it difficult to place crypto assets into custody? And why is structuring these assets into a PPLI an effective solution for this?

Cryptocurrencies are not financial assets but an asset class on its own. They also lack physical substance. Therefore, they meet the definition of an intangible asset and would be recorded at acquisition cost (i.e. price paid or consideration given).

Cryptocurrencies are designed to work as a decentralized medium of exchange, independent of a financial institution or any other central authority, so the custody is not with a traditional arrangement of a banking institution but held by a token or key with the key holder having secure access via private passwords or biometric authentication systems.

The difficulty for a cryptocurrency (and other digital assets) is that after the keyholder’s lifetime, if the assets have not been the subject of an inventory with regular updates, then it is very difficult for the executor to identify the deceased’s entire exposure to these digital assets.

Digital assets can be entrusted to professional trustees inter vivos, so that the problem linked to the devolution of the keyholder’s credential is solved. However, many trustees have difficulty custodising such assets due to the associated risks, directly or indirectly that they represent.

By using a PPLI policy to structure the digital assets and appoint the trustee as policyholder, these risks can be mitigated. In addition, the trust can also be the beneficiary of the policy to ensure estate planning over many generations.

What are the tax benefits of holding crypto within a PPLI?

Once the assets are placed within the PPLI, such assets enjoy growth free from income and capital gains tax (as long as there is no partial or full surrender), thus the policy benefits from the gross roll-up effect.

This is especially relevant for cryptocurrencies which are subject to high returns (and lows!). Unstructured cryptocurrencies could be subject to tax on an arising basis in countries like Australia, France, India, Singapore and USA.

“Once your assets are placed into a properly designed EWP Asset Structure, they are shielded from taxation, while simultaneously achieving maximum privacy and asset protection.” – Michael Malloy CLU TEP RFC

by Michael Malloy, CLU TEP RFC.
CEO, Founder @EWP Financial

~ Your best source for PPLI and EWP

EWP Financial and Partner Companies

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About EWP Financial and Its Team

EWP Financial and its partner sites

In this blog post, we will talk about Michael Malloy, EWP Financial, its predecessor companies, its main team, Private Placement Life Insurance (PPLI), and Expanded Worldwide Planning (EWP). Let’s get started.

About Michael Malloy:

Michael Malloy, the founding partner of EWP Financial, began his career over 40 years ago as a risk management consultant. He has published the Life Insurance Law Newsletter and written two books on Private Placement Life Insurance (PPLI): “The PPLI Papers” and “The Wit and Wisdom of Professor PPLI.” He manages several companies and websites, including Malloy Insurance Services, Advanced Financial Solutions Inc., Michael Malloy Solutions, and EWP Financial.

“We take intentional care of wealthy families all over the world.” – Michael Malloy

Michael Malloy is a Charter Life Underwriter (CLU), Trust and Estate Practitioner (TEP), and Registered Financial Consultant (RFC).

About EWP Financial and its Predecessor Companies Working Together

Some of these names will be familiar to you: Malloy Insurance Services, Advanced Financial Solutions Inc., Expanded Worldwide Planning, Michael Malloy Solutions, and EWP Financial.

EWP Financial (ewp-financial.com), Michael Malloy Solutions (michaelmalloy.solutions), and Expanded Worldwide Planning (expandedworldwideplanning.com) have been on the internet for several years.

These companies serve as parent companies to oversee various operations under the supervision of Michael Malloy.

Malloy Insurance Services (MIS) was founded in 1985 and provides commercial and personal insurance. MIS specializes in the placement of difficult and complex insurance risks.

For example, MIS has had a liability policy in place for over 30 years for a non-profit corporation. This organization has established over 100 branches in 64 sovereign nations throughout the world.

The roots of Advanced Financial Solutions Inc., based in New York, reach back over 30 years. Its mission addresses the current paradox of striving to achieve full compliance in tax transparency while also providing clients with both privacy and tax savings.

AFS is the original corporate entity that promotes Private Placement Life Insurance (PPLI), which provides wealthy families with the maximum amount of privacy, asset protection, and tax efficiency.

