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Thinking long-term: Estate planning options for international investors and families

The nuts and bolts of multi-jurisdictional private placement life insurance planningPresented by Frank R. Suess

QWealth Symposium, September 2010, Cork, Ireland

© BFI Consulting Inc. All rights reserved.

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What we do – structure first, then investLong-term planning does NOT start with asset allocation!

Personalized Wealth Management SolutionsPersonalized Wealth Management Solutions

Wealth PlanningServices

Wealth PlanningServices

Structure Solutions• Tax & Estate Planning

• Asset Protection• Trust and Corporate• Insurance brokerage

Structure Solutions• Tax & Estate Planning

• Asset Protection• Trust and Corporate• Insurance brokerage

Asset Allocation, Portfolio Management and Global Custody Services

Asset Allocation, Portfolio Management and Global Custody Services

Private Banking• Access to First-Class Banks

at Institutional Terms• Performance Tools

• Consolidated Reporting

Private Banking• Access to First-Class Banks

at Institutional Terms• Performance Tools

• Consolidated Reporting

Portfolio Management

• Asset allocation and discretionary management

• Tailored Portfolio Strategies

• The BFI MAP™

Portfolio Management

• Asset allocation and discretionary management

• Tailored Portfolio Strategies

• The BFI MAP™

© BFI Capital Group Inc. All rights reserved.

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Life insurance becoming a key instrument in today’s global wealth planning toolkit

Integrated wealth management with ‘high-end life insurance’

Worldwide recognised legal format Effective and compliant structure:

demand for transparency and on-shore solutions

Substitute or complement to traditional wealth planning instruments

Still underpenetrated market

Foundations

Trusts

Wealth planning

toolsLife

Insurance (PPLI)

Strong demand for needs-based solutions based on life insurance (PPLI)

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Structuring a wealth management plan within a life insurance policy...?!

© BFI Capital Group Inc. All rights reserved.

„Insurance Envelope“

Your personalizedinvestment portfolio

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The basic structure of„new life insurance“

Policy AssetsInsurer General AccountSegregated account(s)

for the benefit of policy xyz

Policyholder Insurer

Policy xyz with fixed returns / benefits

Variable returns

Asset Manager / Advisor

Limited Power of attorney

Key Points: • Beneficial owner of the assets in the policy account is the carrier. • Insurer insolvency does not expose policy assets.

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Asset management tailored to meet your

personal investment objectives

„Insurance Envelope“tailored to meet the legal

requirements of your tax domicile

Personalized wealth management in your insurance structure

Policyholder Insurer

Policy AssetsSegregated account(s)

for the benefit of policy xyz

Policy xyz with “variable” returns / benefits

Asset Manager / Advisor

Limited Power of attorney

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Multiple Jurisdictions - Who is the investor?

PolicyholderPolicyholderInsuranceCompanyInsuranceCompany

Bank /Policy Account

Bank /Policy Account

IndependentAsset Mgr.IndependentAsset Mgr.

US

LiechtensteinCayman

CH

Key Point: • Investor is the insurance carrier, NOT a US person!

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Getting it right, from the start, for the long-termKey elements of solid wealth management solutions

Safety – jurisdictional and institutional…

Asset Protection – from plaintiffs and creditors...

Privacy – keeping your affairs confidential...

Global investment flexibility – no restrictions or limitations...

Tax benefits – during lifetime and after...

Full compliance – peace of mind!...

© BFI Capital Group Inc. All rights reserved.

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• Tax Benefits– Earnings accrue tax-free… / tax-free compounding– Depending on policy-type and jurisdiction, tax-free surrenders / death benefits– Tax-free loans possible– Ideally suited for cross-border planning needs

• Security– Suitable for long-term planning due to contractual structure

– Local and international laws on asset protection and privacy– protection from default of carrier

• Planning flexibility – one or more policyholders, one or more insured, individual or legal entities– flexibility to change beneficiaries at any time– flexible and direct transfer of wealth, separate of probate

Various Planning Considerations

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• Confidentiality– Non-reportable in most jurisdictions– Transactions / Investments done in the name of the insurance carrier

• Liquidity– withdrawal or liquidation possible at any time, no surrender penalties– lump-sum or regular payments– efficient loans via Portfolio pledge

• Investment Flexibility– Choice of asset manager / investment strategies– Investment allocation / strategy can be changed at any time – Inclusion of non-bankable assets possible

© BFI Consulting Inc. All rights reserved.

Various Planning Considerations (cont’d)

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Structuring your insurance portfolio

Individual, Partnership, Trust, Company, etc.

Life Insurance Policy

Segregated Account Investments(incl. legal entities…)

“Above” the Policy

Policy Contract(policyholder, insured,

beneficiaries)

“Below” the Policy

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Caveats

• Inheritance / Estate tax not avoided by life insurance solutions per se

•Beware of advisors who don‘t do their homework– Generally, the policy should come with a legal opinion– The choice of carrier and its jurisdiction are critical

•Transfer of existing portfolio (“In kind premium”) subject to CGT

•What are your primary objectives? You may not be able to „have it all“…, for example:

– Flexibility / Investments „underneath“ vs. tax benefits– Retirement planning versus inheritance planning

•Cost of insurance

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Some of the jurisdictions with the most favorable tax laws

• Austria• Germany• Italy• Mexico• South Africa• Spain• Sweden• United Kingdom• United States of America

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Emerging Role of Life Insurance

“New”Life Insurance

Income TaxPlanning

Income TaxPlanning

Capital Gains Tax PlanningCapital Gains Tax Planning

Death / Estate Tax PlanningDeath / Estate Tax Planning

Hedge against Death

Hedge against Death Dynasty

PlanningDynastyPlanning

Immigration /EmigrationImmigration /Emigration

MultipleJurisdictions

MultipleJurisdictions

InvestmentFlexibilityInvestmentFlexibility Securities

LawsSecurities

Laws

Asset Protection

Asset Protection

FinancialPrivacyFinancialPrivacy

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A glimpse of a few specialties

• Inclusion of non-bankables, e.g. – International real estate– Physical precious metals– Pre-IPO / Pre sale

• Combined strategies, e.g.– Nongrantor trust structures– ILITs

• Limited cash value policies, e.g.– Frozen Cash value– Zero Cash Value– Limited with Risk Shift– Etc.

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Any Questions?

Thank you for your attention!

© BFI Consulting Ltd. All rights reserved. © BFI Consulting Inc. All rights reserved.