Affluent investors care about what they keep, not what they earn. For over two decades, one of the best-kept secrets in tax planning has been private placement life insurance, which makes it possible for a hedge fund investor to garner tax-free returns. Private placement life insurance is a variable universal life insurance policy that provides cash value appreciation based on a segregated investment account combined with a life insurance benefit. Private placement life insurance is designed to maximize savings while minimizing the death benefit.

The below illustrates where private placement life insurance proved quite useful.

An affluent client sets up a non-grantor trust for the benefit of her children and funded it with a $5,000,000 gift. The trustee invested the gifted funds in hedge funds. Unfortunately the trust would have to pay taxes at a rate of almost 50% on the annual earnings because of the increased tax rates that came into effect in the U.S. on January 1st 2013 with the passing of The American Taxpayer Relief Act. Paying the high tax rates on the trust’s earning each year will significantly hamper the growth of the assets for the children. By investing the $5,000,000 into Private Placement Life Insurance, the trustee can still invest in hedge funds, received tax deferred growth on the underlying hedge fund earnings and provide a $20,000,000 tax free death benefit for the children.


About Seneco & Associates


Frank W. Seneco founded
Seneco & Associates, Inc., in [date].
Highly visible and well-regarded in his
industry, Frank is a frequent speaker
on advanced planning strategies.

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