Michael Malloy Solutions provides a clear, unified voice for all our entities to educate wealthy families and professional advisors on how to enhance privacy and gain the maximum amount of asset protection and tax efficiency while staying compliant with tax authorities worldwide.

EWP Financial is our latest development, a specialized company that offers services in Private Placement Life Insurance (PPLI) and Expanded Worldwide Planning (EWP). PPLI is a type of life insurance designed for high net worth individuals, providing customized investment solutions and tax-efficient planning. EWP is a unique approach to financial planning that takes into account the complexities of cross-border investment and taxation, helping clients achieve their global wealth management goals. With a team of experienced professionals and a commitment to personalized service, EWP Financial is dedicated to helping clients achieve their financial objectives with confidence and peace of mind. There are offices in New York, the British Virgin Islands, and California, ready to answer your questions.

About Our Team

Our Regional Representatives are highly experienced and knowledgeable in the financial industry, and they have a deep understanding of the local market and cultural nuances of their respective regions. They are committed to providing our clients with tailored financial solutions that meet their unique needs and requirements.

Here, you can get a glimpse of the main team members who work together to provide you with the best financial solutions to help you achieve your goals.

Please Contac Us for any questions you may have.

Thank you.

by Michael Malloy, CLU TEP RFC.
CEO, Founder @EWP Financial

~ Your best source for PPLI and EWP

Video 5 – EWP: The Deep Internal Design – Did You Know This About PPLI & EWP?

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EWP: The Deep Internal Design

PPLI Is a Cornerstone of Stability

Did you know this about PPLI & EWP? - 5

In this Episode we explain the elements that comprise a successful EWP Asset Structure. We also reveal why an EWP Asset Structure always outperforms a taxable investment. Our conservative and straightforward approach to asset structuring gives you the maximum amount of tax efficiency, asset protection, and privacy. This is why an EWP Asset Structure has the reputation as the best asset structure available today for wealthy families worldwide.

by Michael Malloy, CLU TEP RFC.
CEO, Founder @EWP Financial

~ Your best source for PPLI and EWP

The Metaverse – EWP and PPLI – Video 3

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The Metaverse Video Series

Transform Your Assets Inside an EWP Metaverse

PPLI Is Your Partner in Creating Financial Strength and Stability

The metaverse is a concept that has been thrust into our lives. Is it something new and or just a fad that will die out in a few years? At EWP Financial we are creating our own metaverse that has at its foundation the rock-solid Six Principles of EWP. In this video, through compelling images and concise dialogue, we explain how these Six Principles can create for you a financial future that beneficially transforms your own assets for tax efficiency, privacy, and asset protection.

by Michael Malloy, CLU TEP RFC.
CEO, Founder @EWP Financial

Michael Malloy-CLU-TEP

The EWP Stories Video Series – Part 1 – Episode 2

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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.

————————————————————————————————————-

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

EWP & Tax Shield-Part 3

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Expanded Worldwide Planning-EWP and Tax Shield

Private Placement Life Insurance (PPLI) in Action

PPLI Benefits U.S. Persons with Real Estate–Part 3

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The universality of Expanded Worldwide Planning (EWP) is not to be denied. This is objectified by Wikipedia. In the first sentence of their page on International Tax Planning, Expanded Worldwide Planning (EWP) is featured.

We are taking a cue from Wikipedia. Over the next few weeks, we will feature one of the six principles of Expanded Worldwide Planning (EWP). The six principles are: privacy, asset protection, tax shield, succession planning, compliance simplifier, and trust substitute. Today we feature the tax shield.

PPLI Benefits U.S. Persons with Real Estate

The benefits of using PPLI for U.S. persons investing in real estate in the U.S. are substantial. Why don’t more U.S. persons take advantage of these benefits? At Advanced Financial Solutions, Inc., we maintain that it is because of profound misunderstandings about the Investor Control Doctrine and the diversification requirements of variable contracts under IRS code section 817(h).

Ironically, these misunderstandings have been clarified by the Webber decision, Webber v. Commissioner, 144 T.C. No. 17 (June 30, 2015). In the popular press, and in many tax journals, this same Webber decision was interpreted as the ‘nail to the coffin’ for PPLI.

