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Life insurance and skipping a generation

Skipping a generation means passing on an inheritance to the second generation. What is the point of skipping a generation under a life insurance policy and how does it work?

life insurance and skipping a generation-1-mobile
life insurance and skipping a generation-1-tablet
life insurance and skipping a generation-1

His wish

  • To bequeath part of this cash directly to his 9-year-old grandson
  • That his grandson may not dispose of these inherited assets until he is 25 years old 

Solution

Takes out a life insurance policy drafted to include a specific beneficiary clause with one certain condition, namely:

A beneficiary clause with the obligation to reinvest the death benefits in a life insurance policy and a temporary inalienability clause under which surrenders are blocked until the subscriber's 25th birthday).

life insurance and skipping a generation-2-mobile
life insurance and skipping a generation-2-tablet
life insurance and skipping a generation-2

On the death of the insured

life insurance and skipping a generation-3-mobile
life insurance and skipping a generation-3-tablet
life insurance and skipping a generation-3

Profits from the policy are reinvested in a new insurance policy for which the policyholder/insured is the grandson. 
Beneficiaries must be the legal heirs.

On the grandson’s 25th birthday

life insurance and skipping a generation-4-mobile
life insurance and skipping a generation-4-tablet
life insurance and skipping a generation-4

Advantages

Key points

  • Direct transfer to the grandchildren, avoiding the inheritance being taxed twice (in cases where the intervening generation is not short of cash).
  • Enables the balancing out of intergenerational transfers.
  • During the lifetime of the grandparents, they retain control of the assets -> with the right to make partial surrenders of the policy.
  • It is not possible for a minor to take out a life insurance policy in every European country. It is possible in France but not in Italy. Please consult a trusted advisor in order to adapt the beneficiary clause in line with what is possible under local law.
  • The rights of the person entitled to the reserved portion of the estate must be respected, and this may vary depending on the policyholder's country of residence.
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