We have previously discussed "entrusted holding" as a method to protect assets. Although entrusted holding is low-cost and simple to operate, the risk lies in the integrity and death risk of the entrusted holder, and it may violate the law. In fact, there are other ways to protect assets. This article will explore another more common method - life insurance.
Basic functions of life insurance
Life insurance is a great wealth inheritance tool. When the insured dies, the benefits will be paid directly to the beneficiaries, usually without going through probate proceedings. However, until the policyholder dies, the assets in the policy still belong to the policyholder's name. If a policyholder goes bankrupt due to debt, will his life insurance policy be confiscated to pay off the debt?
legal protection
According to Article 13 of the Married Persons Status Ordinance, Chapter 182 of the Laws of Hong Kong, for all life insurance policies and endowment life insurance policies, if the beneficiary is the spouse or child of the insured person, the policy will constitute a trust for the beneficiary. As long as the trust remains outstanding, policy payments will not form part of the insured's estate or become subject to his debts.
Key points
- policy type
Although the law clearly specifies "life insurance policies" and "savings life insurance", there are also some investment-linked life insurance commonly known as "fund policies" on the market, as well as critical illness and accident insurance that contain life insurance components. As long as these policies contain a life insurance component, even if the proportion is small (such as the death benefit of 101%), the law theoretically applies. However, pure medical and pure accident policies are not covered by the law.
- The relationship between the beneficiary and the insured
The law requires that the beneficiary must be the spouse or child of the insured person, not the spouse or child of the policy owner. Other relatives such as parents, brothers and sisters are not covered by the protection. Children born out of wedlock or legally adopted children are covered.
Case
For example, Mr. A insures himself and his son is the beneficiary. Since both the policy holder and the insured are Mr. A, and the beneficiaries are his children, if Mr. A goes bankrupt, the policy will not be confiscated. However, if the beneficiary is Mr. A’s father, since the two are not spouses or children, the policy value may be used to pay off the debt. In 2006, there was a case in Hong Kong. After a woman was issued a bankruptcy order, the beneficiary of one of the insurance policies was her father. In the end, the Official Receiver's Office terminated the policy in accordance with the law.
Another situation is that Mr. A insures his father, Mr. A is the policy holder, the insured is his father, and the beneficiary is Mr. A’s brother. Since the law is based on the relationship between the insured and the beneficiary, Mr. A’s father and brother are in a father-son relationship, so the policy will not be confiscated.
in conclusion
If you want to use a policy to protect assets, the type of policy and the relationship between the insured and the beneficiary are very important factors. Choosing the right policy type and ensuring the legal relationship between the beneficiary and insured can effectively protect assets from forfeiture.
Disclaimer: The content of this article is for reference only and does not constitute investment advice or an invitation, solicitation or recommendation for any investment product. Readers are advised to make their own judgment and seek professional advice.
The content of this article is purely the author's personal opinion and does not represent the position of 852FIN.
852FIN reminds readers that the content contained in this article mainly comes from online public information and does not constitute any professional advice. Readers should seek professional advice with specific questions regarding insurance and asset protection.
852FIN and the author of this article are not responsible for any loss or damage caused by the information contained or omitted in the article.
The content of this article is for reference only and does not constitute investment advice or an invitation, solicitation or recommendation for any investment product. Readers are advised to make their own judgment and seek professional advice.
Any information on the 852Fin platform ("852Fin Information"), including but not limited to product comparisons, product ratings, blog articles, etc., is for general education and reference purposes only and does not constitute or intend to constitute any regulated advice, trust, immigration , insurance, finance, investment or other professional advice, recommendation, approval, endorsement, invitation, sale of insurance, trust, immigration, financial or investment products.
852FIN reminds readers that the content contained in this article/video is mainly from public information online and does not constitute any professional advice. Readers should seek professional advice with specific questions about products or services.
852Fin Information does not consider your personal needs, and reading the relevant information should not be regarded as a personal suitability assessment, nor can it form the basis for any decision to purchase products/services.
852FIN and the author of the pen column are not responsible for any loss or damage caused by the information contained or omitted in the article.
Before purchasing any product or service, you should conduct your own research based on the information provided by the company that provides you with the product or service, and/or seek independent and professional advice from a licensed professional. 852Fin information is collected, verified, and updated from different channels with our best efforts. 852Fin and its related parties, agents, directors, officers, and employees will not be held liable for any claims or losses arising from the relevant information. 852Fin also does not guarantee or guarantee the accuracy, completeness and timeliness of the relevant information.
Discussion about this post