Let us explore how the Webber decision makes it clear that in a properly structured PPLI policy, U.S. real estate can be held and still be fully compliant with the IRS. We will do this through the lens of what the Webber decision tells us about the Investor Control Doctrine and the diversification requirements of variable contracts under 817(h).

These are the key points of the Webber decision that support the inclusion of U.S. real estate in a properly designed PPLI policy:

✦ The egregious flaunting of what is known as the Investor Control Doctrine by Jeffrey T. Webber, William Lipkind, his attorney, and the manager of his Insurance Dedicated Fund (IDF) (Butterfield Bank) has blinded advisors and their clients to an essential point in the tax court’s decision. Judge Lauber, the presiding judge, found no objection to the private companies and other investments that were placed as in-kind premium in the two PPLI policies that were in question. There is nothing in the rules regarding PPLI either before or after Webber which would prohibit the use of private company securities, actively operated and closely business interests, and real estate enterprises within a policy IDF or Separately Managed Account (SMA).

✦ The Tax Court’s key issue was the fact that Mr. Webber was on the board of every company in which the policy invested, invested his own funds from his personal wealth and his IRAs, and that he negotiated the terms of every loan on behalf of the company and then gave the instruction to Mr. Lipkind and Butterfield Bank. The court states, “The record includes more than 70,000 emails to or from Mr. Lipkind, Ms. Chang (Webber’s accountant), the IDF Investment Manager, and/or Lighthouse (the insurance company) concerning petitioner’s “recommendations” for investments by the separate accounts. Mr. Lipkind also appears to have given instructions regularly by telephone.”

✦ IRC Sec 817(h) provides a detailed overview of the investment diversification requirements of variable insurance products. The regulations address a wide range of investment alternatives that are not found in retail variable life and annuity products such as direct investment in real estate, and commodities.

✦ Treasury regulations 1.817.5 provide very detailed guidance on the investment diversification rules. The regulations interpret these rules for investment asset classes such as real estate, and allow for a period of time to meet the diversification requirements of IRC Sec 817(h). For non-real estate accounts, the regulations provide for a one-year period to meet the diversification requirements. Real estate accounts provide for a five-year start up period and a two-year liquidation period.

✦ The court states: “The “investor control” doctrine posits that, if the policyholder’s incidents of ownership over those assets become sufficiently capacious and comprehensive, he rather than the insurance company will be deemed to be the true “owner” of those assets for Federal income tax purposes. In that event, a major benefit of the insurance/annuity structure–the deferral or elimination of tax on the “inside buildup”–will be lost, and the investor will be taxed currently on investment income as it is realized.”

✦ It is clear from reading the Webber decision that, if Mr. Webber had followed the very language stated in his policy, his PPLI structure would have worked, and complied with the Investor Control Doctrine and the diversification requirements of 817(h). The court record reads: “As drafted, the Policies state that no one but the Investment Manager may direct investments and deny the policyholder any “right to require Lighthouse to acquire a particular investment” for a separate account. Under the Policies, the policyholder was allowed to transmit “general investment objectives and guidelines” to the Investment Manager, who was supposed to build a portfolio within those parameters.”

PFIC + Subpart F + GILTI = All Redefined with PPLI

Distributions from a properly structured PPLI policy are distributions from a life insurance policy. Like all policies, both U.S. and issued in other jurisdictions around the world, the distributions are subject to the tax code sections that apply to life insurance.

In a properly structured policy, one can withdraw all basis in the policy, which are the premiums paid, tax free, and take very low cost loans to withdraw the remaining funds. The costs of these loans is equivalent to an administrative charge, and is usually in the range of 25 bps. When the policy is held until the death of the insured life, the amount of the loan is merely subtracted from the death benefit, therefore, the loan need not be repaid.

The 2017 Tax Cuts and Jobs Act (TCJA), has brought an increase in taxation for those who have subpart F income. Just like Passive Foreign Investment Company (PFIC) income, subpart F income can be structured inside a PPLI policy, and, therefore, shielded from tax. PPLI has been used for many years to shield PFIC income.

TCJA gave us a new section of the tax code, Section 951A. For those who have an interest in a controlled foreign (CFC), particularly if they are not C corporation shareholders, there is a new opportunity to use a PPLI structure to shield this income from tax. Section 951A gives us Global Intangible Low-taxed Income (GILTI), which if held in other than a C corporation, has very unfavorable tax consequences that can be greatly mitigated by using PPLI.

