Case Studies

Solution

• Two UK compliant life insurance policies are written and £15m of mixed funds invested in one and £5m of clean capital invested in the other.
• The Policy is compliant in both the UK and Belgium.
• The policies are written on a joint life, last survivor basis and denominated in euros.
• A discretionary investment manager and a custodian of underlying assets is appointed.
• An investment strategy is selected based on the clients’ risk appetite.
• The Policies are compliant with the Personal Portfolio Bond regime, and the investment manager can access direct lines, if required.
• UK situs assets can be invested in without any tax consequence;
• When Mr and Mrs Volter move to Belgium the policy terms and conditions will be amended to ensure local regulatory and tax compliance.
• The two adult children can then be nominated as beneficiaries, on a subsequent move to Belgium in respect of any policy proceeds payable on second death.

The Benefits

• Gross roll-up and full tax compliance in both the UK and Belgium.
• No RBC needs be paid. The insurance provider charges approximately £40,000. A saving of approximately £20,000 per annum.
• 5% tax deferred withdrawals can be used (while UK resident). The mixed funds policy to defray expenses in respect of the French and Belgian properties (withdrawn sums not remitted), without tax consequence. 5% withdrawals from the clean capital policy can be brought back into the UK to fund UK lifestyle.
• The policies continue to stay outside the UK Inheritance tax (IHT) net whilst Mr and Mrs Volter are resident in the UK for less than 15 years and provided they do not acquire general law domicile.
• The policy can be assigned into trust prior to becoming deemed domiciled to maintain IHT protection without triggering a tax event.
• No UK exit taxes are triggered at the time of the move from UK to Belgium this assumes they are not trustees.
• No 2% premium tax or stock exchange tax on the policy on return to Belgian residency.
• Withdrawals or surrenders are not taxed in Belgium.
• Beneficiaries can be changed at any point in the future.
• The clean capital Policy can be pledged as collateral in respect of a loan whilst in the UK, both can be used as collateral on a move back to Belgium.
• The Policy remains EU portable and can be adapted for local compliance should Mr and Mrs Volter decide to move away from Belgium.
• Mr and Mrs Volter benefit from simplified tax reporting while both UK and Belgian tax resident.
• The investment manager can manage one ‘fund’. Clean capital and mixed funds stay separate. There is no ‘mixing’ of the funds.

Note:  Case Studies are based on our current understanding and are subject to change; they are for illustrative purposes only; actual outcomes depend on individual circumstances.

Solution

• Two UK compliant life insurance policies are written  and €8m of mixed funds invested in one and €2m of clean capital invested in the other. The policies are compliant in both the UK and France.
• The policies are written on a joint life, last survivor basis* and denominated in Euros.
• A discretionary investment manager and a custodian of underlying assets is appointed.
• An investment strategy is selected based on the clients’ risk appetite.
• The Policies are compliant with the Personal Portfolio Bond regime, and the investment manager can access direct lines, if required;
• UK situs assets can be invested in without any tax consequence;
• When Mr and Mrs Dupont move to France the policy terms and conditions will be amended to ensure local regulatory and tax compliance;
• The two adult children can then be nominated as beneficiaries, on a subsequent move to France in respect of any policy proceeds payable on second death.

The Benefits

• Gross roll-up and full tax compliant in both the UK and France.
• No RBC need to be paid. The insurer charges approximately €20,000. Versus the RBC, this represents a savings of approximately €10,000 per annum.
• 5% tax deferred withdrawals can be used (while UK resident). The mixed funds policy to defray expenses in respect of the French property, without tax consequence. 5% withdrawals from the clean capital policy can be brought back into the UK.
• The policies continue to stay outside the UK Inheritance tax net whilst the policyholders are resident in the UK for less than 15 years.
• No UK exit taxes are triggered at the time of the move from UK to France.
• The “gain” portion of any withdrawal proceeds is charged to tax at a flat rate of 30% in France.
• A special Inheritance tax regime applies in France as premiums were invested before age 70. On second death there is a €152,000 allowance per beneficiary, then a tax rate of 20% on the first €700,000, and 31.25% tax (at current rates) on the balance. This compares to current Inheritance tax rates of up to 45%.
• Beneficiaries can be changed at any point in the future.
• The clean capital Policy can be pledged as collateral in respect of a loan whilst in the UK, both can be used as collateral on a move back to France;
• The Policy remains EU portable and can be adapted for local compliance should Mr and Mrs Dupont decide to move away from France.
• Mr and Mrs Dupont benefit from simplified tax reporting while both UK and French tax resident.
• The investment manager can manage one ‘fund’ . Clean capital and mixed funds stay separate. There is no ‘mixing’ of the funds.

Note:  Case Studies are based on our current understanding and are subject to change; they are for illustrative purposes only; actual outcomes depend on individual circumstances.

* Possible only if the matrimonial regime is a régime de communauté universelle avec clause d’attribution intégrale