Private Placement Life Insurance for digital assets

PROTECTING DIGITAL ASSET WEALTH: WHY PPLI IS THE MISSING PIECE IN YOUR TAX STRATEGY

Most ultra-high-net-worth individuals holding digital assets face a wealth preservation problem they don't realize exists.

You've likely optimized for capital gains treatment. Maybe you're using Delaware trusts or offshore entities for estate tax planning. Perhaps you're holding through corporate structures or qualified opportunity zones.

But here's what almost no one considers: asset location strategy for tax-inefficient digital holdings.

The Digital Asset Tax Problem

Traditional wealth preservation advice assumes you're holding stocks, bonds, or real estate—assets that benefit from:

• Long-term capital gains treatment
• Step-up in basis at death
• Tax-deferred compounding through buy-and-hold strategies

Digital assets don't fit this model.

Blockchain protocol stakes, tokenized private equity, digital real estate, and alternative crypto strategies generate:

• Ordinary income (staking rewards, validator income, protocol fees)
• Short-term gains from frequent rebalancing
• Taxable events on every swap, rotation, or restructuring

If you're holding high-yield digital assets in a taxable account, you're paying 37%+ federal tax plus state tax on income that could be growing tax-free.

The PPLI Solution: A "Super Roth" for Digital Assets

Private Placement Life Insurance allows qualified purchasers ($5M+ net worth) to hold alternative investments—including digital assets—inside a tax-advantaged life insurance structure.

Done correctly, you get:

• Zero tax on rebalancing between protocols, tokens, or strategies
• Tax-free compounding on all gains (no annual drag from ordinary income tax)
• Estate tax exclusion when owned by the right trust structure
• Access to principal + 85-90% of gains without age restrictions (unlike Roth IRAs)

How It Works: The Three-Layer Structure

1. Insurance Layer: Variable universal life policy issued by a licensed carrier (often offshore 953d carriers for flexibility)
2. Investment LLC: Single-member LLC that holds your digital assets within the policy
3. Independent Manager: A qualified investment manager executes trades (you define strategy; they execute)

You can't directly control trades (IRS "investor control" rules), but you can dictate:

• Asset class allocation (e.g., 40% blockchain infrastructure, 30% tokenized real estate, 30% digital credit)
• Risk parameters and diversification requirements
• Manager selection and replacement rights

What Works Inside PPLI (Digital Asset Context)

✓ Blockchain protocol stakes with high staking yields (8-15% annually)
✓ Tokenized private credit with quarterly distributions (10-14% yields)
✓ Private digital funds with carried interest and management fees
✓ Algorithmic trading strategies generating ordinary income
✓ DeFi protocol positions with high impermanent loss turnover
✓ Tokenized real estate with rental income and value-add strategies

✗ Direct crypto day trading (violates diversification rules)
✗ NFT collections or digital  IP certifications (personal use assets)
✗ Assets you personally control or trade

The Math: PPLI vs. Taxable Account

Let's say you have $10M in tokenized private credit yielding 12% annually (paid quarterly as ordinary income).

Taxable Account (37% federal + 13.3% CA = 50.3% effective rate):

• Year 1 income: $1.2M → $603K after-tax
• Year 10 compounded value: ~$19M after taxes

PPLI Structure (0.75% all-in costs):

• Year 1 income: $1.2M → $1.11M after fees
• Year 10 compounded value: ~$28M tax-free
• Difference: $9M+ additional wealth preserved

Who This Is For

PPLI makes economic sense if you:

• Have $15M+ net worth (ideally $30M+)
• Can commit $5M+ to the structure for 10+ years
• Hold tax-inefficient digital assets (not just buy-and-hold Bitcoin)
• Want to rebalance between protocols without triggering taxes
• Are building generational wealth (not planning liquidity events soon)

Who This Isn't For

Skip PPLI if you:

• Hold primarily long-term capital gains assets (like Bitcoin/Ethereum buy-and-hold)
• Need liquidity in 3-5 years
• Want direct control over every trade execution
• Prefer simple, transparent structures over tax optimization

Offshore vs. Onshore PPLI

Onshore (U.S. carriers):

• More regulation and consumer protection
• Higher costs (1.0-1.5% all-in)
• Stricter asset limitations
• Better customer service and reporting

Offshore (953d election carriers):

• Greater flexibility in asset selection
• Lower costs (0.5-0.9% all-in)
• More sophisticated structuring options
• Requires more sophisticated due diligence

For digital assets specifically, offshore carriers typically offer more flexibility with blockchain-native assets, tokenized securities, and alternative crypto strategies.

The Estate Planning Stack

PPLI solves the income tax problem. But if the policy is owned in your personal name, the death benefit is still in your taxable estate (40% estate tax above $13.6M per person).

The solution: Stack PPLI inside an Irrevocable Life Insurance Trust (ILIT) or Spousal Lifetime Access Trust (SLAT).

This combination protects you from both:

• Income tax (via PPLI tax-free growth)
• Estate tax (via trust ownership outside your estate)

Real Minimums and Costs

• Minimum investment: $2M (though $5M+ is where economics really work)
• Setup costs: $75K-$150K (legal, trust work, compliance, carrier onboarding)
• Ongoing costs: 0.5-1.0% annually (carrier fees, manager fees, admin)
• Investment manager: 0.5-1.5% depending on strategy and assets

The Access Question

Unlike Roth IRAs, you can access PPLI funds before age 59.5 through tax-free policy loans.

You can typically access:

• 100% of principal with no penalties
• 85-90% of gains through structured withdrawals and loans

The insurance carrier maintains a death benefit requirement (usually 10-15% of cash value), which is why you can't access 100% of gains while alive.

Why This Stays Exclusive

PPLI lives at the intersection of insurance law, tax code, and alternative asset expertise. The advisors who structure these:

• Don't advertise (referral-only practices)
• Require $5M+ minimums to make economics work
• Work with 20-50 families, not 500 clients
• Charge institutional advisory fees for white-glove structuring

How 969 Capital Adds Value

We don't sell insurance policies. We architect holistic wealth preservation strategies that integrate:

• Estate planning vehicles (trusts, LLCs, family offices)
• Tax-efficient asset location (PPLI for tax-inefficient assets)
• Digital asset custody and manager selection
• Compliance and reporting infrastructure

Our role is ensuring the structure works as a system—not just selling you a single product that leaves estate tax or structural gaps.

If you're holding $10M+ in digital assets and your tax strategy is "hold for long-term capital gains," you're optimizing for the wrong asset class.

Contact us at cc@969capital.com for a confidential consultation on whether PPLI fits your digital asset wealth preservation strategy.