Hedge Fund Life Insurance

One distinct benefit of a PPLI policy is the ability to place tax inefficient investments like hedge funds into a tax-friendly environment. Some advisors have even coined the term, Hedge Fund Life Insurance, to highlight the advantages of combining hedge fund investments and life insurance into one tax-advantaged asset structure.

The numbers tell the story well on the chart below.

View Image in PDF format

The chart compares a taxable investment to one held in a PPLI account over the long-term. The very clear winner is the PPLI account. Even over a ten year period there is more than $3M more in the PPLI account. The chart does not even show the death benefit which is always more than the cash value account. In a properly structured policy, the death benefit is also tax-free, making a PPLI asset structure the undeniable victory in the quest for tax efficiency.

Conclusion

Let us summarize the tax advantages of holding investments in a PPLI asset structure:

✦ Tax-deferred “inside build-up” of policy cash values. The industry has preserved the tax preferred treatment of life insurance for decades.

✦ Non-recognition of capital gains. The policyholder has the ability to switch investment options within the product without triggering taxation. Life insurance separate accounts are legally the owners of the investments within variable insurance products. The life insurer receives a reserve deduction equal to its investment income.

✦ The option of tax-free access to policy cash values through a partial surrender of the cash value and low-cost policy loans. A policyholder may take a partial surrender of the cash value and recover his tax basis in the contract first. Policy loans with a net cost of approximately 25 basis points per annum also receive income tax-free treatment.

✦ The policy’s basis is its cumulative premiums. Once the policyholder has recovered his basis in the contract, the policyholder has a contractual right to a policy loan which allows the policyholder to borrow up to ninety percent of the policy cash value.

✦ Income tax-free death benefit. The policy cash value grows on a tax-free basis. The policyholder can access investment gains within the policy on a tax-free basis during lifetime, and beneficiaries receive the death benefit income-tax free.

✦ Estate tax-free death benefits through the use of third party ownership of the policy, such as an irrevocable life insurance trust (“ILIT”). IRC Sec 2042 provides that as long as the insured does not retain any incidents of ownership within the policy, the death proceeds will not be included in the taxable estate of the decedent.

Look no further if you wish to achieve the utmost in privacy, asset protection, and tax efficiency. You have arrived when you implement a PPLI asset structure. Please contact us today to let us know how we can assist you in creating your own bespoke PPLI asset structure.

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

Michael Malloy-CLU-TEP

#michaelmalloy #PPLI #EWP #privateplacement #lifeinsurance #advancedfinancialsolutions

The EWP Da Vinci Code – Part 3

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Expanded Worldwide Planning–EWP & Asset Protection

Private Placement Life Insurance (PPLI) in Action

The EWP Da Vinci Code–Part 3

The EWP Da Vinci Code - Part 3

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The universality of Expanded Worldwide Planning (EWP) is not to be denied. This is objectified by Wikipedia. In the first sentence of their page on International Tax Planning, Expanded Worldwide Planning (EWP) is featured.

We are taking a cue from Wikipedia. Over the next few weeks, we will feature one of the six principles of Expanded Worldwide Planning (EWP). The six principles are: privacy, asset protection, tax shield, succession planning, compliance simplifier, and trust substitute.

Domestic Asset Protection Trust vs. Offshore Asset Protection Trust

Today we feature asset protection. In this segment we will discuss the development of Domestic Asset Protection Trust (DAPT) and Offshore Asset Protection Trust (OAPT). We again alert you to the fact that a simpler and more time-honored approach to asset protection is using life insurance. In a sense, asset protection comes automatically with Expanded Worldwide (EWP).

Advisors debate which is better: a DAPT or an OAPT. We say that they do serve a purpose for some clients, but why not adopt The EWP Da Vinci Code, and receive not only outstanding asset protection benefits, but all the six principles of Expanded Worldwide Planning (EWP) in one complete package?

