According to public information, more than 30 trust companies currently provide insurance trust services, and more than 30 insurance companies provide insurance trust services that are connected with trust companies.
1. The powerful function of insurance trust.
Insurance trust is a cross-field combination of financial products and inheritance tools that combines insurance and trust for the purpose of wealth inheritance, and is a service trust with high value-added characteristics.
Specifically, it refers to the policyholder and the insurance company or trust company to sign an insurance or trust contract, designate or change the trust company as the insurance beneficiary, when the insured event occurs, the insurance company directly delivers the insurance money to the trust company, the trust company manages, uses and distributes the insurance money according to the trust contract signed with the settlor (generally the insurance policyholder), and delivers all the insurance money and investment income to the trust beneficiary when the trust is terminated or expires.
The core function of the insurance trust is to make up for the two shortcomings of life insurance premiums - the inflexible distribution of benefit distribution plans and the lack of remanagement.
The insurance trust can bind the policyholder's children or other beneficiaries to properly use the insurance money according to the policyholder's wishes, or avoid the life insurance policy being included in the policyholder's liquidation assets and the imposition of inheritance tax.
The shortcomings of insurance are the advantages of trust, and the shortcomings of trust are the advantages of insurance, so the combination of insurance and trust can achieve better complementarity.
It can be said that insurance trust is a powerful combination of insurance and trust, combining the dual advantages of insurance and family trust, which can fully meet the management and arrangement of family wealth before and after the customer's death.
Insurance trust can allow wealth to flow in and out in a planned way, and comprehensively upgrade the asset inheritance planning of high-net-worth customers, which has powerful functions.
Advantages of Premium Trusts
The advantages of insurance trust over insurance
Compared with insurance, insurance trust has the advantages of a wider range of beneficiaries, more flexible payments, more independent claims payments, and more preservation and appreciation of property.
Advantage 1: It can break through the limit of insurance beneficiaries.
For example, an unborn person cannot be a beneficiary of a policy, but through a trust, and for example, an insurance must have a clear beneficiary, but the beneficiary of the trust can be a definite scope in addition to a clear person.
Advantage 2: You can flexibly arrange the payment of beneficiary funds.
Although many insurance companies provide post-claim payment arrangement services, the flexibility is not very high. The trust, on the other hand, can set many flexible payment conditions, such as a separate beneficiary payment as a reward if the beneficiary is admitted to a prestigious university.
Advantage 3: Make insurance claims more independent.
The insurance trust makes the insurance claim independent of property, and the so-called "debt is not repaid" and "divorce is not divided".
If it is a simple insurance, after the insurance claim is paid to the beneficiary, it will become the property of the beneficiary, and the debts of the beneficiary need to be repaid, and it may also become the joint marital property of the beneficiary, and face division in the event of divorce.
Although some insurance companies can provide payment arrangement services for claims as required, because they are the property of the beneficiary and do not have the independence of property, they will be threatened by debts and divorce division.
Advantage 4: Insurance trust can prevent the risk of losing money.
After the general insurance benefits are paid to the beneficiary, the beneficiary's profligacy is uncontrollable. Even if there is a service provided by the insurance company for post-compensation payment as mentioned above, the insurance company should legally pay the benefit because the benefit already belongs to the beneficiary's property, and if the beneficiary requests to receive it in full. If the beneficiary is a trust, because the trust property is independent, it can perfectly solve the problem of losing the family.
Advantage 5: Insurance trust can maintain and increase its value.
If the beneficiary is paid directly to the beneficiary, the management risk of the beneficiary is relatively high. If it is a payment service of an insurance company, some companies have no interest on the unpaid insurance money, and some are calculated according to the one-year regular interest, which has a high risk of depreciation after a long time. However, the trustee of the insurance trust must properly manage the trust assets based on the fiduciary responsibility, and the domestic trustees are trust companies, which generally have strong asset management capabilities.
The advantages of insurance trust over simple trust
This does not mean that insurance trust can replace trust, and insurance trust is a kind of trust, and it accounts for a relatively small proportion of the entire trust asset scale.
Advantage 1: The threshold is relatively low, and the audience is wider than that of family trusts.
At present, there are two kinds of family trusts in China, one is a standardized family trust with a minimum of 3 million to 6 million, and the other is a private customized family trust of more than 30 million.
