- Private company owners may take up to a $1.2 million deduction annually for existing “self-insured” risks.
- Captive acts as a deductible, executive deferred compensation plan (with no employee-match required).
- Profits are protected from creditors and judgments.
- Custodial trust can hold the stock of the captive (for asset protection or estate planning purposes).
- Profits are converted from ordinary income rates to dividend / long-term capital gains rates.
- No limit on profits, excess profits tax or required dividend.
- Legislative Risk: Section 831(b) has been in existence since 1974; there is legislation pending to raise the annual cap to $2.025 million and index it for inflation.
- Investment Default and Principal Loss: Risks are directly tied to the credit rating of the investment portfolio.