Innovative and customized insurance-based variable annuity solutions for family offices, high-net-worth individuals, and institutional investors designed to offer flexible access to alternative investments
Private Placement Variable Annuities – or PPVA – are designed to provide tax-efficient access to alternative investments, supporting sophisticated, long-term wealth planning.
They can be used by family offices and high-net-worth individuals, as well as institutional investors, to achieve multiple objectives, including tax-efficient investing and facilitating streamlined wealth transfer to future generations or philanthropic causes.
Private placement annuities can be a tool to help manage high-net-worth estate planning, with potential benefits including tax-efficiency, customization, diversification, risk management, and facilitating charitable giving.
For institutional investors within the U.S., properly structured PPVA may provide a customized means for holding alternative investments, including private markets and hedge funds.
How PPVA investments are managed
Assets within a PPVA contract are held by the insurance company in a dedicated insurance separate account and invested by an independent manager who retains full discretionary authority over the portfolio. Under the investor control doctrine, policyholders may not direct specific investment decisions. Where a policyholder is treated as having such control, the policyholder may be treated as the owner of the assets held in the separate account for U.S. federal income tax purposes, and the income and gains on those assets may be currently taxable to the policyholder. Underlying investments must also meet the diversification requirements of IRC §817(h), which limits the concentration of investments that may support the value of a variable product. The insurance company selects and works with investment managers experienced in meeting these standards and monitors diversification compliance as a routine part of contract administration.
An accredited investor or qualified purchaser purchases a PPVA contract.
The insurance company issues and administers the contract.
Assets are held in a separate account, not subject to the insurance company’s creditors, and are invested with designated funds or managers.
The investment fund or manager executes the stated strategy. Policy value fluctuates with investment performance.
A PPVA is a flexible, tax-deferred variable annuity designed for institutional-quality access to alternative investments within an insurance separate account structure. Used by family offices and high-net-worth individuals, as well as institutional investors, PPVA supports sophisticated, long-term wealth planning – offering tax deferral on investment growth and, in certain structures, facilitating tax-efficient wealth transfer to charitable beneficiaries.
A Private Placement Annuity, just like Private Placement Life Insurance, is a specialized insurance-based financial product. Policyholder eligibility is the same: you must qualify as an accredited investor and/or as a qualified purchaser to access PPVA, and the core policy structures are similar: with investments held in insurance separate accounts and the value of the policy fluctuating with the performance of the underlying investments.
PPVA differs from PPLI in several respects: it typically has a lower minimum premium commitment than PPLI and does not require medical underwriting, and assets passed to a family foundation or other tax-exempt entity transfer income tax-free. Structurally, PPVA does not include a death benefit or provide access to tax-favored loans against policy cash value; gains distributed to individual beneficiaries are taxed at ordinary income rates.
The key differentiators of PPVA are flexibility – providing access to alternatives including private equity, private debt, hedge funds, real estate, infrastructure, insurance-linked securities, and more – and tax-efficiency. Other differentiators include:
Key considerations for potential investors are the long-term nature, access requirements and fundamental investment risk:
PPVA policies are individually designed, so costs vary based on factors such as contract structure, premium amount, and the investment options selected. Policy charges, fees, and other expenses are disclosed as part of the contract and may differ from one policy to another.
Investments within a PPVA are held in insurance separate accounts, meaning they are structurally segregated from the insurance company’s general account assets and are generally not subject to the insurance company’s creditors. In addition, life insurance policies may provide a degree of protection from policyholder creditors under applicable state law, although the scope of such protection varies by jurisdiction and individual circumstances. Investors should consult their legal advisors regarding policyholder creditor protection and the treatment of PPVA assets under applicable law.
State premium taxes may apply to PPVA contributions, varying by the state in which the policy is issued and the policyholder’s state of domicile.
Disclosure:
PPVA is a variable annuity. Investment returns are not guaranteed and will fluctuate based on the performance of the underlying investment options, which involve risk, including possible loss of principal.
This document does not constitute advice or a recommendation or offer to sell or a solicitation to deal in any security or financial product. It is provided for information purposes only and on the understanding that the recipient has sufficient knowledge and experience to be able to understand and make their own evaluation of the proposals and services described herein, any risks associated therewith and any related legal, tax, accounting or other material considerations. To the extent that the reader has any questions regarding the applicability of any specific issue discussed above to their specific portfolio or situation, prospective investors are encouraged to contact Axcelus or consult with the professional advisor of their choosing.
Except where otherwise indicated, the information contained in this website is based on matters as they exist as of the date of preparation of such material and not as of the date of distribution or any future date. Recipients should not rely on this material in making any future investment decision.
Certain information contained herein constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue,” or “believe,” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events, results or actual performance may differ materially from those reflected or contemplated in such forward-looking statements. Nothing contained herein may be relied upon as a guarantee, promise, assurance or a representation as to the future.
