Private Placement Life Insurance (PPLI) Calculator

PPLI explained: What it is: customized life insurance policy where cash value is invested in investor-controlled accounts (hedge funds, private equity, separate managed accounts); Tax benefits: cash value grows income-tax-free; tax-free loans from cash value; death benefit income-tax-free; no required minimum distributions; access to tax-advantaged asset location; Minimum investment: $5M-10M minimum (most PPLI policies); typically $1-2M+ minimum annual premium for 5-7 years; Insurance carriers: Zurich International Life, Investors Heritage, Pacific Life, Transamerica Elite Life (offshore); Costs: insurance cost of insurance (COI): $2,000-10,000/year per million of death benefit; policy fees: 0.5-0.75%/year; investment management: underlying fund fees still apply; investor control doctrine compliance: must not have too much control over investments (IRS rules); Available investments: hedge funds (can access strategies not available in IRAs); private credit; private equity; custom SMAs; Regulation: offshore PPLI often issued in Cayman, Liechtenstein, Bermuda; onshore: US-domiciled insurance company.

PPLI vs. taxable account after-tax return comparison: Scenario: $10M portfolio, 8% gross return, 37% tax rate, 10-year projection; Taxable account: 8% return; pay 23.8% on long-term gains annually (or higher for funds with short-term gains); After-tax return: approximately 6.5% net; 10-year value: $18.8M; PPLI: 8% return tax-deferred; estimated COI and fees: 0.75%; Net return inside policy: 7.25%; 10-year value: $20.1M; Difference: $1.3M ($13% more); Additional benefits: estate: death benefit passes income-tax-free; potentially estate-tax-free (irrevocable life insurance trust); charitable: death benefit to charity with full charitable deduction; state tax: if PPLI is in Nevada or offshore trust, may avoid state income tax; PPLI is most powerful for: high-income investments (hedge funds with high ordinary income); held for 20+ years (compounding effect grows); estates with estate tax exposure ($27M+ married).

Family offices (single or multi) make sense at $50M+ in investable assets. Below that, private banking (JP Morgan Private Bank, Goldman Sachs PWM, UBS) offers similar services with lower minimums ($5-25M). Family offices provide consolidated reporting, direct deal access, and custom investment mandates unavailable at private banks. Multi-family offices (Bessemer Trust, Glenmede) offer a middle ground at $10M+ with family-office-level service at lower cost.

Most wealth advisors recommend 3-5% of liquid net worth in cash/cash equivalents for UHNW individuals — enough to cover 12-24 months of lifestyle expenses plus opportunistic investments. Excess cash above this benchmark costs 5-8% annually in opportunity cost vs. diversified portfolios. Treasury bills, money market funds, and short-duration bonds provide liquidity with yield while maintaining capital preservation objectives.