Make Your Voice Heard on Capitol Hill
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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The need for fact-based reporting of issues important to family owned businesses and protecting a lifetime of savings has never been greater. Now more than ever, successful families and family owned businesses are under fire. That's why Family Enterprise USA is passionately working to increase the awareness of issues important to family owned businesses built on hard work, while continuing to strengthen our presence on Capitol Hill. The issues we fight for or against with Congress in Washington DC include high income tax rates, possible elimination of valuation discounts, increase in capital gains tax, enactment of a wealth tax, and the continued burden of the gift tax, estate tax and generation skipping tax.
Family Enterprise USA promotes generationally owned family business creation, growth, viability, and sustainability by advocating for family businesses and their lifetime of savings with Congress in Washington DC. Since 2007, Family Enterprise USA has represented and celebrated all sizes, professions and industries of family-owned enterprises and multi-generational employers. It is a bi-partisan 501.c3 organization. Family foundations can donate.