Recent research focusing on the main perceived risks to wealth creation and preservation shows that, in today’s world, succession planning remains the main concern for wealth holders and their families. With a record US $16+ trillion of global wealth expected to be transferred to family members over the next three decades – from baby boomers to Generation X to millennials – such concern has an even bigger meaning and impact than ever before. Especially when considering that the same research reveals that only 53% of Ultra High Net Worth Individuals believe they have a robust succession plan in place.

This upcoming and momentous transfer of wealth is not the only factor facing High Net Worth Individuals and families.

We live in increasingly uncertain times, driven by global geopolitical and macroeconomic uncertainty, a fast-evolving regulatory environment and a greater requirement for transparency. If one looks at Europe alone the range of issues are significant – Brexit still in chaos with upcoming European parliament elections, a growing wave of Eurosceptic and populist governments and ongoing riots in France to name but a few.

In addition, we are witnessing the emergence of a new ‘family paradigm’ in today’s fast-changing world. Over the last decade, marriage rates have fallen dramatically in many Western European countries, while divorce rates have exploded.  Many of the younger generations are opting for civil unions in countries where this is possible, or simply choosing to live and have kids together, without any legal link or contract. While society continues to evolve, the law is struggling to keep up, directly affecting – and not providing efficient answers for – succession planning for these non-traditional families.

Latest research shows that 20% of international clients will live in at least three countries during their lifetime.
Tom Rasqué

Tom RasquéHead of Business Development LuxembourgLombard International

Now combine the above with the fact that families have never been more internationally mobile, with their wealth now more globalised than ever, a different approach to succession planning is required.  Latest research shows that 20% of international clients will live in at least three countries during their lifetime, 34% of them holding a second passport, and over 41% sending their children abroad for education.

In such a context, it is challenging to find efficient wealth and succession planning solutions that can synchronise to the ever-evolving legal and tax environments of the different jurisdictions where such clients might reside or dynamic family configurations they are in.

How Luxembourg unit-linked life insurance can help

A Luxembourg unit-linked insurance contract brings with it tangible succession planning benefits. It is an established and internationally recognised tool for wealth preservation and succession planning needs.

It enables policyholders to create a flexible succession plan which can respond to changing personal dynamics.  It also can include a broad range of asset classes as well as non-traditional assets, which can enhance diversification within a portfolio and potentially bring higher returns, making unit-linked solutions attractive if compared to other investment solutions.

Luxembourg life insurance also provides one of the strongest policyholder protection regimes materialised in national law by the Triangle of Security. This ensures that all assets underlying a life insurance policy are held by a custodian bank approved by the Commissariat aux Assurances (CAA), the state insurance regulator; thus ring-fencing these assets from both the insurance company and the custodian bank.

Moreover, policyholders can freely choose their beneficiaries and have the flexibility to change them during the duration of the contract.

Beneficiary clauses can be drafted to explain how wealth should be distributed, who should get what and when, and to deal with situations involving children or heirs that may not yet be mature enough to manage all their assets.
Tom Rasqué

Tom RasquéHead of Business Development LuxembourgLombard International

This advantage is essential when considering complex family situations, to ensure the smooth transfer of wealth to the next generation. Beneficiary clauses can be drafted to explain how wealth should be distributed, who should get what and when, and to deal with situations involving children or heirs that may not yet be mature enough to manage all their assets. Such contracts are also highly efficient for policyholders who divorce and/or with children from different partners, as they allow them to set up clear rules for their succession in a private and confidential way.

Finally, Luxembourg unit-linked insurance solutions are cross-border by design. Each contract can flex should the policyholder or their designated beneficiaries relocate, thereby meeting the local requirements of the jurisdiction(s) they choose to reside in.