What is behind the success of Luxembourg life insurance?

Luxembourg life insurance has become highly popular among international investors. Its reputation extends far beyond the borders of the Grand Duchy.

In 2025, a record year, gross inflows into Luxembourg life insurance policies reached €35.1 billion, compared with approximately €29 billion in 2024.

Growth was driven primarily by France, with €16.4 billion (+20.3% compared with 2024), Italy with €3 billion (-28.8%), Belgium with €2.3 billion (+10.5%), Germany with €2.32 billion (+17.2%), Luxembourg with €1.98 billion (+16.47%) and, finally, Portugal with €0.8 billion (+27.5%).

This success has traditionally been based on several specific advantages:

• particularly attractive tax neutrality in the event of relocation abroad;
• access to the protective mechanisms of the “security triangle” and the “super-privilege”;
• broad diversification in asset management: securities, funds, private equity, multiple currencies, etc.

Historically reserved for wealth management clients, with minimum investments of around €1 million, Luxembourg life insurance has become significantly more accessible. Some providers are seeking to attract a broader client base, including executives, business owners, self-employed professionals and entrepreneurs, by making their policies available from €100,000, or even €50,000.

A closer look at the benefits of Luxembourg life insurance

Luxembourg life insurance as an estate planning tool

Luxembourg life insurance allows the policyholder, among other things, to determine in advance the beneficiaries who will receive the funds when the policy comes to an end. This occurs, in particular, upon the death of one or more insured persons.

The beneficiary clause can be amended throughout the term of the policy.

It can therefore complement a traditional estate planning strategy based on:

• a will;
• gifts;
• the matrimonial property regime;
• direct or corporate ownership of assets;
• where appropriate, a more complex family structure.

The main benefit is the ability to organise the transfer of financial assets with a certain degree of flexibility, while retaining, depending on the structure of the policy, the possibility of managing and investing the assets throughout its duration.

The beneficiary clause: at the heart of the arrangement

For a Luxembourg resident, the wording of the beneficiary clause is crucial.

For example, a clause may designate the surviving spouse as beneficiary or, failing this, the children in equal shares, with representation in the event of predecease.

A more sophisticated clause may, however, be considered where the objective is to treat different generations differently, provide for a child requiring particular protection, or take into account a child who has already received substantial gifts.

It should nevertheless be remembered that life insurance is not an automatic means of circumventing all inheritance rules. The legal classification of the policy, the law applicable to the estate, the family situation and the rights of the heirs must be considered together.

Life insurance and forced heirship rules

This is probably one of the most important aspects of wealth planning.

The question is not simply: “Whom have I designated as beneficiary?”

but also: “Could this designation affect my heirs’ inheritance rights?”

For a Luxembourg resident, it is particularly important to consider which inheritance law actually applies, as this may be influenced by the European Succession Regulation.

The specific advantages of a Luxembourg policy

Luxembourg life insurance offers particular benefits from a wealth planning perspective due to its structure and the protection it provides to the policyholder.

It can make it possible to bring a diversified portfolio of financial assets together within a single policy, with management tailored to the policyholder’s profile.

However, a “Luxembourg policy” does not mean that “Luxembourg taxation automatically applies”.

The situation must therefore be assessed in light of the tax residence of the policyholder and that of the beneficiaries.

A simplified example

Let us consider a married Luxembourg resident with two children and financial assets of €2 million.

They could structure their assets as follows:

• one portion held directly;
• one portion held within a Luxembourg life insurance policy;
• a beneficiary clause designating the spouse, followed by the children;
• a will coordinated with the beneficiary clause;
• potentially, lifetime gifts.

The purpose of such an approach is not simply to “invest €1 million in a life insurance policy”.

Rather, it is to coordinate the different instruments so that, upon death:

• the assets are transferred to the intended beneficiaries;
• the spouse’s rights are properly protected;
• the children are treated in accordance with the policyholder’s wishes;
• the beneficiary clause does not conflict with the will;
• the tax implications are anticipated.

Key advantages and limitations

For a Luxembourg resident, Luxembourg life insurance can be an effective estate planning instrument, but its value is greatest when it forms part of a comprehensive strategy.

A sound approach is to consider the various elements in the following order:

assets → matrimonial property regime → inheritance law → forced heirs → will/gifts → life insurance → beneficiary clause → taxation of beneficiaries.

In other words, the recommended approach is to start with family and estate planning objectives, and then determine the role that life insurance should play.

CapitalatWork’s wealth and tax planning team can assist you with these estate planning matters.

Financial management within the policy

In addition to structuring the policy from an estate planning perspective, consideration must also be given to the financial management of the assets invested throughout the term of the policy.

At the heart of this offering, three types of investment vehicles provide a high degree of customisation depending on the investor profile and the amount invested:

• Dedicated Internal Fund (Fonds Interne Dédié – FID): this allows the management of the assets to be delegated to a professional. It is probably the most widely used investment vehicle within Luxembourg life insurance policies.
• Specialised Insurance Fund (Fonds d’Assurance Spécialisé – FAS): the policyholder can participate in the management of the assets held within the policy.
• Collective Internal Fund (Fonds Interne Collectif – FIC): this allows several investors with the same investment profile to pool their investments.

The Dedicated Internal Fund and discretionary management

Within a Dedicated Internal Fund, investing through a discretionary management mandate with CapitalatWork can offer a coherent combination of professional investment management and wealth and estate planning.

The management is governed by an investor profile determined together with the policyholder and the insurer.

CapitalatWork has been part of the Foyer Group since 2009 and provides wealth management services in Luxembourg.

Why this combination can be attractive

Professional investment management

Since 1990, CapitalatWork has offered diversified discretionary management across international equities and bonds. The entire investment analysis process is carried out in-house.

Investment management separated from the estate planning strategy

With Luxembourg life insurance, the death of the policyholder does not necessarily require the entire financial structure of the assets to be reconsidered: the management of the policy and the beneficiary clause are two distinct matters.

The structure can therefore be viewed as follows:

• Life insurance: wealth planning wrapper;
• Beneficiary clause: organisation of the transfer of assets;
• CapitalatWork: financial manager of the assets held within the insurance policy.

Policy structure

Policyholder : Retains administrative control over the policy.

Luxembourg insurer : Structures the insurance policy in accordance with the policyholder’s wishes.

CapitalatWork : Manages the assets under a discretionary management mandate.

Custodian bank : