Wealth planning is a dynamic process of asset accumulation, lifetime uses and distribution of wealth and it addresses both your personal and business needs and objectives. Many wealthy individuals fear the erosion of their estate from taxes, creditor’s claims and even family disputes at a time when wealth is transferred from one generation to another.
What is Life Insurance for HNWI?
A recognized wealth preservation tool in international private banking that
combines liquidity planning with guaranteed insurance investments.
With this product, investment portfolios are kept in insurance instead of in traditional bank accounts. This type of life insurance product can be set up as unit-linked insurance or a fixed-term insurance, which means that the proceeds of the life insurance that are ultimately to be paid out will depend on the performance or the length of time the securities are kept in the life insurance policy.
A life insurance plan can support your wealth planning ambitions, but also provide the required liquidity to:
- Give your family greater financial security after the major bread-winner passed away.
- Ensure inheritance tax liabilities are met and debts are paid back at the time the estate is distributed , and
- Facilitate the continuity of the family businesses. Wealth Preservation Planning Tool
- Liquidity planning in case of death – fund for future financial liabilities
- Flexible estate and succession planning with individual beneficiary nomination Investment
- Inherent premium leverage due to guaranteed performance for life plus profit participation
- Asset diversification into recognized investment class protection
- Protection of family members’ future lifestyle
- Asset protection provided by law flexibility
- High death coverage
- Individual plan modeling and ongoing adjustment
Types of Life Insurances
There are basically two types of life insurances for high net worth individuals, the so called Universal Life Insurance (ULI) and the Private Placement Life Insurance (PPLI).
The ULI Universal Life Insurance is a type of permanent insurance, providing a coverage for your entire life after the premium has been payed. Unlike traditional life insurances ULI provides a higher degree of flexibility, because it allows policy holders to modify the amount and frequency of premium payments if, for example you envision significant income fluctuations. Along with the lifetime protection and cash value accumulation it also provides tax advantages and efficient succession planning. It is offered by both domestic and foreign insurance companies.
The PPLI Private Placement Life Insurance is a variable universal life insurance product designed for high net worth investors. It provides policy holders with sophisticated asset management choices. Generally, the core motivation for acquiring a PPLI product is to establish a tax-friendly investment environment, at the lowest possible cost, in which an investor may designate traditional private bankers or external money manager(s) to manage the assets paid or transferred in into the insurance policy instead of having them managed by the insurance company. The death benefit component of the policy usually is considered a secondary benefit.
The income tax benefits of life insurance include:
- in certain jurisdictions tax-free earnings (dividends, interest, and capital gain) on policy assets;
- the ability to withdraw and to borrow assets from the policy cash value free of income tax (with proper structuring); and
- the receipt of policy proceeds by the policy beneficiaries at the death of the insured on an income tax-e fficient basis.
In Summary The key benefits of combined individual private banking & investments with insurance are:
- Tax efficiencies during term, at withdrawal and on payments upon death;
- Inheritance planning with flexible beneficiary nomination;
- Asset and investor protection to safeguard private wealth;
- Simplifying reporting duties due to insurance reporting rules;
- Widening the investment universe by changing legal ownership; and
- Legitimate privacy of individual wealth.