Creating five living legacies 

Issue 4, October 2024 I PCS Vision

For a number of our high net worth (HNW) clients, their commercial success runs secondary to their greatest legacy – safeguarding their family’s future. We help this client cement her legacy across three generations. Read on to find out how. 

PCS by Mercer client is a director in a successful pharmaceutical business. She is a widow; her husband passed away two years ago, and she has inherited a significant sum from her husband’s estate. 

In her mid-seventies and enjoying good health, our client has five adult children who are all married, as well as seven grandchildren. She and her adult children work in the business she founded with her husband. 

We recently organized an insurance coverage review with our client, including assessing the legacies policies held by her adult children. 

In the legacy policy coverage review, the client and PCS by Mercer jointly determined that all the adult children are sufficiently insured. However, the benefits from those policies would only apply to the grandchildren. The client therefore expressed her wish to take care of both generations. 

She would like to gift her children with a tool that can help to generate income as well as act as a generational legacy.  

Following some in-depth conversations with the client, during which we explored her objectives for investing in life protection solutions, we presented two options as “living plan solutions” – a savings plan solution^ and a universal life solution.  

The client decided to take up five savings plans (one for each of her adult children), because the solution serves three critical functions. Firstly, as a substantial legacy. Secondly, savings plans create a steady income stream for each child, one that has compounding value capabilities. And finally, it’s a legacy that can be easily transferred by her adult children to the grandchildren if the giftees choose to do so. 

Premium: USD 1 million for each of the five policies. Even though multi-pay arrangements are an option, our client paid the entire USD 5 million for the five polices at inception. A single payment means, if required, beneficiaries can enjoy higher accumulation value when the income withdrawal period begins. (Year six onwards in this specific instance)

• Multi-pay arrangements present liquidity management options for HNW families, but single prepayments can be made to maximize value accumulation.
  
  
• A key reason for policy reviews is to explore a client’s objective(s) in having coverage, which can change. Circumstances and resource availability can also change over time, and yearly reviews help HNW clients find the most appropriate life protections for their changing circumstances. 
  
  
• Savings plans maximize steady returns over the long term. They are an increasingly popular tool for high-net-worth wealth management/transfer. 
  
  
• Savings plans can be incepted without medical checks and the insured can be transferred as needed. 

 

* 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.