Swiss Advisors 1973
The life insurance policy and the trust are among the most used instruments for asset planning, generational transfer, and asset protection. Each one has its specific characteristics, advantages, and limits.
In life insurance policies, the insurer paying the amount to the beneficiaries is dependent upon the occurrence of an uncertain and future event (related to the insured party's human life i.e., the "demographic risk"). When this event occurs, the insurer is required to pay the beneficiary the indemnity set forth in the insurance contract (with not possibility of postponing it to a later date).
The insurance policy also allows a good level of flexibility given that it is possible to change the beneficiary at any time via written communication to the company or with a testamentary disposition. Also, depending upon the country of residence of the policy holder and/or beneficiary, the policy also allows taxation to be rationalized.
Combined use
In view of the characteristics of each of these two instruments (life insurance policy and trust), it should be noted that, in fact, they can be used in combination to make the most of their potential for efficient estate and succession planning.
Considering, for example, that using a trust would guarantee greater discretion over the allocation of assets (which would avoid an immediate devolution that could lead to the dispersion of the assets), a person might consider taking out a life insurance policy with the beneficiary being a trust (which could have already designated beneficiaries or could pursue specific purposes).
So, when the insured event occurs, the sum will be transferred directly to the trust and will increase the trust fund, pending future allocation of the assets to the trust's beneficiaries.
In this way, it is possible to defer the attribution of those sums of money to the beneficiaries, especially when there are specific requirements (for example, when the beneficiary is a minor or when a beneficiary is not able to provide for prudent management of their assets) that require periodic attributions mediated by the trust rather than attributions in a single solution.
