This briefing is designed for financial advisers only and should not be distributed to or relied upon by individual investors.
Brendan Harper
Head of Asia and HNW Technical Services
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In our Technical Spotlight section, Stephen Atkinson examined the growing private market asset investment sector and how international bonds, paired with private asset investments, could serve as complementary planning tools.
Selecting the optimal structure to hold private market assets is crucial for wealthy clients. This case study demonstrates how an international bond stands out as a potentially efficient solution.
A client, resident in Sweden, holds a large portfolio of listed securities and private market investments. These include private equity funds registered in the Cayman Islands with upcoming capital calls, hedge funds, and US property investment funds.
Each year, the client must report the income and gains accrued in these funds and pay tax at a flat rate of 30%. The Swedish Tax Authority frequently requests detailed information, often leading to discrepancies between the client’s tax return and the information the Authority receives via CRS, resulting in increased compliance costs.
Additionally, the client has been considering estate planning, aware of the complexities involved in distributing a multijurisdictional asset base, which could expose them to higher probate costs and possibly Estate Tax in the US.
To address these challenges, a private insurance policy from Utmost Wealth Solutions was implemented, designed to comply with Swedish tax and regulatory requirements. The client’s portfolio was consolidated into this policy, with private equity capital calls covered by a liquidity portfolio within the same policy.
This approach balanced the overall risk and changed the tax basis, allowing the client to pay an annual yield tax of 0.888% of the policy value each year. The Swedish Tax Authority can easily reconcile the policy value and transactions with the CRS report made by the insurance company.
Additionally, the client nominated beneficiaries to receive the policy death benefits, bypassing the need for probate in multiple jurisdictions.
The client benefited from enhanced tax efficiency, reduced administrative costs, and simplified estate planning.