Why bring Leonardo da Vince into this discussion? Because Leonardo said, “Simplicity is ultimate sophistication.” We have taken this as our model in implementing Expanded Worldwide Planning (EWP) in our PPLI asset 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 advanced guidance system (GPS), but you might be able to do without it.

“Asset protection does not come as an extra feature with Expanded Worldwide Planning (EWP), it is part of the package, just like turn signals on a new vehicle.” ~ Michael Malloy

As we will read, the controversial aspects of DAPTs and OAPTs arise out of public policy issues: is the use of this particular trust the best for the common good.

It is not our place to take a position on public policy issues. At Advanced Financial Solutions, Inc. our role is to assist wealthy families in their quest to implement the six principles of Expanded Worldwide Planning (EWP). Asset Protection is one of these six principles, and it is achieved through the financial planning tool of life insurance.

Life insurance is considered a societal benefit. Life insurance relieves governments from providing families with the needed cash at the death of the family’s income earner. Life insurance encourages savings for retirement through the accumulation of the cash value in the policy. PPLI is a form of life insurance, and thus bypasses much of the attention that is focused on trust structures.

In terms of the actual PPLI contract, all investments are held in separate accounts in the policy, thus, they are not in the insurance company’s general account. For this reason they are not subject to the creditors of the insurance company, if the company were to become bankrupt.

When government regulators look to curb what they would term abuses of public policy: in other words, wealthy families who have gone too far in stretching tax and trust law, aggressive trust structures are a frequent target.

We now give you a brief history of DAPTs and OAPTs, and the public policy issues that raise concerns with government regulators.

According to Wikipedia:

“An asset-protection trust is any form of trust which provides for funds to be held on a discretionary basis. Such trusts are set up in an attempt to avoid or mitigate the effects of taxation, divorce and bankruptcy on the beneficiary. Such trusts are therefore frequently proscribed or limited in their effects by governments and the courts.”

What we might call the modern asset protection trust was formulated in the late 1980s, and the first jurisdiction to adopt it was in the Cook Islands. These trusts had spendthrift provisions and could be self-settled. These OAPTs had a one year fraudulent conveyance statute.

The Cook Islands legislation was soon followed by similar laws in the Cayman Islands, Belize, Nevis, the Channel Islands, the Isle of Man, and numerous other international financial centers.

In 1997, Alaska passed legislation allowing for irrevocable, discretionary, self-settled trusts. Ninety days later, Delaware followed suit, and as of this date some 16 states have passed DAPT legislation.

The controversy surrounding DAPTs and OAPTs arises from the degree to which OAPTs, in practice, often defeat deep-seated precepts of U.S. trust law. A key precept is that one ought not control and benefit from property and at the same time shield it from one’s creditors.

The underlying policy rationale for the non-enforcement of self-settled spendthrift trusts is clearly stated in A. Scott’s The Law of Trusts:

“It is immaterial that in creating the trust, the settlor did not intend to defraud his creditors. It is immaterial that he was solvent at the time of the creation of the trust. It is against public policy to permit a man to tie up his own property in such a way that he can still enjoy it but can prevent his creditors from reaching it.”

For a U.S. wealthy family to form a DAPT, it is not necessary to form a trust in a jurisdiction outside the U.S., so this can make the process less expensive and time consuming. This takes us back to the old adage: “you get what you pay for.”

The greatest deficiency of DAPTs is that they are necessarily governed by U.S. law. The DAPT fails to achieve the jurisdictional separation required to fully protect the asset.

Since only a quarter of states currently have DAPT statutes, it is probable that states where litigation is taking place are those in which DAPTs are expressly prohibited as being against public policy. In a conflict-of-law analysis, it is difficult to envision any judge in a non-DAPT state agreeing to apply the laws of the DAPT state.

OAPTs are more secure for several reasons:

a foreign trust is not subject to the jurisdiction of the U.S. courts, so a U.S. attachment order will have no effect within that foreign jurisdiction;

furthermore, creditors seeking to reach the assets embark on independent legal proceedings in the foreign jurisdiction in which the trust is located;

even a favorable foreign judgment may be a hollow victory. The creditor still may not be able to satisfy that judgment from the assets held in the trust unless she proves that the transfer to the trust constituted a fraudulent conveyance.

