EP48 - How One Family Used Life Insurance To Transfer Wealth
Individual life insurance has little to do with corporate insurance and everything to do with families. It is an investment wrapped in an insurance contract, governed by legislation in Germany, Belgium, France, or elsewhere, covering both insurance law and the tax law that determines whether the structure is fully compliant in the country in question.
In this Episode:
François Jacquemin explains how individual life insurance contracts support generational management and cross-border wealth transfer, sharing a personal story about structuring a family trust for grandchildren in Luxembourg.
The advantage of the Luxembourg environment is not the old ways of doing business, moving cash across a border in a bag. It is the flexibility of the insurance environment to serve a client properly. That service is generation management: transferring wealth from an older generation to a younger one. Depending on the family, this structure can apply to a modest savings contract or to a large sum a parent or grandparent wants to pass on smoothly.
Various arrangements are possible. Dual ownership is possible, where a father gives money to his son, but the son cannot withdraw it until the father dies. The transfer can happen between two people, or across a generation to grandchildren, involving several parties to the same contract. Restrictions usually come down to tax rules. If someone can withdraw the money freely, it may not count as a genuine gift, and the tax relief would not apply.
One story from early in a career illustrates why this matters beyond the technical structure. A father of five children was left alone after his wife died. The grandparents wanted to give money to the children, but not until they reached a certain age. The family office, acting as the family's bank, reached out, and together they worked out how to structure it. This was not about optimizing a tax position. It was a trust environment; the grandparents simply wanted to provide for their grandchildren after losing their daughter, and they wanted peace of mind that the money would not be misused before the children turned eighteen or older.
The meetings were difficult, coming so soon after the mother's death, made more so by a personal connection: having lost his own mother very young, there was a strong emotional link to this family's situation. Sharing that made the room less heavy. The relationship did not end there.
Years later, once the children reached the right age, the contract was surrendered and the family received the benefit. It meant closing a relationship that had spanned watching children become young adults, some choosing to study, others to travel. That was a good example of what generation management can look like in practice, not a tax strategy, but a way to give people the right money at the right time to start their lives.
Timecode:
00:00 Luxembourg Life Wrappers
00:48 Flexibility and Compliance
01:16 Generational Wealth Transfer
02:34 Ownership and Tax Limits
03:22 A Personal Client Story
03:59 Structuring a Trust Solution
05:14 Maturity and Payout
06:03 Closing Reflections
François Links:
Apple Podcast
Transcript:
I'd like to address a point now which is not geared towards corporate insurance, but very much into individual life insurance and, and, and wrappers and, and, and a very specific category of those contract or a specific usage of, of those contract because basically this con- this type of contract is a, is an investment wrapped into an insurance contract with a set of legislation, whether in Germany, Belgium, France, or other countries. There's a set of of law that you need to comply with for the insurance type the, the insurance contract itself, and many other laws, but also tax law that you need to, to comply with so that the insurance contract is fully compliant in in in, in the country in question. The it's very clear here that the, advantage of the Luxembourg environment, it's not the old ways of doing business and, you know, transferring cash from one border to Luxembourg coming with a bag of cash and, going to the bank. But it is really using the flexibility of the insurance environment to give a proper service, to a client. This service is generation management, transfer of wealth from an older generation to the younger generation. And, the insurance contract and the structure that you have in Luxembourg can allow that to, happen, whether it's for a small contract, a savings, or it is a large sum of money that the father, the mother, or the grandmother, the grandfather is going to invest in an insurance contract and structure the contract into, allowing a, smooth transfer to the generation Various element here can, come into play. either there's a dual ownership of the contract where the father is going to give money to his son, but until the father is passed away maybe, the son cannot just withdraw money from the contract. He's still the owner of the contract, but can't withdraw the, money. And I'm not going to go into the, details here. So it's not about lecture about tax and, structuring about the contract, but it's about the fact that it can happen. It can happen for one person to, another person. It can happen to a generation, to the grandchildren, so many parties to, the contract. it can happen also in a way that the, person giving the money or willing to transfer the money can still want to enjoy part of that money or not at all. And there are some restrictions that applied to, that flexibility, which can be, usually or usually it's, tax related. So if you're able to withdraw money then maybe it's not, a real gift that, you give to your, child or your grandchildren, therefore you won't have the tax relief, for instance. I mean, without, without here again being too going into the details and not about the exactitude of what I'm saying, but just for, for the story. Uh, oh, story. Um, I, I remember a, a- actually it was a bit of an emotional story at the beginning of my career. Uh, so it was a, a very sad story where the, um, a, a father you know of five kids was, was, was alone because his wife passed away and the grandparent wanted to give money to, to the children but not usable before they got a certain age. The family office or the, the service of the bank that was serving as, as family office in this in this very, very context. They, um, they, they, they, they approached us and we discussed how, how we could structure that. So we, we did do that which allowed the grandparent to, to, to make, to, to, to transfer the wealth. And here it was not at all about optimization of the tax situation. It was really a trust environment where the grandparents just wanted to provide for the need of the grandkids because their mother had passed away. They were the parents of the, lady who died. So this trust structure was really to smoothen the transfer of the money and giving them peace of mind that the money was not going to be adversely used by some circumstances before they were, 18 or older. And it was rather emotional because it happened very quickly after the death of the mother and, having lost my, mother as well very young. And I was young at the time. I had a very, strong emotional connection to this. So we went through a difficult, difficult meetings, but, we structured it and I've explained also my situation to them and we could connect quite let's say that the room was less heavy afterwards. And, um, then I met them again once they got the money because it was a, a, a long-term investment and I wa- I was still working for the company. So when they got the right age, then we, we simply, um, surrendered the contract. They surrendered the contract and, and they, they were able to benefit and then to get the, the money. And that was, um, that was a good moment because we, we, we went from a, a difficult time and then throughout the, the, the whole lifetime of the, of the contract, we managed it properly. And then I could close the, the, the, the, the relationship with them by giving them the benefit and, and seeing how, how they, they got from kids to, to, to, to young adults. That was that was really nice. They were thankful and they were actually starting their life. Uh, some wanted to study, the others wanted to travel. And I don't, I don't remember, remember, but I found that a great that we provide with an insurance contract, happiness in life, structure in life. We, we support people in having the, the right, the right money at the right time for them to start their life. So that was a good example I found to complete my, my initial statement about generation management.