Insurance trusts are different, because there is often leverage between the premium and the insured amount, so as long as the insured amount can reach the threshold of the family trust, this reduces the threshold for the establishment of a family trust in disguise, and some are even as low as 1 million premiums.
Here's an example.
A 30-year-old woman who does not smoke buys a whole life insurance policy with an insurance amount of 5 million, and its premium may only be between 1 million and 2 million. In the future, if the establishment of a family trust based on term life insurance can be realized, the threshold will be lower.
For another example, if a 30-year-old non-smoking woman buys a 30-year insurance policy with an insurance amount of 5 million, the premium may only need to be about 10,000 yuan per year, or even lower.
Advantage 2: Leverage and income lock-in (not available in simple trusts).
The core connotation of life insurance is leverage, which can obtain a higher insurance amount by paying lower premiums, so as to achieve risk transfer, which is an important tool for risk management in wealth management.
Life insurance trust also has the function of income locking, taking the current domestic common whole life annuity insurance as an example, the current predetermined interest rate is generally 3-4%, once the contract is signed, the income will be locked until the insured for life.
In a simple trust, although the trustee can maintain and increase the value of the trust assets through its asset management ability, there is a certain degree of uncertainty, which may have a high return, may be very low, or even a loss.
In recent years, the number of high-net-worth individuals in China has risen rapidly. The common appeal of many high-net-worth individuals is to ensure that the funds are transmitted in complete order to the greatest extent and provide worry-free protection for the lives of future generations.
On the one hand, there is a rigid demand for greater financial insurance and financial transmission, and on the other hand, there is a relative shortage of alternative products, and the imbalance and insufficiency between demand and supply have prompted the integration of protection, stable and long-term wealth management, and the insurance trust in line with the spirit of supervision or will rise again.
The eight functions of insurance money
Insurance trust is a combination of insurance and trust, with the dual advantages of insurance and family trust, and perfectly meets the management and arrangement of family wealth protection for high-net-worth customers before and after their death.
Under the holding of such trusts, the wealth will be remitted in a planned way, and the planned ceding out will be carried out, and the asset inheritance planning of high-net-worth customers will be improved in an all-round way, which is very powerful.
Now, let's analyze and understand the functions of insurance trusts by citing a number of cases.
1. Risk isolation between the enterprise and the family
The inseparability between family wealth and business assets is a potential risk for most entrepreneurs.
The consequence of the inseparability between family and enterprise is that if an entrepreneur is judged to be jointly and severally liable for the debts of the enterprise, everything he has worked hard will be burned to the ground, and his family will even be implicated.
In order to avoid this risk, many high-net-worth individuals will choose to set up an insurance trust.
For example, under the insurance trust, Mr. X gave the funds to the trust company, and then asked the trust company to take out the insurance.
At this time, the trust property is independent and as long as Mr. X is not the sole beneficiary of the trust, Mr. X's creditors will not be able to pay the benefits of the policy.
However, if the insurance payment is directly transferred to the trust account after the insurance payment is paid, the creditor still cannot ask the court to enforce it.
2. Prevent the risks posed by marriage change
Nowadays, the divorce rate in Chinese society is rising rapidly, and according to the latest data, the national divorce rate in 2022 is 4353 per cent, with an average of one out of every two married couples getting divorced.
At the same time, with the breakdown of marriage, most of the property division, no matter how much net worth assets are divorced twice, it will also reduce the wealth level by several levels, and the speed of wealth loss is frightening.
However, the risk of divorce property division is not uncontrollable, for example, Mr. S can use the insurance trust to provide conditional barriers and arrangements for the marriage risk of the young daughter.
The establishment of a trust for premarital deposits does not require the signing of a prenuptial property agreement with the little girl's boyfriend, and it also does not require the little girl's boyfriend to know that after the establishment of the trust, the assets do not belong to the joint property of the little girl, nor do they belong to the little girl's personal property before or after marriage, which has a considerable degree of confidentiality and effectively avoids hurting the feelings of the husband and wife.
During the period of marital harmony, the income distributed by the trust can ensure the daily needs of the children and their spouses, and in the event of a marriage change, the trust property is an independent property and will never be divided as the joint property of the husband and wife.
