However, the biggest factor in choosing PPLI is the ability to defer or save taxation. For example, in an irrevocable life insurance trust, the proceeds can pass on without having to pay estate taxes.
However, for some investors like Jonathan Feldman of Millennium Drilling and Patriot Exploration fame, PPLI goes much beyond tax benefits and work as a preferred instrument for asset protection as well as making worldwide investments.
As an investor, Jonathan Feldman is interested in the emerging markets the East alike others. And it is here that Feldman prefers PPLI, because, as he points out, profits from investments made through U.S. compliant PPLIs into foreign markets are not subject to capital gains tax, if the investments are not related to real estate.
Also, Feldman stresses, many foreign insurance carriers are much more flexible than their counterparts in the US.
The advantages of buying PPLI are many to high net worth individuals. For example, PPLI can be adjusted and negotiated to a great extent and customized to fit the wishes of the policy holder, but such flexibility is next to impossible in the case of purchasing ordinary life insurance policies.
However, to get the tax benefits, first the PPLI must be compliant with U.S. laws in order to be eligible for tax-deferred earnings. Again, if the policy is terminated in an untimely fashion or before the death of the policy holder, then tax would need to be paid on all untaxed earnings, thus defeating one of the major purposes of PPLI.
One of the biggest benefits, something which is more important than tax considerations in PPLI, says Jonathan Feldman, is the ability of PPLI to protect assets.
In case of foreign PPLI the insurance company may not be subject to U.S. laws at all. Even in the cases of PPLI issued by U.S. carriers, the policy can be written in a manner where cash and securities paid as premium is protected from judgment creditors. This is true in the ordinary course of things, unless, somehow a court reaches a conclusion upon facts that it was a fraudulent conveyance created only with the purpose of defrauding creditors.