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This article has originally been published in Funds People. Read the original article here (in Portuguese)

The most common use of Luxembourgish Unit Linked Life Insurance for Portuguese-resident High Net Worth Individuals (HNWIs) is that where an individual subscribes a single-premium whole-of-life or mixed-term contract which insures his/her own life and appoints certain beneficiaries to receive an indemnity from the insurer upon his/her death.

The solution has proven to be a very successful and versatile wealth planning tool which not only provides for many possibilities to organise a client’s succession, but offers asset protection and interesting tax advantages in case the client redeems part or all of the monies invested in the policy during his/her lifetime. The five main features are summarised below.

  1. Wealth Planning: Luxembourgish Unit Linked Life Insurance providers generally use an Open Architecture approach. Contracts can be tailored to appoint different banks and asset managers to the roles of custodian and investment manager. This makes it possible to design solutions based on the investment strategy which best fits the client’s objectives.
  2. Investment flexibility: The life insurance contract gives clients access to international investments and institutional asset classes in which he/she could not otherwise invest directly. Additionally, Luxembourgish rules regarding diversification requirements and eligible assets for investment in connection with life insurance contracts allow investment in non-traditional assets, such as private equity or alternative investments.
  3. Succession planning: A life insurance contract makes it easy to appoint beneficiaries and change them at any time via a simple request to the insurance company. It also ensures that beneficiaries have rapid access to liquidity after the insured’s death. Moreover, life insurance can be used as a tool to provide financial protection for persons who may be unable to properly manage the wealth upon the client’s death and/or to design a mechanism by which the wealth is gradually transferred to a given beneficiary.
  4. Asset protection: Life insurance contracts issued by Luxembourgish insurers are protected by a State-controlled and regulated scheme, commonly known as the “Triangle of Security”, that ensures the assets linked to the life insurance contracts are protected for the owners and beneficiaries should the custodian bank or the insurance company default.
  5. Tax advantages: Any income generated within the portfolio of assets linked to the life insurance contract is accumulated within it, without generating any taxable event for the Portuguese-resident policyholder. Only if the policyholder requests the insurance company to partially or fully surrender the contract and redeem all or part of the monies invested in the insurance policy, would the positive difference between the premium paid and the amount returned to him/her (reduced by 20% or 60% if the policy has been in force for at least five or eight years respectively) be subject to capital gains tax at 28%. Moreover, the payment of the life contract to the beneficiaries upon the death of the life assured is tax exempted in any case, even if the latter are not relatives to the policyholder and are therefore subject to 10% Stamp Duty on amounts inherited directly from the client.


In recent years, Luxembourgish Unit Linked Life Insurance has also proved to be a great wealth planning solution for foreigners arriving in Portugal under the Golden Visa and/or the Non Habitual Residents’ Regime. Unit Linked Life Insurance (sometimes referred to as Private Placement Life Insurance, Savings Insurance, or similar terms) is a well-established concept in most countries around the world and many governments even provide tax benefits for it as a way of encouraging long-term savings.

This international recognition of the solution provides many cross-border planning opportunities for families with members spread across two or more jurisdictions, as well as for clients who might change their residence at some point in the future. For example, a solution can be designed to be compliant and tax efficient for a Swedish couple currently living in Portugal but who might move back to Sweden at some point and also addressing the fact their child lives in France.

They would subscribe to a dual compliant solution designed to meet the requirements both of Portugal and Sweden so that they can freely change their residency at any time with their wealth structured in a way which is efficient in both countries, while they also ensure their wealth is transferred to their child upon their death in the most efficient manner under French rules.

A less common but equally interesting application of Luxembourgish Unit Linked Life Insurance is as a target-based tool to reward employees or Board members and foster their long-term loyalty. In this case, life insurance is used as a tool to remunerate employees or Board members if certain targets are reached or certain conditions are met before a certain date. Also used with sportspeople, the main advantage of this solution is that the obligation to pay is externalised with the insurer who makes sure committed monies are paid if the conditions are met. The payment to the employee /Board member/sportsperson is not subject to Portuguese Personal Income Tax until the conditions are met, if the recipient is Portuguese tax resident at that moment.
In sum, Luxembourgish Unit Linked Life Insurance is a versatile and simple tool that can address very diverse issues and provide numerous advantages through its many applications. 



By Pablo Pecina
Associate Director - Wealth Planning
Lombard International Assurance