What Is A Captive Insurance Company

by Bruce Givner on March 12, 2012

A captive insurance company is usually an insurance company owned by an operating business or group.  The captive underwrites the insurance needs and risks of the operating business and its subsidiaries.

The most well known case challenging the validity of a captive insurance company was brought by IRS against the United Parcel Service in 2001. The courts ruled in favor of the United Parcel Service and the IRS has since issued guidance to help captive insurance company owners in proper structuring and reporting.

Currently, nearly all major corporations have captive insurance companies and it is becoming more common for smaller closely-help corporations to establish captive insurance companies. For smaller closely-held corporations captives can help protect the business from business risks and also can aid in sophisticated tax and asset protection planning.  When a captive is established in connection with a closely held business, the captive is most often owned by an irrevocable trust for the benefit of the children of the owner of the closely held business.  This is referred to as a “Wealth Captive.”  The combination of income tax, estate, gift and generation skipping transfer tax benefits, and creditor protection, make the Wealth Captive an extremely attractive tool for the owners of closely held businesses.

To determine if a captive insurance company is right for your closely-held business, you will need a careful review by a highly skilled and experienced tax attorney.

For all complex tax planning needs and to establish your captive insurance company, contact The Law Offices of Givner & Kaye today. (310) 207-8008

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