Cryptocurrencies

Using Private Placement Life Insurance (PPLI) to eliminate taxes from crypto transactions

When you sell Bitcoin or any other cryptocurrency, there are tax consequences.

Cryptocurrencies including bitcoin are classified as property by the IRS. The capital gains tax rate depends on the duration that the investment is held. Capital gains from crypto sales inside a Private Placement Life Insurance (PPLI) policy are not taxable.

You also can access the value of your crypto tax-free via a policy loan without transacting a crypto sale. Since your crypto assets are held inside a PPLI, your bitcoin can be transferred to your heirs tax-free.

Case Study: An individual makes a $2M Bitcoin investment and sells for $9M. 

Gain:                                                  $7,000,000

Capital Gains Tax Rate:                   20%     

Proceeds After Capital Gains:        $5,600,000      

Strategy: Purchase bitcoin inside a PPLI policy where the crypto assets grow tax-free and offer you tax-free policy loans and tax-free death benefits. If $2 million of Bitcoin are purchased within the PPLI policy, the net rate of return is significantly higher.

Gain:                                                   $7,000,000

Annual Policy Charges:                    1%

After Tax Proceeds:                          $6,930,000

Client can borrow 90% (tax free):  $6,237,000

In the above case study, the crypto assets sold in a traditional sale create a taxable event which triggers a capital gains tax and reduces the profit by the $1,400,000 tax payment.

The crypto assets sold inside the PPLI policy are tax protected and the profit is $1,330,000 greater than the exact same transaction occurring outside of the PPLI. Furthermore, the owner of the policy can borrow up to 90% of that value without selling any assets or incurring any taxes.

Click here to learn more about implementing PPLI Strategies or contact us to discuss implementing your crypto strategy today.