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After 10 years as J.P. Morgan’s Senior Insurance Advisor for the Latin American Private Bank, Fernando Reátegui established Private Client Insurance Advisors, LLC to serve the insurance needs of International Private Banking Clients.
On April 23, 2009, PCIA, LLC was registered with the State of Florida as an Independent Insurance Agency.
Through its affiliation with Brokers Insurance, a Lifemark Partner and Brokers Insurance Bermuda, PCIA, LLC has access to both U.S. and International Insurance carriers that have the capacity and service capabilities to meet the needs of the International Private Banking Client.
Our specialty is to work as a team with the Clients’ financial, legal and tax Advisors to provide efficient insurance solutions for the clients’ benefits
Why PCIA, LLC?
Our experienced insurance advisors work with clients’ advisors to understand their needs and objectives with the goal of better integrating the client’s entire financial picture. Because we get to know our clients through our extensive relationships with them, we are in an excellent position to help them assess their insurance needs. One of the many advantages of our integrated approach is that it enables us to provide recommendations that are not only suitable, but also permissible.
We have no bias in choosing our carriers other than to ensure that they meet our criteria for financial stability and service quality.
We have no interest in promoting particular products. Our philosophy is to make available alternative solutions that can be tailored to fit our clients’ particular circumstances. We advise on traditional insurance solutions such as those for providing family protection, estate and succession planning, as well as sophisticated solutions for pre-immigration planning, multi-jurisdictional estate planning, and tax-efficient transfer of assets to U.S. beneficiaries.
We are imbued with the highest regard for our clients’ desire for total discretion and confidentiality.
The most common mistakes
In our experience, when we do review policies, the most common mistakes we find are:
-Policies are purchased from companies in the wrong jurisdiction
-U.S. tax consequences are not taken sufficiently seriously
-The tax consequences of having the wrong insurance are not taken seriously enough
-A client has failed to read the fine print
-Policies are purchased, put in a drawer and never reviewed, even after major life changes like a client’s divorce or the death
of a beneficiary
-Unnecessary policies have been purchased
-There are coverage gaps between policies
The uses of insurance
Wealth advisory planning
Many Latin American countries have minimal or no estate taxes. As a result, estate planning in Latin America is focused on minimizing income taxes. With life insurance, a client can provide that future generations will enjoy immediate liquidity paid in a tax efficient manner.
A Brazilian who has children in U.S. buys a policy that is compliant with U.S. regulations. The death benefit will be paid income-tax free to the beneficiaries in the U.S.
Life insurance can be used to enlarge or protect a philanthropic bequest.
A client wants to put $10 million in a trust to benefit the Red Cross. Assuming that the $10 million is invested so that it earns 5% annually, he then uses half of that income to buy a $10 million life insurance policy. As a result, instead of leaving $10 million to the Red Cross, he will leave twice that amount.
Solving family issues
Insurance can be used to address a wide range of family issues—from taking care of permanently disabled heirs and non-blood relations to placing constraints on profligate heirs and buying out business partners. One common use is buying policies for members of an extended family.
A 66-year-old client had six children ranging in age from 11 months to adult from two marriages. He arranged to leave his operating business to his older children and he bought life insurance policies for the benefit of his younger children.
Buy-sell agreements are increasingly being funded with life insurance. They are used to smooth corporate succession by enabling surviving partners to buy out the interests in the company of their deceased partners’ heirs. The life insurance policy readily provides the liquidity needed to execute the buyout. Its use is particularly on the rise in cases where the next generation doesn’t want the business so business owners need to make succession plans to protect both their families and their businesses.
Each of two business partners buy life insurance on their own lives and make their partners the beneficiaries of each other’s policies. When one of them dies, the other will be able to buy out the deceased’s share from his heirs.
Insurance may be used to protect a family from the premature death of the family provider or by a company to prevent losing a key employee.
A major Latin American company bought a life insurance policy with an investment account for its chief operating officer. If the executive stayed with the employer for 15 years, he would be given the policy, which by that time would have a cash value of $2 million. At retirement, he could exchange the policy for an annuity. The company offered the policy in hopes that its prominent executive would not be lured away by a major multi-national promising richer benefits.
Latin American clients frequently use their portfolios as collateral to obtain loans for their operating companies.
A client pledges his portfolio as collateral to get a loan for the operation of his business. He also procures a life insurance policy for the term and amount of the loan. If the client dies while the loan is outstanding, the insurance policy will be used to repay the loan and the collateral will be released to the beneficiaries.
Many Latin American clients contemplate moving to the U.S. or they have to plan for U.S. beneficiaries to whom they want to transfer assets with minimal taxation. Some families face both challenges. In all these instances, insurance can be used as a tool to transfer wealth to U.S. beneficiaries in a tax efficient manner.
If a client owns tangible U.S. assets in his personal name, we can calculate the estate tax liability so that he can buy a life insurance policy to cover the potential estate taxes when he dies.
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