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How HNW families successfully transfer their wealth

Tuesday, October 05, 2021

Written By

How HNW families successfully transfer their wealth Rupert Searle
How HNW families successfully transfer their wealth

Life insurance | Succession | Intergenerational Wealth Transfer

Inter-generational wealth transfer can be challenging on its own, and being a global citizen only adds to the complexity.

Research shows that senior members of HNW families have concerns around delegating the management of their businesses and investments, as well as the next generation’s ability to manage these family assets.

Wealth over $15 trillion is estimated to be transferred to the next generation by 2030. This poses a very important question to HNW individuals like yourself…

Have you secured your financial house for the generations to come?

 

Many families in the region are generally underprepared when it comes to succession planning, with merely 25% of wealthy family businesses having any kind of wealth transfer strategy in place.

The financial consequences of not having a plan in place can be devastating to not only you, but your loved ones.

So how can you best build a plan that ensures financial security and longevity of wealth?

Like building anything, you begin with a solid foundation. And when it comes to preserving wealth and protecting legacy, there is no stronger foundation than life insurance.

Consider this common recipe for a family feud, seven members inherit an equal share of a business, but four want to sell, and the other three wishes to retain ownership. Life insurance allows the three family members with an interest in maintaining the business to inherit the asset, while the other four members are provided with an equivalent cash value from the universal life insurance policy.

If this isn’t reason enough, here are five more reasons why you need a life insurance policy…

  1. It simplifies succession planning
    According financial analyst and writer, Mark P. Cussen, it should be standard practice for all parties involved in the succession to take out life insurance policies. It’s a crucial component of the plan that is usually overlooked, and barely spoken about by advisers. In the event of one of the parties passing away prior to its completion, life insurance would be the only thing standing between them and the dissolution of the deal.
  2. Payouts can fund succession procedures
    To avoid falling into a financial pitfall, you must ensure the finances used in any buy-sell agreement is protected by a layer of insurance, preferably life insurance. The benefit of having something like this set in place is that if one of the key parties passes prior to the completion of the plan, insurance payouts can continue the execution of the plan.
  3. It assists in proper allocation of funds
    Proper allocation of funds is critical to successful wealth transfers. If either the buyer or seller lack life insurance, the deal is set on a less secure footing. This put you at a higher risk of losing your assets and funds.
  4. Life insurance plans are variable
    The type of life insurance policy you choose can make a world of a difference to your succession planning process. Each of them have their own benefits and drawbacks. Therefore, having an adviser that truly listens to your goals and needs is critical to the success of your plan.
  5. Business funding for the future
    It's never too late to think about having life insurance cover. These policies can help mitigate much of the financial stress surrounding securing fundings, succession planning and passing down businesses to heirs.​​​​​​​​​​​​​​

    It's never too late to think about having life insurance cover. These policies can help mitigate much of the financial stress surrounding securing fundings, succession planning and passing down businesses to heirs.​​​​​​​

 


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