3. Quality wealth management and planning
Choosing to set up an insurance trust can not only achieve the purpose of effective wealth inheritance, but also use the professional capabilities of the trust company to ensure the security and appreciation of your wealth.
Mr. T's use of an insurance trust to plan for retirement is the most suitable choice.
First, Mr. T can maintain and increase the value of his wealth by putting his wealth into the trust account.
Second, the insurance claim funds will also receive professional asset management services from the trust company.
The trust company will distribute the agreed amount of funds to Mr. T's family every month, so as to provide a guaranteed and high-quality life for his children.
At the same time, Mr. T is also able to select a supervisor to effectively manage and strictly supervise the use and arrangement of the trust property.
Fourth, the use of insurance leverage to achieve wealth inheritance
Insurance trust has the dual advantages of policy and trust, and helps your family realize wealth inheritance planning by virtue of the insurance leverage function.
The threshold of family trust is relatively high, generally more than 30 million, but the insurance trust perfectly lowers the threshold of the trust by virtue of its insurance leverage or regular payment method, and reduces the financial pressure when the purpose of asset inheritance is achieved.
Through the merit-based selection of the trust institution, Mr. H entered into an insurance trust with the function of a family trust.
Mr. H only needs to pay 300,000 yuan per year for 10 years, and he can get a death insurance with an insurance amount of more than 8 million yuan, and if the risk arises, the 8 million compensation will be immediately attributed to the family trust and managed according to his previous agreement.
With the high leverage of insurance, Mr. H only used a relatively small premium to obtain a very high sum insured, which optimally protected the future life of his relatives.
5. Inspire future generations to work hard
All successful individuals or high-net-worth clients aspire to their offspring not to lose a motivated heart because of the huge wealth they have left behind, but unfortunately, the pressure and motivation are often the same.
The main reason why Mr. F's son is reluctant to continue his studies is that he already knows in advance that he can live well enough without studying and working, so he has lost the pressure of life.
In fact, in this case, Mr. F may choose to set up an insurance trust to motivate his children.
Mr. F should stipulate in the trust agreement that he will pay his son basic living expenses every month, and that he will receive scholarships of varying amounts when he is admitted to high school, university, and graduate school, and that his son will also receive similar scholarships if he excels in school.
When the child steps into the society, if he needs to start a business, he can immediately get a start-up** and other similar bonuses.
Establish an insurance trust to set the conditions for children to get bonuses (university entrance examination, graduate school, entrepreneurship, etc.), so as to motivate children to continue to climb the peak of life and continue to work hard.
6. Efficiently protect the property of minor descendants
But now, Mr. Z's own early life experience makes it difficult for him to trust others and do it himself, no matter what.
During an expedition to the mountains, Mr. Z unfortunately encountered a landslide and passed away. But he left behind a huge inheritance with his wife and young son.
Mr. Z has a younger brother who has seen Mrs. Z go out on blind dates many times during her new widowhood, and he can't help but be very worried about his son.
Since Mr. Z did not make any prior arrangement, he could only inherit the wealth by legal inheritance, i.e. after deducting the share of the joint property between Mr. Z and his wife, the wife and son would divide it equally.
Unfortunately, Mr. Z's son is too young, and his wife is still in charge of this part of the estate. If the wife remarries, the security of the son's property will not be guaranteed.
Nowadays, high-net-worth clients similar to Mr. Z in society are advised to set up an insurance trust in advance before their death, put their wealth into the trust assets, use the trust company to take care of them, and protect the daily life and business needs of Mr. Z and his family in accordance with the trust agreement.
After the death of Mr. Z, an additional insurance benefit will flow into the trust, and the son and his wife will not interfere with each other's shares, and the son's income will be managed and protected by the trust company.
Only a fixed living allowance will be distributed to the guardian before the son is a minor, and the funds will be directly distributed to the son one by one according to the provisions of the trust agreement when the son becomes an adult, so as to ensure the property security and future life of the minor child.
Seventh, the perfect succession from generation to generation
The insurance trust can avoid the improper management or profligacy of the beneficiary after obtaining a large amount of funds at one time, and only provide long-term living protection for the basic life of the beneficiary.
At the same time, it can also set distribution conditions and reward the beneficiaries for positive behaviors in a specific period, such as studying abroad, getting married, starting a business and other similar events.
