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Insurance Trust:
An undervalued financial instrument
A wealth amplifier for high-net-worth individuals
What is an insurance trust?
The word insurance trust is actually a superposition of two words: insurance + trust.
Insurance Money: The full name is insurance claim money.
Trust: Many people have a misunderstanding of this word and will understand trust as a wealth management product.
Of course, there is indeed a kind of trust wealth management called collective trust, which is a kind of wealth management product, and this kind of wealth management product has indeed performed poorly as a whole in recent years, especially some trust wealth management related to real estate, and there has been a large area of deferred payment. Therefore, many people's first reaction when they hear about trusts is: this kind of thing must not be touched.
But in fact, a collective trust is not a trust in the true sense.
In Article 2 of Chapter 1 of the Trust Law, the term "trust" as used in this Law refers to the act of entrusting the settlor's property rights to the trustee based on his trust in the trustee, and the trustee shall manage or dispose of it in his own name for the benefit of the beneficiaries or for specific purposes according to the settlor's wishes.
In layman's terms, we hand over the assets to the trustee (usually a trust company), and the trustee manages them on behalf of us. For example, when the real estate was particularly hot before, many people were not qualified to buy a house, so they paid to buy the house in the name of a relative or friend, and then signed a holding agreement.
However, in order to solve the risk of holding on behalf of these natural persons, there is a special institution to help customers manage assets, which is a trust company.
Therefore, the insurance trust, in fact, is to hand over the insurance claim payment to the trust company for management, rather than to a natural person. Because according to a normal insurance policy, the beneficiary will be a natural person, such as one's lover, parents, or one or more children.
We hand over the insurance claims to the trust company, which is called the insurance trust.
Why set up an insurance trust?
According to the trust structure, our settlor entrusts the trust company to manage the assets on behalf of us, and the trust company accepts our entrustment and becomes the trustee to manage our trust property by receiving trust remuneration, distributes these properties to investment projects, and then distributes the trust benefits in accordance with the trust contract.
1.It can solve the risk of natural person holding on behalf of others.
In real life, it is very common for high-net-worth individuals to find someone to hold assets on behalf of them, mainly including capital holding, equity holding and real estate holding. As for the reasons for escrow holding, it is generally that the actual holder is unwilling to disclose his identity, or to avoid related party transactions in operation, or to circumvent the restrictions of relevant policies, laws and regulations, etc.
On the surface, it seems to be a very convenient way to hold assets in hiding, but from the perspective of wealth protection and inheritance, there are huge risks hidden here. The insurance trust has both the function of the policy and the function of the trust, and can also fundamentally solve the problem of escrow.
An insurance trust can be set up here2In the 0 model, the trust company acts as the policyholder, sometimes the beneficiary is a close relative of the customer, and sometimes the beneficiary can also become a trust company. By designing insurance trust products in which the trust company acts as the policyholder, the risk of asset holding, especially the risk of cash and policy holding, can be resolved.
The settlor purchases the policy as the policyholder, and establishes a trust, and after the insurance product is underwritten, with the consent of the insured, the policyholder and the insurance beneficiary of the policy are changed to a trust. The settlor will pay the funds to the trust account, and during the duration of the policy, the trust will continue to pay the remaining premiums as the policyholder using the trust property, and when the payment conditions agreed in the insurance contract occur, the insurance company will directly deliver the insurance claims to the trust plan, and then the trust company will manage, operate and distribute to the trust beneficiaries in accordance with the trust contract.
2.Debt risk can be guarded against.
Trust assets are separate from the trust company. In practice, each customer's insurance trust will have an independent bank account in the trust company, this special account is independent of the trust company, and the trust company helps us to manage the property in the process, we need to strictly follow the trust contract to perform, and can not use the money in these accounts at will.
Therefore, although a trust company, as a corporate legal person, may bear certain debt risks, according to Article 16 of the Trust Law, trust property is different from property owned by the trustee (hereinafter referred to as inherent property) and shall not be included in or become part of the inherent property of the trustee.
If the trustee dies or is dissolved, revoked or declared bankrupt in accordance with law, the trust property does not belong to his estate or liquidation property.
Therefore, here, it can be clearly seen that no matter what happens to the trust company, the trust property is still independent of the trust company and is not affected by the trust company's debts.
