Strategies for Protecting Wealth
by Darrell Aviss

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Private Wealth Journal

Private Insurance Portfolio

A Private Insurance Portfolio—sometimes referred to as a portfolio bond, private placement life insurance, or insurance wrapper—combines a bank account, a brokerage account, and an insurance policy under one asset-protected umbrella.

It is a singularly unique vehicle that offers a set of advantages high-net worth cannot get anywhere else: It will supercharge your investments, internationalize your portfolios, allow access to investments that are not available to the typical investor, offer substantial tax advantages, hedge against a devaluing domestic currency, and provide ironclad asset protection.

Private Insurance Portfolios are used typically by families with a net worth in excess of $10 million—often far in excess. These days, sophisticated investors are concerned with privacy, taxes, currency risk and global diversification, in addition to asset protection. Unfortunately, there are no domestic vehicles that offer all of these benefits in one bespoke package.

Here’s how it works: An investor enters into a contract in with an insurance company, usually domiciled in Switzerland (although the privacy laws and no-tax environment of Liechtenstein are more attractive to some investors). The insurance company then opens an account with a private bank selected by the investor, who receives the policy from the insurance company. Legally, the investor is the client of the insurance company and the insurer is a client of the bank.

The investor can designate the bank or an outside investment advisor to manage the account. Think of the Private Insurance Portfolio as a sophisticated holding vehicle in which the investor, through his financial advisor, can direct the insurance company to invest in a wide range of investments: typically, high-return, wealth-building opportunities with long-term horizons.

For instance, PIPs often hold hedge funds (which are currently some of the best performing investments on the planet), private equity, venture capital or offshore mutual funds. With these high-powered investments free to compound in a tax-free environment, they can create a level of wealth unparalleled by other vehicles.

• Tax Efficiency. A Private Insurance Portfolio offers tremendous tax benefits (available from few other investment vehicles) without the need for expensive and complex trust structures. The degree of tax efficiency will depend on the tax laws of the client’s domicile. In most jurisdictions, it is possible to achieve tax deferment—if not total elimination—of income, capital gains, and even estate taxes.
• Asset Protection. The key goal of a Private Insurance Portfolio is to provide protection from creditors or litigants arising from unforeseen, adverse events.
• Global Investment Flexibility.
• Separate and Simple Estate Planning. This type of investment is well suited for making distributions separate from an estate.
• Confidentiality and Privacy.

For more information, click here: Understanding the Private Insurance Portfolio (PDF)