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NOWOTNY KNOWS SQUAT! Part 3 - Using Malta Pension Plans to Raise AUM and Sell More Life Insurance

I know that I have been going on and on about how much I love the Iron Game while tracing my steps and interest in all things iron from a unique perspective as an American kid growing up in the Panama Canal Zone. Interesting people visited the Canal Zone, usually unannounced. In 1972 I was waiting for my mother (of blessed memory) in the parking lot of the Balboa Commissary while she shopped. My Dad (of blessed memory) was the manager of the Balboa Commissary at that time. I knew an Air Force "brat" from Howard Air Force Base named Tony Franklin who attended the Canal Zone. We played sports against each other. He happened to pass by the parked car at that time with his mother and another woman. I called him to say hello and noticed that the other woman was the Queen of Soul, Aretha Franklin, his aunt who was visiting them.

In 1977, I happened to be at the Iron Temple, the weight room at the Balboa YMCA, my home away from home. The weight room was hot like a sauna and not air conditioned in the heat and humidity of Panama. In walks Tony Carroll, who was the reigning Mr. Universe and former Mr. World to work out while visiting a friend in the military stationed in the Canal Zone. Honestly, it was the reincarnation of Hercules, He attended a movie at the Balboa Theater that evening and the people attending the movie just stared at him in the lobby before the movie. It's not everyday that you get a chance to see Mr. Universe in person, let alone in the Canal Zone.

This is the third installment in the series Nowotny Knows Squat. This series focuses on value added planning ideas that financial advisors and life insurance agents should introduce to their clients. In case, you haven't heard, the top marginal tax rate is going up and the estate tax exemption is likely to decrease. I don't know the date and time yet, but it is! This episode focuses on the Malta Pension Plan for the high-net-worth client. This planning technique produces great results for the client and provides an excellent structure to attract, retain and increase assets under management.

Overview of the Malta Pension Plan

The Malta Pension Plan (MPP) shares many characteristics with the Roth IRA except unlike the Roth IRA, it does not have any contribution limits and is not restricted to cash contributions. Hence, a contributed capital asset may be contributed without triggering the built-in gain, sell the asset without taxation and reinvest the proceeds without taxation within the Plan. Like the Roth IRA, the taxpayer has the ability to receive substantially tax-free distributions as early as age 50. Beginning at age 50, the taxpayer may withdraw up to 30 percent of the account value tax-free. As early as three years later and every year thereafter, the taxpayer may receive additional lump sum distributions on a tax-free basis within the Plan. The taxpayer may also receive taxable distributions above and beyond the aforementioned tax-free distributions. The U.S.-Malta Income Tax Treaty is the legal authority for this tax treatment.


The Malta Pension Plan is an important tool in the financial advisor's toolbox. First, it is a high value idea that not every "Tom, Dick, and Harry" is bringing to the attention of clients. Its tax-benefits are unique and arguably not surpassed. From a tax compliance standpoint, the tax treaty is pretty strong authority if you ask me. The absence of tax erosion means that you have more assets to grow and manage. There are advanced planning applications that involve the sale of life insurance and split dollars. Take on faith for now, that the sales are large sales. The takeaway message is that if you aren't talking to clients about this idea, you are short-changing your client and yourself. Operators are standing by to take your call!


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