Private Placement Life Insurance

Top 3 Takeaways:

1. Higher, Permanent Exemption: OBBBA locks in a $15M per person ($30M per couple) estate and gift tax exemption starting in 2026.
2. PPLI Advantage: Private Placement Life Insurance offers tax-free growth and estate protection for ultra-high-net-worth individuals.
3. Expert Oversight Needed: PPLI’s benefits depend on strict IRS/SEC compliance and professional legal-financial guidance.

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Passage of the One Big Beautiful Bill Act on July 4, 2025, ended an unwelcome period of uncertainty for estate planning by increasing and making permanent the expanded lifetime gift and estate tax exemption, which was set to decrease dramatically at the end of this year. Now set at $15 million per individual (or $30 million per married couple) as of January 1, 2026, this more generous exemption provides high-net-worth families with some breathing room to consider their ideal estate planning strategy.

However, for certain individuals, even a higher exemption is not sufficient to protect their assets from federal estate taxes. This requires innovative solutions to shield their wealth and minimize taxation. One such tool is Private Placement Life Insurance, which can be tailored to the specific life insurance, investment, and estate planning needs of the insured and their family.

What Is Private Placement Life Insurance?

Private Placement Life Insurance (PPLI) is a form of variable universal life insurance sold privately to qualified investors—typically high-net-worth or ultra-high-net-worth individuals with complex financial situations. PPLI provides death benefit protection for the insured’s chosen beneficiary or beneficiaries and has a cash value component. Premiums paid in excess of what is needed for the death benefit coverage, as well as investment growth within the policy, are credited to the policy’s cash value. Unlike traditional variable universal life insurance policies, PPLI allows for a far greater range of investment options, including hedge funds, actively managed accounts, and alternative assets. In addition, while regular policies may have coverage limits insufficient for high-net-worth families, PPLI can be designed to achieve a level of death benefit coverage appropriate for the purchaser.

 In the U.S., PPLI policies are considered an unregistered securities product, meaning they can only be presented to those considered accredited investors or qualified purchasers under Securities and Exchange Commission (SEC) regulations. Typically, those who most stand to benefit from considering PPLI as part of their estate planning and asset protection strategy are insurable and:

• Have a high net worth with both significant liquid assets and annual income high enough to cover anticipated living expenses
• Possess the ability to fund at least $1 million in annual premiums for several years, typically reaching more than $5 million in total investments, as well as implementation and ongoing administration costs for the policies and continuing annual premiums thereafter
• Have a long-term investment horizon (10 to 15 years or more) with interest in investing in alternative asset classes not typically available through regular life insurance products

Have long-term, multigenerational estate planning and asset protection needs

Potential Benefits and Risks of PPLI

PPLI takes advantage of the tax treatment extended to life insurance to shelter investment income that might otherwise be subject to capital gains tax or increase the value of the insured’s taxable estate. Specifically:

• Investment earnings within the policy grow tax-free. This helps preserve the gains from tax-inefficient assets with high turnover, allowing reinvestment and further growth.
• Transfers between investments within the policy are also untaxed.
• The death benefit is not taxed as income for beneficiaries.

A PPLI policy can also be paid into an irrevocable life insurance trust to provide further asset protection and estate tax minimization; if properly done, the proceeds of the life insurance policy paid into the trust will be excluded from the taxable estate of the insured.

In the U.S., PPLI premium payments must be carefully calculated to avoid having the policy classified as a Modified Endowment Contract (MEC) by the IRS, which could subject any withdrawals from or loans taken against the policy to income tax. In addition, diversification rules state that each account within the policy must have at least 5 investments, with no one investment controlling more than 55% of the portfolio. Finally, policyholders are bound by the investor control doctrine, which states that they cannot exert excessive control over policy investments, which may also lead to the loss of favorable tax treatment. Those considering PPLI as part of their overall estate planning strategy must consult experienced legal and financial professionals to ensure their policy stays in regulatory compliance and accomplishes their desired goals.

Expert Domestic and International Estate Planning for Ultra-High-Net-Worth-Individuals

Those with extraordinary estate planning needs require inspired legal guidance that takes advantage of every opportunity to reduce taxation, safeguard wealth, and preserve the value of their legacy for the generations to follow. The Trusts & Estates team at Bridge Law provides customized solutions for both domestic and international estate planning, with ongoing support to ensure that as your circumstances change, your estate plan evolves to meet them. To learn more about your options, schedule your consultation by contacting us here.

Frequently Asked Questions