The Unit Linked goes one step further than life insurances instruments. It covers death, disability or retirement, but also allows the policyholder to choose in which stocks, bonds or mutual funds invest the product.
The Unit Linked combines the tax benefits of life insurance with the profitability and liquidity of an investment instrument, being advantageous too for inheritance and wealth tax planning.
Inheritance and Donations Tax
With regard to the Inheritance and Donation Tax, we can highlight the followings aspects:
- The policyholder can separate the family assets from the investment. In this sense, the policyholder is allowed to benefit anyone, whether legal heir or not (always safeguarding the rights of the legitimate ones). Since the investment is not part of the inheritance, it is not included in any Public Registries, giving this product a high degree of confidentiality.
- In cases where the policyholder is not the same as the beneficiary, the insurance is not subject to the Personal Income Tax, but to the Inheritance and Donations Tax, which allows to take advantage of the beneficial tax regime of some autonomous regions, giving the users of this product a wide range of tax strategy opportunities.
In this regard, it is important to remember that the beneficiaries can be changed without going to a public notary, which facilitates the tax planning of the inheritance.
Personal Income Tax
As a life insurance as it is, it can defer the taxation of the capital gains generated through market instruments until the maturity or the redemption of the insurance. The tax base will be the difference between the benefit or rescue and the premiums paid.
The beneficiary will be subject to Wealth Tax only for the redemption value at December 31st (except in case of irrevocable beneficiary designation).
Finally, this instrument enables to switch the applicable legislation by changing the residence of the policyholder. This way it makes it possible for entrepreneurs, athletes or multinational executives to enjoy the benefits of this insurance in each country.