Ownership of a Captive

There are many choices regarding ownership of the captive insurance company.  As a C-corporation, a captive can have multiple classes of stock with different rights, restrictions and privileges. 

To the extent that claims against the captive's reserves are less than those projected by the actuaries and reflected in the premiums, the reserves grow, and the stock becomes more valuable.  This value can be returned to the shareholders as qualified dividends [IRC 1(h)(11)] (which are currently taxed at the capital gain rate for federal tax purposes) or as a capital gain distribution on complete liquidation of the corporation [IRC 331]. 

There are numerous other tax planning opportunities with respect to growth in value of the captive.

For more on tax planning, see:

Estate and Business Planning