The threat of higher taxes, which President Biden has affectionately called making billionaires and millionaires pay their "Fair share", isn't the only factor sparking interest in PPLI: as Bloomberg's Ben Steverman writes, "a little-noticed change in US insurance law at the end of 2020 makes the tool more powerful, at the same time that competition among insurance carriers and advisory firms is giving rich investors more flexibility, lower costs and a wider choice of products on PPLI platforms."
When the holder of a PPLI policy dies, heirs inherit the PPLI's contents tax-free, a perk which strikes at the heart of Biden's plans to get the very wealthy to pay more taxes on their investments, especially on capital gains that currently aren't levied if assets are held until death.
The tool can also be combined with other loopholes: Family offices, for example, can buy PPLI policies inside dynasty trusts, which are vehicles that let multiple generations of wealthy heirs avoid the estate tax.
As Steverman explains, though lobbyists' primary goal was tweaking the rules affecting ordinary life insurance products, the upshot is that the wealthy can now put more money into a PPLI policy while paying less to an insurance carrier for life coverage.
To improve their pitch to the wealthy and their most-trusted advisers, some providers are now allowing those advisers to keep control of the PPLI investments.
So what happens next? Well, if Democrats want their tax revolution not to be derailed by a simple loophole, one option they have to stop the wealthy from using PPLI to escape taxes is to cap the size of life-insurance death benefits.
Otherwise, as University of Chicago's Hemel warned warns, PPLI is a "Relatively easy workaround that will allow high-net-worth individuals to generate virtually unlimited amounts of investment income while avoiding capital gains taxes during life and at death."
https://www.zerohedge.com/markets/how-americas-ultra-wealthy-are-evading-democrats-new-taxes
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