PRIVATE PLACEMENT LIFE INSURANCE (PPLI) – A SOPHISTICATED TOOL TO ENHANCE FAMILY WEALTH PLANNING
By Michael D. Darosa, Director of Portfolio & Wealth Advisory at BBR Partners, and Steven R. Katz, Partner and Director of Portfolio & Wealth Advisory at BBR Partners
February 2026
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Wealthy families face a unique challenge: how to preserve and grow wealth across generations without losing ground to taxes. PPLI offers a powerful solution, combining tax-advantaged growth with institutional-grade investment access and estate planning benefits in one structure. PPLI isn’t just a conventional insurance product, it’s a sophisticated wealth strategy.
This whitepaper is intended to be an educational resource, to explore the fundamentals of PPLI, simplify the complexity around it, and offer our views on how to unlock the investment benefits of the structure.
PPLI FUNDAMENTALS:
PPLI is best understood as a specialized form of Variable Universal Life (VUL) insurance, tailored for wealthy families seeking both advanced income tax and estate planning solutions. Both PPLI and traditional VUL share core characteristics:
- Death Benefit: Each provide a life insurance component.
- Cash Value: Policyholders pay premiums that become investment assets that support the policy and are invested in the market.
- Tax Advantages: Investment assets are sheltered from income tax.
- Estate Planning Capabilities: When properly structured, each can also deliver estate tax-free death benefits.
Where PPLI distinguishes itself is investment flexibility. Unlike traditional VUL products, which typically limit investment options to mutual funds or similar vehicles, PPLI allows allocations across a broader spectrum of strategies including alternative asset classes. This flexibility enables wealthy families to align sophisticated investment strategies with a tax efficient structure.
Unlike traditional life insurance, which prioritizes the death benefit, PPLI is designed to optimize long-term cash value accumulation. As the cash value increases, the net amount at risk (the difference between the cash value and the death benefit) declines, which in turn reduces insurance costs within the policy. This dynamic can make PPLI highly cost efficient for families focused on tax-advantaged investment growth.
Our discussions with wealthy families often revolve around thoughtful planning strategies designed to preserve and grow wealth. Tax efficiency and estate planning are key topics, and PPLI has emerged as a powerful tool to enhance family wealth planning. Before even considering whether PPLI is the right fit for a family, we start with what matters most, gathering a clear understanding of liquidity needs, estate planning objectives, and family dynamics. PPLI is not a one-size-fits-all solution, it requires thoughtful design and collaboration across a team of advisors. Our role is to simplify complexity, guide families through the options, and align each decision to reflect the family’s specific vision. To illustrate how PPLI can function in practice, we’ve included several anonymized client cases where PPLI has come up, and why.
GOAL |
FAMILY PROFILE |
WHY PPLI? |
| Maximize Generational Wealth Transfer |
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PPLI is designed to strengthen existing strategies by reducing income tax exposure and optimizing wealth transfer to future generations through the Generation Skipping Trust structure. Additionally, at the death of G2, the investment assets (death benefit) are paid out in cash acting like a step up in basis. The step-up would not otherwise take place upon the death of the grantor or the G2 beneficiary. |
| Income Tax Minimization |
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Because of California’s high-tax environment and the extended investment horizon, PPLI offered an efficient way to limit tax impact on a broad set of investment holdings in a high tax state. |
| Income Tax Minimization |
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PPLI was used to reduce the income tax burden to the grantor without turning off grantor trust status. |
THINGS TO CONSIDER:
When implemented carefully, PPLI can be a powerful tool, but a few key considerations need to be appropriately assessed.
- Cost – Setup costs, insurance related fees, administrative fees, and state specific premium taxes should be closely monitored and understood.
- Compliance –The policy must comply with specific IRS rules and insurance regulations (e.g., diversification requirements, investor control limitations which prevents the policy owner from having investment influence, modified endowment contract status, etc.). Non-compliance can lead to loss of tax benefits.
- Complexity – With layers of tax, insurance, estate and investment considerations, PPLI can feel overwhelming to implement. The strategy requires a team of advisors who have implemented the structure before.
- Investment Risks – Sufficient performance is critical to cover the insurance costs and support long-term wealth accumulation goals.
- Liquidity – PPLI requires long-term commitment. Investment assets should remain invested for the duration of the policy to maximize the benefits. There is the ability to withdraw up to 85% of the invested assets tax-efficiently, but this should only be considered in limited circumstances.
- Funding – Ownership entities should have significant scale to fund premium payments with cash, minimums typically being $1-5M paid annually over a few years.
- Family Dynamics – Every family is unique. Ownership structures, beneficiary choices, and trust arrangements should reflect a family’s vision and avoid future complications.
UNLOCKING THE INVESTMENT POWER OF PPLI:
From an investment perspective, our goal is to align customized investment solutions with the unique tax advantages of the PPLI structure. PPLI is about creating a thoughtful, disciplined strategy that has the ability to compound capital over long periods of time within an insurance vehicle. We focus on three key guiding principles:
- Stability is critical. In the early years of a policy, costs are higher, so avoiding excessive volatility is essential.
- Liquidity, while PPLI allows access to higher returning, less liquid investment strategies, we still seek to maintain a level of liquidity for tactical rebalancing, capital calls, and IRS diversification requirements.
- Finally, income tax-free investment is one of PPLI’s greatest advantages. In addition to core portfolio strategies, we focus on strategies that can can benefit from tax-advantaged environments, like credit-oriented strategies.
FINAL THOUGHTS:
We hope we have shown that although PPLI involves additional layers of complexity and compliance, when implemented thoughtfully, it can be a powerful tool for optimizing long-term wealth creation and aligning sophisticated investment solutions with tax-efficient planning. If you have more questions, please contact BBR Partners.
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Michael Darosa joined BBR Partners in 2020 and is a Director of Portfolio & Wealth Advisory. His responsibilities include working with clients to develop their overall financial strategy, manage their investments, and integrate their investment, tax and estate planning into a cohesive wealth management plan. Michael lives in Manhattan.
Steven Katz joined BBR Partners in 2003 and is a Partner and Director of Portfolio & Wealth Advisory, working with clients to develop their overall financial strategy, manage their investments, and integrate their investment, tax, and estate planning into a cohesive wealth management plan. Steven has considerable experience structuring tax-efficient trust and estate strategies that are fully integrated with investment plans. Steven is also a member of BBR’s Compliance Committee and lives in Chappaqua, NY.
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