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Life insurance as a succession planning tool in Portugal

Market: Portugal (available in English, French and Portuguese)

French version   Portuguese version

What are the possibilities?

A Unit-linked life insurance contract is commonly defined as a product associated with one or more investment funds, qualified as ICAE – Instrumento de Captação de Aforro Estruturado (Structured Savings Collective Instruments), whose objective is providing for the payment  of a capital sum in case of survival or in the case of death of the insured person. This product, due to its characteristics, is designated as a complex financial product under Portuguese law.

Significant case law establishes that life insurance contracts connected with investments funds, called unit-linked products, are structured savings collective instruments which assume the legal qualification of life insurance contracts"[1].

Beneficiaries' clauses

Qualifying as a life insurance contract, the unit-linked product offers privileged options in the context of succession planning due to its flexibility when preparing beneficiary clauses, the integration of certain assets and specific provisions requested by the policyholders at the time of subscription (example: staggered payments to the beneficiary after the death of the insured person).

Each case has it unique factors and the possibilities of structuring and conceiving the relevant beneficiary clauses are multiple and can be complex or simple depending upon the will of the policyholder.

Notwithstanding the flexibility that is provided to the policyholders as regards the preparation of the beneficiary clauses, and which results from the principle of contractual freedom, it is necessary to comply with the rules contained in the laws of succession. The policyholders can obviously at any time use their power to amend the beneficiary clause and therefore establish in the new clause something fundamentally different from what was provided before, except in case of an irrevocable appointment. The beneficiary clause is irrevocable where the beneficiary has expressly accepted the benefit or the policyholder has expressly waived the amendment right. Where the appointment is irrevocable, the prior written agreement of the beneficiary shall always be necessary for the exercise of any right arising from the contract.

Type of assets

Moreover, in the context of succession and asset planning, the unit-linked contract is a product that permits the allocation of social structures (namely familiar structures) and relevant structuring the unit-linked product due to the possibility to invest in traditional and/or complex financial products such as the integration of a RAIF[2] (Reserved Alternative Investment Fund), hedge funds, unlisted assets, among others. The policies issued by insurance companies in Luxembourg can invest without restrictions or with limited restrictions in certain types of assets, as it follows from the rules of the Commissariat aux Assurances[3].

Tax benefits

Beyond estate and asset planning needs, a life assurance contract offers fundamental tax planning benefits:

  1. Upon death of the insured person – the beneficiary shall not be subject to inheritance tax;
  2. In case of donation made in direct line – there is no tax liability.

Together, these factors make the unit-linked life insurance contract in Portugal particularly attractive, for purposes of succession planning and structuring, for the persons residing in Portugal and for citizens of other nationalities who want to travel to Portugal under the regime of Non-Habitual Residents[4] and/or Golden Visa,

Bâloise Vie Luxembourg has a team of Portuguese experts in the area of asset structuring in insurance, therefore do not hesitate to contact us to obtain additional clarification as to the possibilities for the planning of your assets within a unit-linked life insurance policy and on the advantages of the solutions proposed by Bâloise Vie Luxembourg.

 

[1] See Judgment of the Supreme Court, case No 530/10.6TJPRT.P1.S1 of 12/11/2013, at www.dgsi.pt

[2] See RAIF: a new asset choice for life assurance portfolios? (English version or French version

[3] Insurance supervisory authority of Luxembourg

[4] See "Moving to Portugal" (English version or French version)