The Client
Mr and Mrs Janssens are a middle-aged couple living in Belgium. They have three children, who also reside in Belgium. The couple want to invest approximately €4 million into a discretionary managed investment portfolio. They want this investment to be linked to their inheritance planning.
Client Requirements
- Structure their wealth in an efficient and compliant solution in Belgium, and potentially for other countries if a family member relocates in the future.
- Retain €1 million in their own name and gift €1 million to each of their three children.
- Maintain a certain degree of control over the assets.
- Invest their family assets into a common investment strategy after the gift.
The Solution
Subscription of Four Insurance Contracts
The Janssens subscribe to four insurance contracts, each underpinned by a ‘Family Shared Dedicated Investment Fund’ that encompasses the entire family’s assets.
Step-by-Step Process
Step 1: Subscription and Gift
- Mr. and Mrs. Janssens subscribe to an insurance contract worth €1 million.
- They gift €1 million to each of their three children, with specific conditions attached.
- The conditions are detailed in the gift act (notary deed or private gift act), including:
- Conventional return of assets if a child predeceases the parents.
- (Optional) annual rent to be paid by the children to the parents.
- Prohibition on bringing the assets into a matrimonial community.
Step 2: Insurance Contracts for Children
- Each child subscribes to an insurance contract with a premium of €1 million (subject to a 2% subscription tax if the child is a Belgian tax resident).
- The parents are named as accepting (irrevocable) beneficiaries of the children’s insurance contracts.
- Policyholders need the agreement of the accepting beneficiaries (parents) to execute rights in the insurance contract.
Step 3: Creation of the Fund
- Creation of a ‘Family Shared Dedicated Investment Fund’ as the underlying asset of the four insurance contracts.
- Total NAV of €4 million, representing the total assets of the family.
The Benefits
- Tax Efficiency: The insurance contract is a compliant solution that creates a favourable tax situation from a Belgian direct tax perspective.
- Inheritance Planning: Allows for inheritance planning while preserving a degree of control over the given assets by the parents.
- Common Investment Strategy: The creation of the ‘Family Shared Dedicated Investment Fund’ linked to the four insurance contracts ensures that the entire family wealth is invested through a common strategy, managed by a discretionary fund manager nominated by the insurance company.