Case Studies: Solving Complex Residency and Succession Issues with Insurance Solutions

Cross-border & International Estate Planning with Insurance — High Net Worth Estate Planning: using insurance for wealth transfer and tax mitigation in the United States (New York, California, Florida focus)

Life insurance is uniquely versatile for high net worth (HNW) families facing residency, domicile, and succession complexity. This article presents real-world case studies showing how bespoke insurance structures — private placement life insurance (PPLI), insured irrevocable life insurance trusts (ILITs), premium financing, and QDOTs — can solve tax exposure, liquidity shortfalls, and succession friction for multinational families based in New York, California, and Florida.

Sources cited: IRS estate tax rules, PPLI market summaries, and interest-rate benchmarks (links at end).

Why insurance matters for cross-border HNW estates (quick facts)

• The 2024 federal estate and gift tax exemption is $13.61 million per individual; estates above that are subject to tax at a top federal rate of 40%. (IRS)
• State-level estate or inheritance taxes may apply depending on domicile or situs (e.g., New York has a state estate tax; California and Florida currently do not).
• PPLI and life insurance trusts provide liquidity, tax-efficient wealth transfer, and asset protection while accommodating cross-border ownership and reporting.

See related guides: Residency, Domicile, and Policy Ownership: Avoiding Unintended Tax Traps for International Estates and Cross-Border Estate Planning: Choosing Onshore vs Offshore Life Insurance for Multinational HNW Families.

Case Study 1 — New York family with dual citizenship, real estate exposure, and liquidity gap

Situation

• A U.S. citizen (resident of New York) and a second spouse who is a non-U.S. citizen/resident co-own substantial U.S. real estate and offshore investments.
• Combined estate projected at $45M including NY real property; anticipated federal + NY estate tax exposure on the death of the U.S.-resident spouse.
• Liquidity shortfall for estate taxes and business succession.

Solution deployed

• Create an Irrevocable Life Insurance Trust (ILIT) to own a large-denomination life policy on the U.S.-resident spouse to provide immediate liquidity for federal and state estate taxes and fund business buyouts.
• Fund the ILIT using annual gifts that take advantage of the gift-tax exclusion and part of the donor’s unused lifetime exemption.
• Where a non-U.S. spouse complicates ownership, structure the ILIT and policy ownership to avoid inclusion under local residency/ownership rules (see QDOT considerations where required).

Why this worked

• The ILIT keeps life insurance proceeds out of the decedent’s probate estate (and generally out of inclusion for estate tax if done correctly).
• For families with NY exposure, life insurance proceeds held in an ILIT are a standard solution to meet the immediate tax-bill timing mismatch without forced asset sales.
• If the non-U.S. spouse holds a substantial share, a QDOT or alternative spousal trust can be used to defer or mitigate U.S. estate tax consequences for the non-U.S. spouse.

Estimated costs and carriers

• Typical life policy sizes for a $45M estate liquidity plan: $10M–$25M in face amount depending on other liquid assets.
• Well-known carriers that underwrite multi-million-dollar custom strategies include Prudential, MassMutual, John Hancock, and Sun Life. Pricing varies by age, health, policy type (PPLI, IUL, universal), and underwriting class.
• Example cost range (indicative): a fully-underwritten $10M survivorship UL or PPLI wrap for a healthy couple in their 50s can have annual mortality and policy fees in the range of $50k–$250k depending on structure and investment sub-account returns (actual quotes must be obtained from carriers/ADIs).

See also: Residency, Domicile, and Policy Ownership: Avoiding Unintended Tax Traps for International Estates.

Case Study 2 — California entrepreneur moving to Florida to reduce state estate tax exposure

Situation

• A California-based founder with $30M in net worth (primarily securities) contemplates redomiciling to Florida to eliminate California estate tax risk and reduce overall taxation in retirement and succession.
• Concern: domiciliary challenges — California can contest residency changes if substantive ties remain.

Solution deployed

• Use PPLI (onshore or reputable offshore with compliant onshore wrappers) to:
  • Consolidate investment assets into a life insurance policy that grows tax-deferred within the policy wrapper.
  • Use the policy as the primary vehicle for intergenerational wealth transfer under trust ownership (e.g., ILIT or irrevocable trust settled in Florida).
• Combine with documented domicile change plan:
  • Physical move to Florida, sell/lease California residence, change voter registration, driver’s license, tax filings, and social ties.
  • Maintain insurance ownership and trust situs consistent with Florida residency and local counsel advice.