Conclusion

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 trust that not only gives you asset protection, but the whole formidable array of benefits that Expanded Worldwide Planning (EWP) provides? To achieve this outstanding result, we suggest using an International Irrevocable Life Insurance Trust (ILIT) which owns a properly structured PPLI policy–The EWP Da Vinci Code.

The ILIT has been in use for decades; it has withstood numerous court challenges, and avoids the taint of opposing public policy that you acquire with DAPTs and OAPTs.

Regarding U.S,. tax laws, a properly designed International ILIT, governed by the law of a foreign jurisdiction, is treated virtually the same as a domestic ILIT. For wealthy U.S. families, or those families with a connection to the U.S., an International ILIT in combination with a properly structured PPLI policy, is arguably the most efficient structure for the integration tax-free investment growth, wealth transfer and asset protection.

Please contact us today to find out if The EWP Da Vinci Code is right for you.

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

Michael Malloy-CLU-TEP

#michaelmalloy #PPLI #EWP #privateplacement #lifeinsurance #advancedfinancialsolutions

The EWP Da Vinci Code – 2

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Expanded Worldwide Planning-EWP & Asset Protection

Private Placement Life Insurance (PPLI) in Action

The EWP Da Vinci Code–Part 2

The EWP Da Vinci Code - part 2

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The universality of Expanded Worldwide Planning (EWP) is not to be denied. This is objectified by Wikipedia. In the first sentence of their page on International Tax Planning, Expanded Worldwide Planning (EWP) is featured.

We are taking a cue from Wikipedia. Over the next few weeks, we will feature one of the six principles of Expanded Worldwide Planning (EWP). The six principles are: privacy, asset protection, tax shield, succession planning, compliance simplifier, and trust substitute.

Quiet Protection of PPLI

Today we feature asset protection. Life insurance’s role as a protector of assets is quite different from our nature documentary example of a hunter and its prey. This role is more akin to the method used by dogs and cats in saving the lives of their families.

As you will read in the examples below, this protection was not brought about by physical strength. The type of strength we are speaking of is quietly hidden inside the frame of a small domesticated pet. This type of strength does not manifest until the proper circumstances arise. In this case, a threat to the master or family.

Life insurance in the form of PPLI can be seen to have this inherent quality of a quiet and inconspicuous protector of family assets.

Here are the examples:

From The Associated Press,

“Baby, a gray, white, and brown tabby cat, alerted a sleeping couple to a house fire in a Chicago suburb. Josh Ornberg and Letitia Kovalovsky were sleeping on a couch in the living room when Baby woke them, alarmed that a fire had broken out in the bedroom. The couple said that both they and the cat got out of the house safely.”

A CNN headline reads:

“A German shepherd shielded his family from gunfire in a road rage incident. Michael Pearson’s article continues, “Following an altercation on an Atlanta road, the driver followed the family to a nearby strip mall and opened fire. The dog jumped in front of one of the children and a woman in the car and died of gunshot wounds behind a nearby building. Atlanta police Sergeant Gregory Lyon said,”They survived that only to find that their pet is now gone. It’s sad for the whole family, especially the day after Thanksgiving.”

“Dog stays with owner for 20 hours after man breaks his neck in Michigan,” is the headline from Fox News. The story reads, “A Michigan man, Bob, slipped in the snow and broke his neck. With the closest neighbors far away, his golden retriever stayed with him for 20 hours. “By morning, my voice was gone and I couldn’t yell for help, but Kelsey didn’t stop barking,” Bob said. He lost consciousness, but Kelsey howled until a neighbor heard her and came to the rescue.”

Creditors vs. Debtors

By implementing the six principles of Expanded Worldwide Planning (EWP) through a properly structured PPLI policy, wealthy families achieve substantial asset protection benefits.

Historically trusts were employed to shield assets from excessive taxation, unreasonable claims of creditors, and bankruptcy. Trusts were developed in England originally to minimize the impact of inheritance taxes arising from transfers at death. The essence of the trust was to separate “legal” title, which was given to someone to hold as “trustee”, from “equitable title”, which was to be retained by the trust beneficiaries.

In both Roman times and as early as the 14th century in England, the use of trusts to shield lawful claims of creditors was recognized as a practice not conducive to sound public practice. Today we called it fraudulent conveyance.

