family office

Insurance Solutions (USA)

International Insurance Solutions

Permanent life insurance, together with family trusts, constitutes an important tool for high net worth family’s wealth protection and estate and tax planning.

Today, with the globalization of wealth allocation, more and more members of high-net-worth families are becoming global in terms of residential status, leading to assets that are facing “transnational” tax and legal issues, especially complex assets – permanent life insurance. Clients often only refer to local sales advice when making purchase decisions, and thus lacking awareness and perspective of the complexity of “transnational” tax and legal obligations. In the context of global transparency driven by the Common Reporting Standards (CRS), the lack of professional advice on “transnational” risks will lead to serious legal and tax exposures.

Meritigroup’s globalized and integrated wealth solutions is vital to the successful implementation of clients’ wealth plan. We help our clients tailor their unique international solutions of life insurance and family trust, and continuous compliance monitoring will ensure the feasibility of their wealth plan. At the same time, we also provide third party review of existing life insurance and family trusts for our clients and families.

Typical Errors

1. Life insurance in China:
Client A: Mr. A’s family immigrated to Canada and deployed a large amount of whole life insurance in China before immigration, which was thought to be long-term and tax-free investment. However, after Meritigroup review, we concluded that the type of policy the client chose could not meet the requirements of the Canadian tax exemption policy. After immigration, the client not only needs to report foreign properties, but also to report the accrual income that may be taxed annually in Canada.

2. Life insurance in Hong Kong:
Client B: As a Canadian tax resident, Mr. B applied for whole life insurance in Hong Kong paid by parents in China. And he planned to transfer the policy to an existing offshore family trust. However, after Meritigroup review, we have determined that the order of his transfer-in policy may make his offshore trust be deemed Canadian trust for income tax purpose, therefore that the proceeds within the trust need to be taxed in Canada, and the type of policy transferred does not meet the Canadian tax exemption policy requirements.

3. Life insurance in USA:
Client C: As a Chinese tax resident, Mr. C settled the life insurance trust commonly used by US residents to hold his own universal life insurance in the USA, where the beneficiaries are his children in Canada. Meritigroup’s review have found that the improper settling of the life insurance trust may make the trust deemed Canadian trust, so the trust needs to file tax returns in Canada. And if the ongoing management of the US policy does not meet the requirements of the Canadian tax-exempt policy, the US policy may also be liable for Canadian taxes.

4. Life insurance in Canada:
Client D: After immigration to Canada, Mr. D’s wife and children become Canadian tax residents, and he continues as a non-tax resident of Canada, spending most of his time in China. As a life insured in Canada, Mr. D applied for a whole life insurance held by his wife. However, Meritigroup’s evaluation has identified structure may trigger Canadian tax liabilities for his wife down the road.

Our International Insurance Solutions
1. Comprehensively assess the current and future possible tax status of the client’s family members;
2. Choose the appropriate insured country – USA, Canada, Hong Kong China, and offshore territories;
3. Select the appropriate insurance products to ensure if they can meet the dynamic management of international taxation;
4. Choose the appropriate policy holder – individual, corporation, family trust;
5. Continue to manage the policy’s premium, fund value, death benefit, and holding structure to achieve optimal control of tax and cost.