Why this worked

• Florida has no state income tax and no estate tax; properly executed domicile change plus a policy held outside the decedent’s estate can lock in state-tax savings.
• PPLI provides flexible investment inside the policy while keeping growth outside taxable income and potentially outside estate inclusion when structured with an ILIT.

Typical market practice & costs

• PPLI minimums for HNW clients are commonly in the $1M–$5M+ initial premium range, with many advisors recommending $5M+ for cost-effectiveness and customization. (Investopedia and industry practice)
• Ongoing administrative/trust fees: commonly $5,000–$25,000 annually depending on investment complexity and jurisdiction.
• Insurers with active PPLI desks in the U.S. and internationally: Lombard International, Sun Life, Prudential, and select captive or global life carriers.

See related guidance: Structuring PPLI and Offshore Policies to Comply with Home-Country Regulations.

Case Study 3 — Family business succession funded with premium-financed insurance

Situation

• A Florida-based family owns a $50M private operating company. Founders want to fund a buy-sell agreement to ensure continuity and preserve business value for the next generation without liquidating assets.
• Founders prefer to avoid diverting operating cash to large annual premiums.

Solution deployed

• Use premium financing: a lending bank provides a loan to pay the life insurance premium (secured by the policy and other collateral), with the policy owned by an ILIT or trust that will fund the buy-sell on death.
• Loan repayment strategies include policy cash value growth, dividends, or a planned repayment at liquidity events (sale/refinancing).

Key commercial terms and risks

• Typical financing terms in recent markets tie to SOFR + margin (commonly SOFR + 150–350 bps depending on credit). (New York Fed — SOFR benchmark)
• Loan-to-premium ratios commonly between 80–95%, depending on lender appetite and collateral.
• Risks: margin increases raise financing costs; collateral calls; credit risk; potential income-tax issues if policy or ownership incorrectly structured.

Market players and indicative pricing

• Banks that provide premium financing include regional and global banks with private bank desks (e.g., Goldman Sachs Private Bank, Bank of America Private Bank, J.P. Morgan Private Bank — terms vary by client credit and size).
• Example cost illustration (indicative):
  • Loan of $5M for premium financing at SOFR (5.0%) + 250 bps = 7.5% interest => annual interest ≈ $375,000.
  • Finance economics depend heavily on policy crediting rates and policy fees.

Read more: Cross-Border Premium Financing: Legal, Tax, and Currency Risks to Consider.

Comparative snapshot: Insurance strategies for cross-border HNW estates

Implementation checklist for advisors and HNW families (New York / California / Florida focus)

• Confirm client domicile and potential state estate tax thresholds (New York residents may face state estate tax even with federal exemption).
• Run modeled scenarios: estate-tax, liquidity needs, buy-sell funding, and trust inclusion tests.
• Choose policy wrapper (PPLI vs conventional UL/IUL) based on:
  • Investment flexibility required
  • Reporting and FATCA/CRS considerations for cross-border assets
  • Minimum premium economics
• If using premium finance, stress-test for interest rate shocks (benchmark: SOFR). See New York Fed SOFR data.
• Engage multi-disciplinary team: estate-planning attorney, cross-border tax counsel, qualified insurance broker, trust/administration specialists, and lender (if financing).

Final notes and reliable references

• Federal estate tax and gift tax information: IRS — Estate Tax overview: https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax
• PPLI market and features (overview): Investopedia — Private Placement Life Insurance: https://www.investopedia.com/private-placement-life-insurance-4769977
• Interest-rate benchmark (SOFR) used for premium financing examples: New York Fed SOFR reference rates: https://www.newyorkfed.org/markets/reference-rates/sofr

Related internal reading:

• Cross-Border Estate Planning: Choosing Onshore vs Offshore Life Insurance for Multinational HNW Families
• Residency, Domicile, and Policy Ownership: Avoiding Unintended Tax Traps for International Estates
• Structuring PPLI and Offshore Policies to Comply with Home-Country Regulations

For bespoke quotes, carrier-specific illustrations, and precise premium or financing terms for New York, California, or Florida clients, coordinate directly with carriers (Prudential, MassMutual, Sun Life, Lombard International) and private banking partners for current pricing and underwriting.