The Romans utilized a type of trust known as a fideicommissum, which facilitated the transfer of assets at death. The Romans were also aware of the abuses of trust that went against public policy. Their great legal scholars Ulpian and Gaius developed the basic framework for the fraudulent conveyance laws as we know them today.

In England in the late 14th century, two laws were enacted that aimed to end popular types of fraudulent conveyance that were then in practice. One law sought to prevent debtors from conveying their lands to their friends until their creditors had come and gone away. Another law sought to end the practice of temporarily conveying their lands to “Lords and other great Men of the Realm” so as to deter creditors.

Another key component to our own asset protection laws are spendthrift clauses. A spendthrift provision creates an irrevocable trust preventing creditors from attaching the interest of the beneficiary in the trust before that interest (cash or property) is actually distributed to him or her.

These spendthrift provisions first became popular in the U.S. in the 19th century, and were controversial. Not just a few commentators thought that spendthrift clauses were a very bad idea. John Chipman Gray, a Harvard Law Professor whose half-brother (Horace Gray) was a U.S. Supreme Court Justice, registered his objections this way:

“The general introduction of spendthrift trusts would be to form a privileged class, who could indulge in every speculation, could practice every fraud, and, provided they kept on the safe side of the criminal law, could yet roll in wealth. They would be an aristocracy, though certainly the most contemptible aristocracy with which a country was ever cursed.”

Notwithstanding such objections, the spendthrift trust, of course, survived and thrived U.S. law.

Yet, such trusts had their limitations; for example, some states carved out exceptions for creditors holding judgments for unpaid alimony and child support. By far the biggest restriction was against spendthrift trusts which were self-settled trusts. That great commentator on trust law, George T. Bogert, firmly believed that the spendthrift provisions of self-settled trusts were unenforceable against public policy, and wrote:

“To hold otherwise would be to give unexampled opportunity to unscrupulous persons to shelter their property before engaging in speculative business enterprises, to mislead creditors into thinking that the settlor still owned the property since he appeared to be receiving its income, and thereby work a gross fraud on creditors who might place reliance on the former prosperity and financial stability of the debtor.”

In the late 1980s in the U.S. most legal practitioners were in agreement that spendthrift clauses could protect the rights of beneficiaries of trust, but you could not create a trust that exempted your assets from creditors, a self-settled spendthrift trust.

This leads us to our last segment of our Expanded Worldwide Planning (EWP) drama or play of opposites.

We look forward to bringing you Part 3 in our series on Asset Protection soon. Please give us your thoughts on what we have brought you so far.

Learning from each other is one of the great pleasures in life.

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

Michael Malloy-CLU-TEP

#michaelmalloy #PPLI #EWP #privateplacement #lifeinsurance #advancedfinancialsolutions

Expanded Worldwide Planning-EWP & Privacy

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Private Placement Life Insurance (PPLI) in Action

Part 1: Privacy

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The universality of Expanded Worldwide Planning (EWP) is not to be denied. This is objectified by Wikipedia. In the first sentence of their page on International Tax Planning, Expanded Worldwide Planning (EWP) is featured.
We are taking a cue from Wikipedia. Over the next few weeks, we will feature one of the six principles of Expanded Worldwide Planning (EWP). The six principles are: privacy, asset protection, tax shield, succession planning, compliance simplifier, and trust substitute.
Today we feature PRIVACY. Privacy is a key element. With FATCA, CRS, and Registers of Beneficial Ownership our clients are looking for ways to keep their affairs private, and still be compliant with tax authorities worldwide. But as you know, it is a cat and mouse game that takes study and constant attention to detail. As you can see from our image, we don’t quite know who is winning.

“Behold, I set before you this day a blessing and a curse….” (Deuteronomy 11:26, King James Bible.) This is an apt phrase to describe the context of privacy today, where with a touch of a keystroke you can send megabytes of data around the world in an instant.
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?
This thought is expressed by Andrew Grove, co-founder and former CEO of Intel Corporation. Mr. Grove’s thoughts on internet privacy appear on the Privacy page of Wikipedia:

“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.”

