In this session, the experts on PPLI and the Family office came together to discuss the multiple options for a combination of structures whereas we have a Family office – PPLI policy or the other way around, PPLI policy – family office.
PPLI can accomplish several goals that are potentially of interest to wealthy families and their single-family offices.
To understand each one of them, we will break it down for you.
Set up Costs for PPLI
There is a setup cost and an ongoing cost. It is a kind of administration cost, plus they are depending on how much death benefit is insured within the policy.
In general, the costs depend on the jurisdiction and the different cost savings.
In terms of privacy, “a Family Office held personally as a shareholder would expose the owner to considerable risk and confer virtually no asset protection benefits. The panel concluded that a Family Office held personally was “half-a-structure” and that some of the weakness exposed in comparing a “bare” Family Office with a PPLI could be clawed back by use of a trust to hold the shares of the Family Office. “
PPLI will confer superior privacy as assets are held in the name of an insurance company
Family offices held by a shareholder do not give families any asset protection benefits.
In the case of PPLI, it depends on the jurisdiction and its regulation. For example, most of the European Countries offer PPLI, such as: Liechtenstein, Luxembourg, Ireland where you have protection rules. If you set up the policy to protect your legal heirs or your family means your wife, your children, or your grandchildren then it becomes a non-seasonable asset and this provides a lot of protection.
Singapore for example, if you set up a policy with a Singaporean carrier expressively needs that you make an irrevocable beneficiary clause where you nominate your beneficiaries.
A family office will help optimize SGP taxes however the family may still be subject to taxes on their home Country. Family offices may be deemed as a CFC.
PPLI allows for legitimate tax deferral and may solve any CFC issues faced by the client.
Depending on jurisdictions both PPLI and a family office can give control back to the client.
There are 2 important aspects the client should consider:
- Policyholder is not the insured person and if the policyholder would die, the policy would continue to last. In general, what you need to have is a regulation within the policy which states to whom it should go. If that has not been clarified, then the policy will be part of your state and the beneficiaries or your legal heirs will be the new policyholder which can make things more challenging.
- On the incapacitated part, you need to have the power of attorney for a third person. If there is nothing, you need to go through the legal process to appoint someone who can now act on your behalf. However, we 1291 Group work very often with something we called an arbiter which is like a protector, where the policyholder can appoint an arbiter. The arbiter has then certain rights to act if the incapacitated or if the policyholder dies, or the policyholder was not also the insured person and therefore it continues to last. This solves a lot of issues. This arbiter is commonly used when we have complex structures.
This is the one aspect where the family offices are far superior. The family office will allow for migration and relocation to Singapore, whereas the PPLI would not have any benefits.
Overall PPLI is an ideal holding structure for international families looking for privacy, asset protection, tax optimization, and other benefits. It is most ideal when combined with a Family office. This powerful combination will provide all the elements: privacy, asset protection, tax optimization along with migration and relocation benefits to Singapore.