The tax burden of a family trust may also be affected by the different tax domiciles of family members, or it may also affect the structure of a family trust due to the laws of a family member's place of residence, or personal family issues (such as divorce, inheritance).
From the perspective of insurance trusts, which have the strongest tax raising function, insurance is not inherently able to avoid taxes. Insurance is applied to tax planning and is made possible by policy structuring. Because insurance can change the nature of the property, the owner. Depending on the nature and owner of the property, the obligation to pay taxes and the types of taxes will be different, resulting in room for planning. For example, United States has a gift tax, while China does not have a gift tax, which creates some room for planning.
At present, there is no room for planning for all dividends in China, and 20% of investment income needs to be taxed. Survival and death benefits are exempt from individual income tax according to the Individual Income Tax Law. The rights and taxes of the main beneficiary of the policy are shown in the table below.
If the cash value/universal account of the policyholder exceeds the principal and receives the income, he or she needs to pay individual income tax. The gift tax is paid by the original policyholder, and there is no gift tax in China, but there is one in the United States. Whoever gets the inheritance tax pays it. For the insured, if the policyholder and the insured are not the same, it will be calculated as a gift (in the United States, the gift tax is paid by the original policyholder, and there is no gift tax in China), if you want to carry out tax planning, you can modify the policyholder. If the policyholder and the insured are the same, income tax (capital gains tax in some countries) will be incurred. For the deceased beneficiary, it will be regarded as an inheritance or income according to whether the policyholder and the insured are the same, and the corresponding taxes and fees will be paid.
Next, we will introduce several cases to introduce how to carry out cross-border tax planning through insurance trust for different demands when the client's identity is overseas and the assets are in China.
1. Overseas identity and domestic assets
At this time, you can choose to use annuity insurance or whole life insurance to plan. A person with overseas status is the policyholder, holds the domestic assets with the domestic policy, and realizes tax planning by being the policyholder and the insured himself.
For foreign assets, this structure is most convenient to use in countries where there is no inheritance tax, such as Canada – the policyholder and the insured are the same person, the deceased beneficiary is a child with foreign status, and once the policyholder/insured person dies, the assets will be distributed directly to the child with foreign status.
In countries with inheritance tax, such as the United States, it is necessary for the policyholder and the insured to be different, purchase whole life insurance, not only the payment amount is free, but also because other estates in the inheritance process are frozen first, after paying taxes can be inherited, the amount of whole life insurance can be used to pay the inheritance tax of other estates.
In addition, for our policyholders, if you need to use money, it is recommended not to choose to reduce the amount, because the interest rate is often higher after the annuity compound interest is rolled, and it is more cost-effective to choose policy borrowing, policy borrowing can be up to 80% of the cash value of the policy, and the interest rate is often lower than 5%, and borrowing is not used as income, and there is no tax, which reduces the cost again.
2. Some overseas identities and domestic assets
1. Assignment before death
Tax planning through whole life insurance: the mother with domestic status is the policyholder, and the children with overseas status are the insured and beneficiaries, and there is no gift tax in China, and there is no inheritance tax at present.
Tax planning through annuity insurance: pay 3 million yuan of premiums per year for 10 years, and the total premiums are 30 million yuan.
The mother with domestic status is the policyholder, and the children with foreign status are the insured and the beneficiary of death. The annual proceeds are gifted to children with foreign status, exempt from personal income tax (capital gains tax in some countries).
2. Posthumous inheritance
In the case that the customer does not have grandchildren, the policyholder and the insured can only be selected, at this time, once the policyholder/insured dies, his assets will be regarded as an inheritance, and if the assets are directly handed over to the children with foreign status, then inheritance tax needs to be paid. The correct way is to transfer the assets to an insurance trust, and then distribute them to children with foreign status, so as to avoid inheritance tax on this part of the property through form transfer.
To sum up, the policy structure is planned through the following three ways: taxpayers, tax scope, tax types, and tax exemption amounts:
· Late tax payment. Consider making a fuss about the timing of receiving and doing tax deferrals through annuity/universal accounts.
Pay less taxes ·. Considering the form of circulation, with the help of the preferential terms of no inheritance tax for insurance trusts.
No taxes are paid ·. With the help of the income tax exemption clause of the tax policy, the death benefit can be exempted from the corresponding taxes.
In practice, the rational use of various tools for tax planning also requires the assistance of professional institutions and tailor-made. Finding a trusted professional body and professional is essential for the financial optimization of high-net-worth individuals.
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