The ownership structure of all new affiliated business ventures can have asset protection and estate planning impacts. Small closely held captive insurance companies are no different. However the IRS feels strongly that layering advanced ownership structuring with privately held family controlled 831(b) captive insurance companies leverages too many tax benefit attributes, and has expressed its belief such structured ownership to achieve asset protection and estate planning benefits may be abusive.

Ownership decisions can impact asset protection, estate planning, business succession planning and other aspects of wealth accumulation and transfer. The US Treasury, IRS division, began sharing its view in 2015 that structuring transaction to layer all available tax incentives can be abusive if done in a manner not intended by Congress. Integration of estate planning and use of life insurance investments inside captives are the types of transactions they caution about, going so far as to have put captive insurance companies on its tax shelter “dirty dozen” watch list.

Legislative initiatives may in time limit utilization of these layered, yet presumably legal, transactions that result in risk finance and family business asset protection. Advisers would nevertheless be remiss in not advising clients of all available tax incentives and tax impacts of business and investment decisions. This reality creates an uncomfortable situation for astute advisers duty bound to inform clients of all available benefits; hopefully this area will be clarified by government regulatory officials soon.


Advisers are currently stuck in a very uncomfortable position. Not advising clients of all available tax incentives and all business and tax planning options could be deemed less than competent advisory services. The IRS may be going too far again in this regard; anytime a closely held business expands into a new area, such as investing in and owning a captive insurance company, structuring ownership to maximize family and business benefits would seem merely being competent, not abusive. A legislative solution and better regulatory guidance would seem in order as everyone wants to maintain a healthy and stable relationship with all government regulatory agencies, particularly the IRS.

If desired by our clients or prospective clients, we can refer legal and tax advisers with captive project experience who can assist you and answer your legal and tax related questions.

Contact us if interested in such referrals.