A Senate Finance Committee report found that “private placement life insurance” (PPLI) policies, which are only available to the ultra-wealthy, are being used to avoid billions in taxes.
The 18-month investigation found that the specialized plans, with average death benefits of $13 million, are actively promoted to the richest Americans as a way to eliminate income, gift, and estate taxes through a “buy, borrow, die” strategy.
There is no requirement to report these policies to the IRS, allowing lucrative alternative investments to avoid scrutiny.
Committee Chair Ron Wyden criticized PPLI as tax shelters masquerading as life insurance, not for protecting families as intended.
Wyden wrote in a statement, “I’m a strong defender of life insurance as a source of financial security for hardworking American families and retirees, but that’s not what’s going on with these tax-dodging private placement policies that are only available to the ultra-wealthy.”
“When you subject these policies to even the slightest bit of scrutiny, it’s clear that this is just a tax shelter for the investments of the mega-rich masquerading as life insurance,” he continued.
Wyden explained, “As is often the case with our tax code and the ultra-wealthy, the scandal here is what’s legal. The companies weren’t even trying to hide the fact that their PPLI policies were tax dodges for the very top — that’s precisely how they were promoted.”
He added, “It’s obvious that this is an abuse of the rules that are intended to protect typical American families.”
As a result, Wyden plans to introduce legislation adding guardrails to prevent millionaires and billionaires from using PPLI to avoid taxes, while not affecting typical family policies.
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