By Cliff Oberlin, Chairman and CEO, Oberlin Wealth Management
Just about everyone, irrespective of wealth, is subject to taxes, and everyone will one day die. Notwithstanding the smartest legal maneuvering, many of the wealthiest families worldwide will either owe inheritance or estate taxes. To deal with these taxes, one of the most effective tools is life insurance.
According to Frank Seneco, President of Seneco and Associates, a leading life insurance specialist, “For very wealthy families, life insurance has two main advantages. One is the certainty of the death benefit. There is no question that at death there will be a specific amount of money available to the family to address taxes and other concerns. The other advantage is the cost-effectiveness of life insurance. When done well, life insurance for many very wealthy families is the best economical solution for these taxes.”
In working with extremely wealthy families the world over on addressing inheritance and estate taxes, a good place to start is by evaluating the quality and viability of their current life insurance.
“The complexity of the lives of the very wealthy often means that it’s smart to regularly gage if their existing life insurance effectively meets their needs,” says Rudi Eyl, President of Bremen Capital Group Family Office. “When we do this, we often find everything is good. However, when their life insurance portfolios are not made up of the best policies, adverse results can be very severe.”
At the same time, one of the bigger problems is being able to get enough life insurance coverage for extremely wealthy families. “Being familiar with the carriers and the reinsurers is often essential in order to obtain sufficient life insurance to cover their needs,” says Eyl. “A related consideration is where the life insurance is being written. For example, for some Latin Americans, it sometimes makes more sense to write the policies in the U.S. or in a location other than in their own country. This can affect not only how much life insurance we can get but also how it will be structured.”
Lastly, there are times when it is not possible to get the amount of coverage the family needs. In these scenarios creativity is essential. There are ways to increase the overall coverage for the family, but whatever course of action is taken must align with the overall needs, wants, and preferences of the family.