Expanded Worldwide Planning (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 call the journalistic authors of the Panama Papers and the Paradise Papers heros of a free press. Others say that these same journalists were thieves, who unlawfully stold 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 a properly structured PPLI policy protect the families whose financial information was published for the entire world to see?
The privacy principle of Expanded Worldwide Planning (EWP) accomplishes its objective in several key ways:

Upon transfer into the PPLI policy, the insurance company becomes the beneficial owner of all the assets in the policy;
If there is reporting to a tax authority for the asset structure, only one number is reported. This is the total cash value of all the assets in the PPLI policy. The individual assets are not reported;
The bank account that is usually opened in connection with a PPLI policy is opened in the name of the insurance company, not the policyowner. The policyowner has full access to the funds in the bank account in accordance with the assets inside the policy.

The Privacy Paradox
In connection to privacy, there is a concept called the privacy paradox that was first discussed by Bedrick, Lerner, and Whitehead, “The privacy paradox: Introduction, News Media and the Law.” We quote below from the Wikipedia Privacy page:

“The privacy paradox is a phenomenon in which online users state that they are concerned about their privacy but behave as if they were not. While this term was coined as early as 1998, it wasn’t used in its current popular sense until the year 2000.”

The authors go onto to explain this in more detail:

“Some researchers believe that decision making takes place on an irrational level, especially when it comes to mobile computing. Mobile applications are built up in a way that decision making is fast. Restricting one’s profile on social networks is the easiest way to protect against privacy threats and security intrusions. However, such protection measures are not easily accessible while downloading and installing apps.”

There is also another type of Privacy Paradox pertinent to Expanded Worldwide Planning (EWP) in the reporting of data breaches and news reporting on wealthy families. This is aptly put by Filippo Noseda of the Mischon de Reya law firm in London:

“It is somewhat curious that serious newspapers who have been covering both the private banking scandals and the erosion of privacy seem unable to make the connection between data protection on the one hand, and the Common Reporting Standard (CRS) and beneficial ownership registers on the other.”

Mr. Noseda also draws our attention to published material by The European Data Protection Supervisor (EDPS) where he questions the OECD’s goal of total financial transparency.
Mr. Noseda writes:

“As if they were living on planet Europa rather than in Europe, the European Parliament, the Organization for Economic Co-Operation and Development (OECD), and politicians show complete disregard for the warnings raised by their own data protection bodies and instead appear hell-bent on introducing a system of total transparency.”

We have grown accustomed to the idea that transparency is a good thing, something that supports the common good. Like many concepts, if taken to an extreme, it becomes its opposite. A weapon in the hands of governments hungry for wealthy citizens’ tax dollars. As proponents of Expanded Worldwide Planning (EWP), we must question this overzealous approach to tax collection.

The History of Privacy
Let us end with some general historical information on privacy, and how Expanded Worldwide Planning (EWP) and PPLI can further the aims of wealthy families seeking increased privacy, asset protection, and tax efficiency.
We quote two eye-opening passages by Greg Ferenstein’s “The Birth and Death of Privacy: 3,000 Years of History…,” courtesy of Medium:

“Privacy, as it is conventionally understood, is only 150 years old. Most humans living throughout history had little concept of privacy in their tiny communities. Sex, breastfeeding, and bathings were shamelessly performed in front of friends and families.”
“Privacy-conscious citizens did find more traction with what would become perhaps America’s first privacy law, the 1710 Post Office Act, which banned sorting through the mail by postal employees.”

This last quote seems quaint in light of the large-scale, present-day concerns of unauthorized data sharing by social media sites.

Expanded Worldwide Planning (EWP) and PPLI are employed by our firm Advanced Financial Solutions, Inc. to not only give you enhanced privacy, we also keep you compliant with tax authorities worldwide. Our firm can be confident of our success, because PPLI and Expanded Worldwide Planning (EWP) asset structuring greatly simplifies the process, and in addition, gives you the privacy that you seek.
We invite you to take advantage of our services, and would enjoy hearing your comments and questions about the topic of privacy. Please contact us today for a no-obligation, introductory consultation.

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

Michael Malloy-CLU-TEP

#michaelmalloy #PPLI #privateplacement #lifeinsurance #advancedfinancialsolutions