Sportsmen and the need for an all-round wealth planning.
Given the circumstances in which the Sportsmen find themselves and through which they suddenly start accumulating considerable wealth, Sportsmen require an appropriate wealth planning which should include different aspects: tax, financial, succession, asset protection, etc.
Main features of Sportsmen
When a wealth planner meets a new client, he knows that his role, approach, communication and expertise will be different, depending on the client’s situation and his legal and financial background.
If the client is a Sportsman, the situation becomes more complicated. Indeed the wealth planner will often meet young clients (often below the age of 20) with little or no legal and financial background who, from one day to another , manage large sums of money and - caught up in the enthusiasm and affected by the context in which they are (i.e. colleagues, social pressure etc) - they start leading a life with no limits to spending and without even taking into consideration that this success and these huge earnings will not last for ever, on the contrary.
Indeed, an average Sportsman’s career - and thus the major source of his income – comes to an end when he is between 35 and 40 years old. As a result, it is not unusual that a Sportsman close to retirement faces financial problems, or even bankruptcy.
Furthermore, Sportsmen very often change their tax residence from one Country to another for professional reasons.
The need for an all-round wealth planning
A wealth planner needs to consider all those circumstances when delivering his advice. Above all, he must try to make his clients understand that with a proper wealth planning starting at the beginning of their careers (or as early as possible) they could avoid finding themselves in unpleasant situations by the age of 40.
A flexible wealth planning should include financial, tax, inheritance and asset protection analysis (e.g. against creditors, etc.), i.e. 360-degree planning.
Based on the above, there are many vehicles and solutions which can indeed be tailored made to the circumstances we are dealing with , but one solution which is certainly one of the most interesting and effective is the Luxembourg unit-linked life insurance contract.
Here below we will analyse some of the main features of the Luxembourg unit-linked life insurance contract in order to better understanding the advantages of this solution.
Luxembourg unit-linked Luxembourg life Insurance contract: a flexible and "portable" solution"
A Luxembourg unit-linked life insurance contract could be subscribed by a Sportsman at the beginning of his career and then topped up with additional premiums in following years. Thus, creating a savings instrument which could be an additional source of income when necessary (i.e. accidents, economical issue etc).
Moreover, it would allow to invest in a varied and diversified financial portfolio (e.g. UCITS, ETFs, AIFs) and benefit from a tax deferral until the moment of a possible surrender.
The Luxembourg unit-linked life insurance contract, due to its main features and flexibility can easily be adapted (with the right precautions and on a case-by-case basis) to different legal and tax contexts. Indeed, it should be possible for a policyholder to continue benefit from the legal and tax advantages of the unit-linked life insurance contract if he would change his tax residence from a Country to another within the European Union.
Furthermore, a unit-linked life insurance contract does not normally fall within the scope of the Exit Tax, which has become increasingly internationally widespread in the recent years.
A unit-linked life insurance contract is also an effective succession planning tool which can be adapted to the particular needs of Sportsmen’s families, (with ad hoc beneficiary clauses) which often involve various family members living in different countries, and therefore subject to different inheritance laws.
For example, if a Sportsman were to die prematurely, the unit-linked life insurance contract would be liquidated in a short time frame (normally within 30 days). It would enable family members, who, had until then, been financially supported by the Sportsman, avoid finding themselves in an unpleasant situation while waiting for the completion of inheritance procedures, which are often particularly complex and can take quite a long time. Furthermore, in most European Countries, the unit-linked life insurance contract is not part of the estate's assets and therefore inheritance tax should not apply (an analyse on a case-by-case basis should be carried on).
Finally, a life insurance contract offers asset protection as it cannot be seized in most European countries. It therefore protects part of a professional athlete's assets against creditors.
In conclusion a Luxembourg unit-linked life insurance contract, in order to be an effective wealth planning tool, needs to be obviously appropriately structured and planned by experienced professionals. However, its flexibility and the features described above enable the unit-linked life insurance contract to provide significant advantages in the most diverse and complex situations, such as those faced by Sportsmen.
Depending on the country of residence, on which parts of the policy should a wealth transfer strategy be based?
A Luxembourg unit-linked life insurance policy is a tool that answers the needs of sportsmen. The Luxembourg life insurance contract is flexible, portable, adaptable both in terms of the beneficiary clauses, which can be changed over time, and in terms of the underlying assets.