3.It can prevent the risk of death.
As an independent company legal person, as long as the trust company is not dissolved or deregistered, its duration is not limited, and if it is dissolved or deregistered, then the settlor can choose to hand over its trust account to other trust companies.
Of course, we don't want this situation, so, when choosing a trust company, it is recommended that you still give priority to the trust company with the prefix of the country, and a few shareholders of domestic trust companies are attached at the end of the article, you can make a preliminary understanding, when making the choice of trust company, the more powerful the shareholders, the better, after all, we all hope that this ** east, can carry hundreds of years of history.
How to set up an insurance trust?
Seeing this, you may say that such a powerful trust is exclusive to the rich, right? Not really. In the past two years, the threshold of insurance trust has become lower and lower, and it can be said that it has become more and more popular.
The method of setting up an insurance trust with the lowest threshold is to configure a fixed amount whole life insurance policy, and there are some trust companies that can be set up as long as the sum insured reaches 1 million.
After the establishment of the insurance trust, there is no money in the account, of course, you can also deposit cash in it, and hand it over to the trust company to help you invest, it is generally recommended to invest in safe and stable creditor's rights assets, after all, the money in the trust itself is the living expenses of family members, and security is the most important.
Unless there is enough money in the trust, it is possible to consider diversification and allocate assets of different risk levels.
There are only five steps to set up an insurance trust
Step 1: Configure a fixed amount whole life insurance policy, the general sum insured is recommended to start at 5 million, otherwise it is not enough to distribute, of course, if you just want to set up an insurance trust account first, and then slowly add it, it can also be 1 million.
Step 2: Choose a trustworthy trust company, the choice of the general trust company will be considered together with the choice of the insurance company, because each insurance company will have its own cooperation with several trust companies, it is recommended to consider the insurance company and the trust company comprehensively, to avoid the occurrence of buying the policy, find that the trust company you want to load is not in the cooperation list.
Step 3: After the policy is in effect, after the cooling-off period, apply to the insurance company to change the beneficiary, change the beneficiary to the trust company, and at the same time, fill in the letter of intent to establish the trust asset distribution method.
Step 4: Conduct double recording with the trust company, complete the signing and confirmation of the trust contract, and hand over the insurance company's preservation and change information to the trust company.
Step 5: The trust is established, and the insurance trust can also be loaded with cash-like assets, so if you want to load cash in addition to the insurance policy, you can transfer it at this time.
The specific process is subject to the actual operation).
After the completion of the five steps, the establishment of the insurance trust is complete, and you will receive the trust contract and a notice of establishment of the trust.
It is important to note here that although the insurance trust has the role of isolating assets and preserving assets, the premise of protection is that the insurance trust established by the legal and compliant funds is true and effective.
Precautions for setting up an insurance trust
Of course, there are a few things to keep in mind during this process:
1.Does your medical condition allow for a fixed amount whole life insurance?
Fixed-amount whole life insurance is a wealth amplifier for high-net-worth customers, which can be used for 10,000 yuan in 1 year to leverage 1 million sum insured, which means that insurance companies need to carry out risk control, so in the process of configuration of fixed whole life insurance, there will be a lot of inquiries about health information, and we must do a good job of truthfully informing about the physical condition, otherwise, if there is a problem when making a claim, the trust side will not be able to play a role.
2.Do your assets meet the requirements of financial audit?
For policies with an insured amount of less than 4 million, this problem generally does not exist, but if you want to do a high sum insured, such as 10 million, or even higher, then you need to provide proof of sufficient funds to prove that you are really worth the money.
This is also very understandable, after all, this kind of life insurance, suicide after 2 years is paid, and the insurance company also has to take into account its own moral hazard.
3.Choice of trust company.
Important things are emphasized three times! Trust company selection criteria: national prefix, national prefix, national prefix.
Please refer to the figure below for the specific shareholding structure of the trust company.
Special note: The 68 trust companies in the picture are the statistics of 2022, and on May 26, 2023, the Fifth Intermediate People's Court of Chongqing Municipality ruled that Xinhua Trust shares were bankrupt, and since then, the trust company has been changed to 67 More information about insurance trust, professionals are welcome to leave a message to supplement. Jiaoliu Jiawei Xinhao caicejun8