Life insurance policies take many forms and it is popular for clients to build up a life insurance portfolio containing a variety of policies acquired throughout their lifetime.
For long-term UK residents, Inheritance Tax [IHT] applies to assets remaining at the demise of the second spouse over the Nil Rate Band of £325k per person. To plan to pay an expected IHT liability, a life insurance policy offers a transparent and robust financial planning solution that pays within the 6-month HMRC timeline.
For American clients or those with US financial connections, we source the optimum policy design from either the US or UK depending on each client’s circumstances.
An independent view of the American life insurance market is largely difficult to reach for UK-based clients. We are the only London practice with the active licences, carrier relationships and deep life insurance experience to open that door and we have been doing so for over two decades. The US market allows us to access far higher amounts of cover than is ordinarily available in the UK as well as offering a range of features that improve suitability for our US UK clients.
Our exclusive relationship from the UK with our US-based partner, M Financial, provides access to highly rated, well established and securely capitalised US life insurance companies. M Financial’s founding partners created proprietary policies and terms with US carriers by demonstrating that an affluent lifestyle and access to both preventative and timely healthcare correlates to a longer life expectancy.
Vie International’s advisors have placed hundreds of high value life insurance policies. We most often find that the US market offers tangible pricing advantages compared to the UK domestic market and improved suitability for US-connected clients because of the legal, tax and structuring considerations and reporting and banking obligations.
Where life policies are placed from the US market, our clients see the creation of a separate asset class with intrinsic USD currency diversification and attractive IRRs from the permanent (whole of) life policies.
Policies from US life insurance carriers offer many options and our financial advisors take time and care to ensure that policy design accurately matches clients’ circumstances. UK policies may be more streamlined, often with fewer optional extras and issued at lower face amounts. Here are some of the flexible US features popular with our clients:
Ownership of a US life insurance policy provides complete portability regardless of residence and, when properly structured, the death benefit is free of both income tax and estate tax in the US and the UK.
Policy ownership is mostly within an insurance trust; this allows for the beneficiaries to receive the payout tax free. A specific US trust designed for life insurance ownership is called an Irrevocable Life Insurance Trust [ILIT].
We recommend that an ILIT written by a US-qualified lawyer is reviewed by a UK private client lawyer to ensure the trust is recognised as intended in the UK, too.
Due to the myriad of accounting, legal, reporting, banking and payout considerations, which require careful consideration both at the time the policy is taken out and if circumstances of any relevant party change during the policy duration, there are very few occasions when UK policies are the most suitable option for UK resident American clients.
For clients with excess earnings, we apply our US and UK knowledge to structure policy ownership and premium payments to maximise tax efficiency for gifting and IHT planning. When designed well, clients can benefit from 4 separate UK and US tax benefits.
Here is a glossary of life insurance policies:
Permanent life insurance – known as Whole of Life in the UK, this cover can be used for inheritance tax mitigation. A permanent life insurance portfolio can be accumulated as a separate asset class, yielding a guaranteed payout.
Variable life insurance – this type of life insurance contains an investment element and is usually most suitable for clients who plan to move from the UK. The US and UK tax the cash values differently: HMRC may tax the growth of the investment, whereas the IRS does not.
Private Placement Life Insurance – this type of life insurance contains an investment element and is most suitable for clients who plan to move from the UK or are living in the US and are looking for a protection policy with a tax-deferred investment portfolio.
Term insurance – this type of life insurance is the most cost effective as the risk is limited to a number of years, eg 10, 15, 20 or 30 years. Convertible term policies are attractive to our clients as the risk rating, upon which pricing is set, is determined at the time the term policy is acquired. Years in the future, clients can convert their term policy to a permanent solution that lasts a lifetime using their existing term policy’s risk rating. This is a valuable feature particularly for those whose health has suffered at a speed greater than someone of equivalent age.
Relevant Life – this type of life insurance is suitable for business owners or to provide executive benefits. The tax advantages for both the company and the employees are numerous, giving the surviving family a payout at their time of need.
At Vie International, we gather key information about your financial, lifestyle and family circumstances and send a summary to multiple insurers to source the optimum offer for your needs. Latest medical records and a comprehensive private insurance medical exam taken at a location of your convenience forms the key information upon which to determine the underwriting risk and cost of annual premiums.
The US life insurance industry is robust and longstanding. Each US state has its own insurance commissioner. Vie International and the insurance agent are state licensed.
Vie International is a fully authorised, regulated and licensed life insurance broker in both the UK and across over 30 states of America.
We know of no other UK company with such reach into the US life insurance market.
We invite you to consider life insurance to protect your family or your business with a tax-efficient planning solution that brings financial security, regardless of political or economic changes. Contact us to discuss your planning.
+44 (0) 203 457 1331
enquiry@vieinternational.com
Vie International Financial Services Ltd
118 Piccadilly
London W1J 7NM
Authorised and regulated by the Financial Conduct Authority
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Securities and investment advisory services offered through M Holdings Securities, Inc. a registered broker/dealer and investment advisor, member FINRA / SIPC in the US
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For important information related to M Securities, refer to the M Securitie's Client Relationship Summary (Form CRS) by nagivation to www.mfin.com/m-securities
Vie International is independently owned and operated