What is structured investment linked insurance business (“SILIB”)?
SILIB is an established and internationally recognized tool for wealth preservation.
It is adaptable to the most complex of situations, and its robustness and flexibility make it highly complementary to other wealth management solutions.
It can be tailored to suit the unique needs of individuals, their families, and institutions, with the potential to enhance financial planning.
SILIB can be used to complement traditional life products?
Protecing families or businesses against loss events such as debt repayment, taxation or key person risk is essential, as is the ability to free up capital otherwise set aside for these events.
SILIB solution, allowing for a holistic and comprehensive approach to estate planning. Life insurance contracts are extremely diverse in practice.
The possible applications go far beyond pure capital investment. The sales approach of tax-free capital investment and payout, which is always used with pleasure, does not even touch the far-reaching application possibilities of this product.
The reasons for using a SILIB are almost identical to those of a private foundation: protection against asset fragmentation, transfer of assets outside the estate, avoidance of inheritance disputes, protection of the family.
Especially due to the increased international mobility of people and assets, the use of a flexible and mobile asset structuring product, such as life insurance, is becoming more and more important.
For banks, asset managers, family offices and law firms, SILIB is an attractive proposition for wealthy clients.
As the most important reasons for taking out PPLI life insurance, the private clients surveyed cited the following reasons
SILIB can be used to complement traditional life products
The key point is the close cooperation between insurer and bank and/ or asset manager. While the insurer structures the products and is the contracting party for the customer, the banks or asset managers provide the investment know-how.
Compared with other instruments (such as a private foundation), SILIB allow estate planning to be structured flexibly and cost-effectively. The testator always retains control over his or her assets before passing away and can quickly and easily change regulations regarding beneficiaries under the insurance contract.
This is also interesting because third parties can also be beneficiaries in the event of an estate, irrespective of claims to a compulsory portion. In many jurisdictions, payouts from a SILIB insurance policy do not fall under the estate and can therefore be passed on to the next generation outside of an inheritance.
This can help to prevent inheritance disputes and to pass on assets to persons or institutions in a targeted manner and in accordance with the wishes of the policyholder.
How the process will be
What are the benefits for the clients?
As we delve into benefits that SILIB has to offer, we consider the case of Mr. and Mrs. R, two very successful entrepreneurs who has built up a substantial portfolio comprising a wide range of assets.
Here, the couple faces a pressing need to preserve their wealth and legacy and to ensure it is passed on smoothly to their next generations. So, how can the couple harness the potential of SILIB to enhance their legacy planning?
SILIB can be used to complement traditional life products
Flexibility
A SILIB edge lies in its flexibility and open architecture to complement other estate planning solutions and various investment strategies. As the investment are legally owned by the insurance carrier, the structure faces fewer constraints due to citizenship issues and can access a more diverse spectrum of asset classes.
Wealth Transfer
Wealth transfer can be carried out effectively without the need for a complicated probate process or a will, therefore securing a direct and efficient pay-out to their beneficiaries to meet their immediate needs.
Tax Efficient
A SILIB can also reap powerful tax benefits in three aspects. As the insurance company holds the ultimate beneficial ownership of the underlying assets, these assets are not subject to income tax on growth, interest, and dividends, except for certain withholding tax. This especially critical for typically tax-inefficient alternative investments such as hedge funds and private equity, allowing for better cash value accumulation and wealth creation as compared to a taxable portfolio.
Confidentiality
SILIB boats enhanced privacy with insurance secrecy laws, in addition to lower or no reporting requirements. Information on the beneficiaries and underlying assets are kept confidential within the policy.