Stable generational wealth transfer 

Issue 3, July 2024 I PCS Vision

We help this successful family safeguard their wealth from volatile market forces using savings plans. Read on to find out how.*^

PCS by Mercer client is a business owner in her seventies. In good health, she retired from the daily operations of the very successful business more than ten years ago. The business is now jointly managed by her two children, who also help to manage the family wealth and assets. 

The adult children are married and have six children between them. 

Ever the visionary, our client is looking to build the type of foundational stability that will enable her family to continue prospering into the third generation and beyond. 

For the core of the family’s wealth management strategy, she specifically wants to incorporate investment tools that offer stable returns; tool that are not correlated to market forces nor macroeconomic volatility. Our client therefore is keen to explore savings plans for the solution’s diverse wealth accumulation and transfer benefits. 

The client has also recently established a family trust via her private bank for the purposes of succession planning that includes the second and third generations.

After thoroughly understanding our client’s needs, we presented her with the following solution, which segregates USD 1.2M/year from her exiting investment portfolio: 

• Six savings plans – one for each of her grandchildren.
• The savings plans are owned by the family trust to facilitate future wealth management.

Premium: USD 1M for each policy via multi-pay over five years (USD 200,000 per policy x 6 policies totaling USD 1.2M/year for five years). 

• Savings plans are highly flexible and maximize steady returns over the long term. They are an increasingly popular tool for high net worth (HNW) wealth management/transfer. Earlier in this PCS Vision, Davin Wong offers some insights on the utility and benefits of savings plans.
• The current high interest environment maximizes the cash-value accumulation of savings plan policies. 
• Multi-pay arrangements allow HNW families to better manage cash flow. Insurers will pay out death benefits in full if premium payments are up to date – even if the full premium has not yet been paid. That said, it's important to note that in order to enjoy this benefit, the client would need to elect the appropriate rider, and nominal costs may apply.

* This case study is based on a real-life family. Some details have been changed to preserve privacy. 

^Savings plans can be known as income plans in some jurisdictions. The terms are used interchangeably by PCS by Mercer for the same category of life protection solutions.