Because Mr. Q was busy with his career all the year round and neglected his son's education, he had no choice but to pin the future and hope of the family wealth on his grandson, hoping that the future of the grandson could inherit the fine lineage of the family under his care.
Therefore, Mr. Q should discipline and motivate his grandson by entering into an insurance trust.
At the same time, Mr. Q should make his son one of the beneficiaries of the trust, but only prepare regular living expenses for him, so that his son can have a worry-free life without food and clothing, but he should not spend too much.
8. Guarantee the management and inheritance of complex family wealth
Mr. D's family is an international family. When Mr. D was young, he went out to study and fell in love with Mary, an energetic American girl, and they never had children after marriage, so they adopted a daughter.
A year later, Mr. D and his wife broke down and divorced, and later married their business partner, Ms. L. Ms. L has also recently been divorced and has a son. The two married and had a son.
At present, the high divorce rate in society has also invisibly contributed to the increase in the proportion of remarried families.
Some of our clients have very complex family members, such as Mr. D, whose family consists of foreigners, stepchildren, and adopted children.
With such a complex family composition, Mr. D's inheritance becomes a complex legal issue, and if there is a dispute over the distribution of property, it will usher in protracted litigation.
In the case of an insurance trust, Mr. D's wealth will be managed and arranged by the trust company, and the amount he wishes to give to each child will be distributed directly to the beneficiaries in the form of trust income under specific conditions.
Due to the different times when each beneficiary triggers the distribution of the trust in the insurance trust, the amount of funds obtained by each person after the distribution condition is triggered is not known, which reduces the probability of contradictions between the beneficiaries.
In addition, the property that enters the trust becomes a trust asset and no longer belongs to Mr. D's estate, so the children no longer need to go through complicated inheritance procedures, which saves a lot of energy.
How to set up an insurance trust
The whole step is divided into two stages, the insurance establishment stage and the trust establishment stage.
The first stage is to establish the insurance phase.
The first is to establish insurance, secondly, the insurance company returns to pass, and finally the contract is formally established after the product hesitation period. The above three points are the most basic requirements for the establishment of an insurance trust.
The second stage is the establishment of the trust.
This stage consists of eight steps:
The first is to fill in the first draft of the customer's wishes and customer information;
After that, the change of preservation information is executed, and the beneficiary is the trust company;
The third is for the client to submit the relevant information for the establishment of the trust, including the identity documents of the parties, the relationship certificate, the beneficiary's preservation change approval;
Fourth, the trust establishment fee is paid after the trust is approved by the preliminary examination; Fifth, the trust company makes a trust contract;
The sixth is the signing and double recording of the trust, the trust settlor is the policyholder, and the insured and the supervisor need to participate;
the seventh is the establishment of a trust contract;
The eighth is that after the trust return visit and the delivery of the seal, the contract officially takes effect.
The most complex of the above eight steps is the completion of the letter of intent for the client's trust in the first step.
To briefly introduce the client's letter of intent to trust, it is usually a book of more than 20 pages of information, which will involve the content, including the basic information of the client, the purpose of establishing the insurance trust, the various fee arrangements of the trust, the investment direction and style of the trust assets, the arrangement of the trust beneficiary, the trust beneficiary under which conditions how much amount of trust benefits can be received, the beneficiary's benefit share, the order of benefit, etc.
To put it simply, the client needs to fill in the letter of intent to tell the trust company what kind of trust he wants to establish, how to build the structure of the trust, and how to distribute the benefits of the trust.
The future trust company is based on the letter of intent to design a trust contract exclusive to the needs of customers, when setting up an insurance trust, in addition to the policy, it will also involve some of the required information as follows:
First, a life insurance policy;
Second, the application form for change of preservation is required to change the beneficiary rights of the policy annuity and the beneficiary rights of the death benefit;
Third, the letter of intent of the insurance trust customer;
Fourth, the approval of the preservation modification;
Fifth, a copy of the front and back of the insured's ID card;
Sixth, copies of the front and back of the ID cards and account copies of all trust beneficiaries;
7. Proof of the relationship between the beneficiary of the trust and the settlor, including household register, birth certificate, DNA, kinship identification, notarization relationship identification, etc.;
8. Proof of payment of trust establishment fee;
Ninth Insurance Trust Project Customer Information Collection Form.