The Benefits And Advantages Of Life Insurance Solutions

Author:Mr Martin Straub
Profession:Envisage GmbH
 
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Life insurance has become virtually ubiquitous in wealth planning. It is flexible, can be adapted to a wide range of purposes, enjoys very favourable tax treatment in most if not all jurisdictions and is virtually universally recognised. Life insurance can be used to preserve and increase wealth as well as pass it on to the next generation in a very tax-efficient manner. The main benefits are taken in turn.

5.1. Inheritance and succession planning

Life insurance can enable the tax-efficient transfer of wealth from the older generation to the younger without the need for estate executors. It can under certain circumstances bypass forced heirship laws by removing the assets from the policyholders estate (the assets become the property of the insurer), though this depends on jurisdiction. Furthermore, legal disputes are rarer, it is exceedingly difficult to attack a life insurance policy, particularly a Swiss policy. Done properly it can be very cost-efficient.

Circumvention of forced heirship laws is possible in some jurisdictions as the policy is not included in the estate. For a European citizen with US Assets, this means no estate tax payable on US situs asset on the death of the insured person. For a US person, a trust owned life insurance policy can eliminate probate, both simplifying the process and saving on associated costs1. Furthermore insurance solutions can substantially reduce the impact of estate tax up to complete circumvention.

Transfer of assets to the next generation on the death of either policyholder or insured person can be greatly simplified. Because at the time of death of the policyholder, the assets contained within the policy do not form part of the estate, those assets are not subject to forced heirship laws. This alone makes insurance a particularly elegant solution for people wishing to arrange their affairs. In particular those wishing to define clearly and privately the "Who gets What?" question. One of the big problems in succession is agreeing on "What did Dad say?" and "What did Dad want?" after the fact when Dad is no longer around. Using insurance, Dad can define exactly what he wants before he goes. Furthermore, Dad can define it privately and confidentially. Beneficiaries can be children from 1st, 2nd (3rd...) marriage or children out of wedlock who might otherwise have been excluded. Benefits to wife (wives...), girlfriend(s), nieces, nephews, foundations, trusts, limited liability companies can all be contractually defined and most importantly – enforceable in a court of law. The possibilities are very wide. The enormous flexibility of insurance makes us real fans of insurance – when...

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