*by Johannes Fiala, Lawyer (Munich), MBA Financial Services (Univ.Wales), MM (Univ.), Certified Financial and Investment Advisor (A.F.A.), EC Expert (C.I.F.E.), Banker (www.fiala.de)
Safeguard assets and values by spreading them abroad There are many reasons to consider life insurance from Liechtenstein. The best known are bankruptcy privilege and insurance secrecy. Remarkable options are also available for structuring the succession during one’s lifetime and upon death, known as estate planning. Last but not least, it is not the insurance company that manages the assets here, but the personal asset manager of the policy holder. Even real estate can be included here.
Preservation of value through protection against insolvency While insurance secrecy primarily serves the purpose of discretion, insolvency protection is intended to preserve the assets of a life insurance policy for the family and protect them from the covetousness of third parties. Both are also known in Switzerland. Whereas in Switzerland assets can be secured for the benefit of descendants and spouses, insurance law in Liechtenstein also permits beneficiaries to be non-marital partners.
Retirement provision for entrepreneurs In Liechtenstein and Switzerland, the protection of a retirement provision has a much higher weight than the interests of possible creditors. This is not only evident in the privileged treatment of private life insurance policies. Statutory and occupational pension provision on an annuity basis is also almost completely protected against insolvency and enforcement there. In Germany, courts have ruled that not only future pension rights can be attached.
Risk of occupational pension provision Recent rulings show that in the event of the insolvency of a company, the occupational pension provision (bAV) of the entrepreneur and his close relatives generally becomes worthless. However, these practical dangers are still being pushed aside by some consultants and almost all intermediaries in their own commission interests. In a nutshell, for the private sector, life insurance in Liechtenstein is at least as interesting as the partial relocation of a company to Switzerland.
Total loss-at home Just how topical the dangers to the entrepreneur’s old-age provision can be is shown by a look at the latest report of the Petitions Committee of the German Bundestag: an entrepreneur had become insolvent. His life insurance policy with pension commitment had been seized in full and without any insolvency protection. The responsible ministry knows this dilemma and wants to improve soon ? at a fairly low level.
Bankruptcy privilege as a design Therefore, there will continue to be customers with a high interest in insurance via foreign countries. If a German insolvency administrator appears in Liechtenstein, he has in principle no other options than any other creditor. The insurer will not provide him with any information, at most politely point out the insurance secrecy. It is crucial to implement the design in good time, as there are also so-called contestation periods abroad.
Signatures abroad The advertising of bankruptcy security is not desired in Germany. The bankruptcy privilege should not apply, for example, if German citizens with habitual residence in Germany choose foreign law as the contractual basis and if the contract is concluded at the same time with the involvement of a “German intermediary” (e.g. agent, broker, banker). (e.g. intermediary, broker, banker). If bankruptcy security is important to the insurance customer, he must go in person to purchase his policy locally, i.e. not sign on German soil. A professional advisor will not only have the necessary contacts abroad, but also financial and actuarial experts at his side, in order to be able to find sensible solutions for even complex structures.
Asset protection through domicile For optimal structuring, a “transfer” is made to an honorary professional abroad. In order to exclude any legal discussion about ?connecting factors in Germany? from the outset, the investor can be assisted in obtaining a domicile there. Such a domicile does not have to be maintained indefinitely, because according to European insurance contract law it is possible and thus harmless if the domicile is later transferred again. At the time of conclusion of the insurance contract, this foreign domicile must then be the habitual residence. This presupposes circumstances at that time which indicate that he does not only temporarily stay at this place and that the regular focus of the personal living conditions is located here.
Commission or fee-based advice: Both methods of remuneration are only uncritical if the foreign choice of law can be effectively agreed on the basis of domicile. A harmful intermediary can be said to exist not only if remuneration is paid to an intermediary, but also in the case of correspondence, telephone calls, other initiations by persons who otherwise also act as intermediaries for insurers ? the client can leave this to the lawyer he trusts to safeguard him, as he is not an intermediary.
Precautionary measures in estate planning: Also by way of anticipated succession or estate planning, such insurance wrappers are used to accumulate assets ‘outside the estate’. Also real estates can be packed economically into such an insurance coat, which the specialist calls also ?wrapping? In principle only securities can be put into a policy. The securities account can be located at a bank in Germany or abroad.
Real estate, occupied at home and/or abroad, can also be converted into securities. Traditionally, this is also readily implemented wherever the land transfer tax is high ? only shares change hands when they are sold. So the property was transferred once to, say, a foreign corporation ? the shares are held in custody by a trustee or they are then transferred to the policy.
When it comes to protecting one’s own assets, it is advisable to diversify ? not only in the sense of classical asset management, but also according to legal systems, in order to make the options there fruitful in a targeted manner. The solution does not always have to be domestic.
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About the author
Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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