Event Recap

At this seminar, our trust and financial advisors explained how to integrate insurance and trust structures to identify potential risks in using insurance as a wealth transfer tool — and how to address them through strategic planning.

Insurance remains one of the most common wealth transfer tools in Taiwan. It provides quick payouts, allows designation of beneficiaries, and helps cover immediate liquidity needs such as end-of-life expenses, estate taxes, or outstanding loans.

However, when viewed within a comprehensive succession framework, insurance alone is not a complete solution. Significant gaps remain in taxation, creditor protection, and cross-border compliance — all of which require structural design to resolve.

By combining insurance with a trust structure, policy proceeds can be distributed conditionally, periodically, or at specific times in accordance with the policyholder’s intent. This ensures the funds reach the intended family members while reducing exposure to beneficiary debts, legal disputes, or asset risks.

‍

Insights from Singapore Financial Advisor Jolene

Jolene shared the unique advantages of Universal Life (UL) insurance and clarified two commonly misunderstood financial concepts — Policy Loans and Premium Financing — which, while often confused, are fundamentally different.

- Policy Loan:

A policy loan is a loan from the insurance company, using the policy’s cash value as collateral. Interest accrues as agreed and, if unpaid, is deducted from the surrender value or death benefit. This method is simple and suitable for short-term liquidity, but if left unpaid for too long, compounding interest may erode the policy’s value or even cause it to lapse.

- Premium Financing:

In contrast, premium financing involves borrowing from a bank or financial institution to pay high-value premiums. The policy is typically pledged as collateral, sometimes along with additional assets. Most loans are interest-only, with the principal repaid later through cash flow, asset liquidation, partial policy surrender, or the final death benefit.

‍

Why High-Net-Worth Families Favor Premium Financing

In recent years, premium financing has become increasingly popular among high-net-worth individuals due to three key advantages — efficiency, leverage, and governance.

1. Capital Efficiency:

By using external financing to pay premiums, personal capital can remain invested in higher-return, more liquid assets such as core businesses, private equity, or real estate.

2. Leverage Effect:

Life insurance inherently carries time value through long-term cash flows and death benefits. Leveraging financing allows policyholders to achieve greater coverage and liquidity with less personal capital — for example, preparing funds for future estate taxes, structuring unequal but controlled distributions, or integrating with family holdings, ESOPs, or charitable trusts to build a long-term “cash engine.”

3. Governance Impact:

Premium-financed policies are often held within trusts, embedding rules for beneficiary conditions, payout schedules, collateral management, and refinancing. This allows financial flows to align with family governance structures, ensuring flexibility and oversight.

‍