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Private Placement Life Insurance
You Don't Have a Return Problem. You Have a Tax Structure Problem.
After-tax returns are what matter. Sophisticated investors design portfolios to minimize tax drag and let capital compound uninterrupted.
Why it matters
For many investors, taxes — not markets — are the largest drag on wealth.
Private credit, hedge funds and other active strategies throw off income every year. That income is taxed at ordinary rates before it can compound. The longer you hold, the more that drag adds up.
Key benefits
What PPLI is designed to do.
01
Grow with less tax drag
Gains and income inside the policy grow tax-deferred. Institutional strategies stay invested instead of paying tax each year.
02
Reach capital without selling
You can borrow against the policy's cash value. Policy loans are usually not taxable income while the policy stays in force.
03
Pass more to your heirs
The death benefit is typically paid to beneficiaries free of income tax. Held in a trust, it can also sit outside your taxable estate.
The trade-offs: upfront costs are substantial, IRS rules limit your say over specific investments, and tax laws can change.
Who is this for?
Built for large, long-term, tax-heavy portfolios.
PPLI is typically offered only to accredited investors and qualified purchasers.
Families and family offices with a large taxable estate.
Investors in tax-heavy strategies, such as private credit, hedge funds and high-turnover portfolios.
A horizon of ten years or more. Upfront costs are real, so time matters.
How it works
Where insurance fits: the policy is the container.
Private Placement Life Insurance is a privately offered life insurance policy. It acts as a legal container for investments. The tax treatment comes from the policy, not from the investments inside it.
1
The policy holds the assets
A carrier issues a private policy. Its cash value is linked to investment accounts inside it.
2
An independent manager invests
The assets go into Insurance Dedicated Funds. An independent manager runs each fund.
3
You set the direction
You choose the strategy and can change managers. IRS rules require the manager to pick the specific investments.
As seen in
SEC-registered fiduciaries, backed by former SEC Chairman Arthur Levitt.
Our role
We design the structure. We don't sell the policy.
Lumida is a registered investment adviser and acts as your fiduciary. We design the structure and coordinate every party. We do not sell insurance products.
The insurance carrier. We help you compare carriers and their financial strength.
The fund managers. We help you choose Insurance Dedicated Funds that match your goals.
Your attorney and CPA. We work with them so the policy fits your trust and estate plan.
The PPLI guide
Download Our Guide
Lumida's guide to PPLI, Insurance Dedicated Funds and variable annuities. An advisor can walk you through how it applies to you.
How each structure works, and when it fits.
The costs, rules and trade-offs to weigh.
How the pieces work with your trust and estate plan.
Thank you. We have your request, and an advisor will follow up with the guide.
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FAQ
Frequently Asked Questions
Is this just another insurance product?
No. Here the insurance is a legal wrapper for investments, not the goal. The structure changes how investment income is taxed. Lumida does not sell insurance products.
Why can investments grow without annual taxes inside insurance?
Under U.S. tax rules, growth inside a properly structured life insurance policy is not taxed each year. To keep that treatment, the policy must follow IRS rules on diversification and investor control.
Why can't I just manage the investments myself inside the policy?
IRS investor control rules require an independent manager to choose the specific investments. If you direct them yourself, the policy can lose its tax treatment. You can still set the strategy and change managers.
What kinds of investments can be held inside these structures?
Insurance Dedicated Funds can hold many strategies, including hedge funds, private credit and other alternatives. Each fund must be diversified, with at least five investments. Options vary by carrier.
How is Private Placement Life Insurance different from a Roth IRA or trust?
A Roth IRA also grows tax-free, but it has income limits, small contribution limits and fewer investment choices. PPLI allows far larger contributions and more investment choice, but it costs more and is more complex. A trust decides who gets assets and when. PPLI is often held inside a trust, so the death benefit can stay out of your taxable estate.
Can I access my capital once it's inside the structure?
Yes, usually through policy loans against the cash value. Loans are generally not taxable while the policy stays in force. Unpaid loans and interest reduce the death benefit, and a lapse with a loan outstanding can trigger tax.
Who is this typically appropriate for?
Accredited investors and qualified purchasers with a large taxable estate, tax-heavy investments and a horizon of ten years or more. It is usually not a fit for smaller portfolios, because the upfront costs are substantial.
Disclaimers
Lumida Wealth Management LLC is a registered investment adviser. SEC registration does not constitute endorsement by the U.S. Securities and Exchange Commission and does not indicate a particular level of skill or ability.
All investing involves risk, including loss of principal. We do not guarantee tax benefits, and individual results will vary based on market conditions, portfolio composition, and personal tax circumstances. Tax laws are subject to change, and strategies that are effective under current law may not remain effective in the future.
This material is for educational purposes only and does not constitute tax, legal, or investment advice. You should consult your own tax, legal, and financial advisors before making any investment decisions.
Lumida does not sell insurance products. CNBC does not endorse Lumida.