(Washington)

Since May, the prospect of huge tax hikes on the wealthy has weighed over the advisor and HNW landscapes. Biden is planning to significantly increase capital gains taxes, and most alarmingly, is planning to get rid of the step-up in basis at death. With that in mind, a new product has been surging to the forefront as the work-around to Biden’s new proposals: private placement life insurance. PPLI is a type of life insurance where payouts flow through to beneficiaries tax-free. However, they are complex for clients to understand and take some significant diligence. According to a law professor at the University of Chicago, “Private placement life insurance poses a serious obstacle to President Biden’s goal of guaranteeing that high-income individuals pay tax on large gains at least once per lifetime … PPLI is a massive loophole — entirely legal, easy to exploit, and politically very hard to close”.

FINSUM: So this seems to be a good, if complicated and restrictive, work-around to the inheritance tax issue, but it does not address capital gains.