This ‘Legal, Easy’ Tax Loophole Helps the Rich Avoid Biden’s Tax Increases

Corruption concept by business man is hide the money at back. stock photo /

With tax hikes on the horizon, the wealthiest Americans are already seeking loopholes to avoid paying more. One strategy that’s gaining favor is “entirely legal, easy to exploit, and politically very hard to close,” one policy expert told Bloomberg.

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Private placement life insurance, or PPLI, seems to be just the tax shelter that millionaires and billionaires need to avoid President Biden’s upcoming tax increases.

What Is a Private Placement Life Insurance Policy?

You probably know that life insurance policies allow you to pay premiums with pre-tax dollars, reducing your overall tax burden. Your life insurance account grows up to the policy limits, and when you die, your heirs receive that money tax-free.

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PPLI policies work in a similar way. A PPLI policy holds money, tax-free, until the policy holder dies. At that point, the heirs can inherit the policy and also hold it tax-free. This helps heirs avoid estate tax, as well. If the money isn’t withdrawn, it’s never taxed.

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Growing Interest in PPLIs

So what exactly is the difference between your life insurance policy and a PPLI? PPLI policies hold the money in hedge funds and alternative investments, which provide portfolio diversification and greater returns. PPLI policies are often preferred over hedge funds for those with millions to invest because they provide diversification and the financial advantages of hedge funds without the tax ramifications of stocks and other types of investments.

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Right now, PPLIs are under-utilized investments, representing only a very small portion of investments for the richest Americans, according to Bloomberg. The American Council of Life Insurers doesn’t track PPLI policies, either. However, Tara Thompson Popernik, director of research for Bernstein Private Wealth Management’s wealth planning and analysis group told Bloomberg, “Clients are very interested in this right now.”

Can Anyone Invest in a PPLI?

According to an article by Gordon Platt published on LinkedIn Pulse, PPLIs are often used most effectively by individuals with a net worth of more than $20 million, or income of several million dollars per year, including business owners generating significant revenue. A PPLI requires a minimum investment of $500,000 to realize a significant return, Platt wrote. Often, that is the price of entry to open a PPLI. Not only must you have that level of money to open the PPLI, but you must be willing to invest the money and forget about it, never withdrawing it, to realize the tax benefits.

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Last updated: September 30, 2021

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About the Author

Dawn Allcot is a full-time freelance writer and content marketing specialist who geeks out about finance, e-commerce, technology, and real estate. Her lengthy list of publishing credits include Bankrate, Lending Tree, and Chase Bank. She is the founder and owner of, a travel, technology, and entertainment website. She lives on Long Island, New York, with a veritable menagerie that includes 2 cats, a rambunctious kitten, and three lizards of varying sizes and personalities – plus her two kids and husband. Find her on Twitter, @DawnAllcot.
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