Distinct advantages  
Insurance may offer an important solution not always considered in overall wealth management. Not only may it help protect against life’s uncertainties, but it can also provide advantages in terms of investment efficiency, taxation and risk coverage.

“Life insurance is increasingly looked upon as a tool to protect and enhance savings; not as an alternative to trusts but as a complementary estate planning option,” explains Simon Pavitt, Private Wealth Solutions Insurance Director for Europe and the Middle East. “Indeed, it can provide liquidity to facilitate the distribution of business and financial assets to loved ones when someone dies, releasing cash-flow which might otherwise have to come from the sale of, or borrowing against other assets.”

Whilst benefits vary by jurisdiction, insurance can offer a deferral of tax liability as well as protection of assets by holding them within a policy that may not be directly owned by the individual. Some clients may also hold investments where net return after tax could be improved by combining them with a tailor-made policy that has local life insurance tax benefits as well as those of gross roll up. 

Succession planning
Leaving money for children can be an emotional, complex and expensive process. Nigel Nicholson, Director, Insurance Development, Private Wealth Solutions explains: “As parents, we all wish our children to benefit from our efforts. In some circumstances, the sheltering of assets to ensure their delivery to loved ones in the most tax-efficient manner can mean using offshore life insurance structures. Clients can specify the amount their beneficiaries will receive and may be able to leave their assets to named individuals rather than to the estate.  Life insurance may also be used to pass the whole asset value of the policy to beneficiaries without creating a charge to inheritance tax or death duties. This is often best delivered by using a life policy in conjunction with a trust so that the trust is the beneficiary of the policy on the death of the insured person.”

Best-of-breed advice
Private Wealth Solutions is an independent business line within HSBC Private Bank, providing wealth planning solutions for high net worth individuals, entrepreneurs and their families worldwide.  In addition to creating fiduciary structures, we work with international insurance brokers and underwriters to deliver tailored solutions. We also offer non-life general insurance services including medical, kidnap, buildings and commercial assets through the HSBC Group. Importantly, our insurance capabilities are rooted in an “open architecture” approach which aims to provide best‑of-breed advice. This way, we select our authorised insurance companies based upon the highest standards of accountability, research and analysis.

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