Tell Congress Where You Stand - Act Now
By Mark Richards
Principal
Winged Keel Group
By Zach Specht
Managing Director, Client Relationship Manager
Winged Keel Group
Read Mark Richards and Zach Specht’s Full Whitepaper – Click Here
Risk compartmentalization, investment policy discipline, and creditor protection concepts for business-owning families
Executive Summary
For families whose wealth is concentrated in a closely held operating business, diversification becomes particularly important once the company generates more capital than it can prudently reinvest. At that point, surplus earnings can remain in the business, accumulate in a taxable investment account, or move into a separately governed pool of long-term family capital.
Private Placement Life Insurance (PPLI) can serve as a “family bank” for this phase of wealth creation. It is not a replacement for working capital, bank credit, or treasury management. Rather, it can separate strategic capital from operating volatility, impose investment-policy discipline, reduce income-tax drag during the compounding period, and preserve access to capital during the insured’s lifetime.
When properly designed and administered, policyowners generally may access policy value through withdrawals and policy loans. Subject to policy terms, basis, adequate funding, and applicable tax rules, those withdrawals and loans are generally received income tax free. This gives the family flexibility to use the PPLI policy as a long-term capital reservoir: money can be taken out when a qualified opportunity arises and, when liquidity permits, put back into the policy rather than permanently depleting the reservoir.
In certain jurisdictions, PPLI may also support creditor-protection objectives. Those protections are jurisdiction-specific and fact-dependent.
A well-designed structure can help a family separate surplus capital from operating assets, institutionalize investment governance, improve after-tax compounding, allow for tax-free access, and preserve optionality for strategic opportunities.
Read Mark Richards and Zach Specht’s Full Whitepaper – Click Here
About Winged Keel Group
Dating back to 1851, the America’s Cup is the oldest continuous competition in sport. The 1983 race marked the first time that the challenger had won the Cup since the contest began. The challenger’s key to victory was the development of a “winged keel.” This structural development increased the challenging yacht’s stability, enabling it to move more smoothly and quickly through the water.
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Family Enterprise USA Action engages with legislators on Capitol Hill on behalf of family offices, hardworking families, and family-owned businesses. It is focused exclusively on the critical tax and economic policies that impact them. Since 1995, FEUSA Action has been the leading advocacy group working daily in Washington, D.C., to reduce and eliminate estate tax, gift tax, and generation skipping transfer tax while blocking increased income and capital gains taxes, the creation of a wealth tax, and other hostile policies that punish hardworking taxpayers and success in the U.S. It is a bipartisan 501.c4 organization.