1 hour ago
I would like to talk to you about our family office's cross-border estate strategy that I have been reviewing and also to initiate a dialogue about Private Placement Life Insurance (PPLI). For those with large amounts of liquid funds and alternative assets in Switzerland, PPLI has been viewed as a top option for structuring wealth. That said, with developments in the field of tax reporting regulations abroad and new developments regarding the regulation of the PPLI in Europe, it is interesting to learn how other family offices in Switzerland are using it these days. Swiss compliant PPLI life insurance is basically a personalized insurance wrapper whereby a specialized investment portfolio can be formed that can include various hedge funds, private equity deals, and discretionary mandates. The main advantage of that scheme lies in its ability to achieve the goals of tax efficiency, asset protection, and easy succession planning all at once. Hence, in the case where the assets are passed to life insurance provider, any income, dividends, and gains earned on investments held in the insurance policy will be tax-exempt according to Swiss tax law.
Another major benefit that asset managers in Zurich and Geneva frequently mention is the creditor protection that insurance contracts can provide under Swiss law, assuming the contract is set up accurately and the principles of naming are strictly followed. For families with connections between several jurisdictions, a Swiss PPLI contract can serve as a portable shell that will allow the structure to change if some family members cross borders without triggering immediate tax-related events every time.
Nonetheless, PPLI is by no means a universal solution nor is it inexpensive to use. The viability of the offshore scheme is mainly reliant on strict adherence to the rules of investor control. Tax regulators in different countries pay close attention to how much power the policyholder has over the particular investments in the account. If the tax authority finds out that the policyholder has the opportunity to control the trades, the privilege of tax transparency may be revoked, resulting in huge back taxes and fines. In addition, setup costs and ongoing mortality risks and management fees make PPLI viable only when investments exceed a certain amount, which is commonly expected to be around five to ten million Swiss francs.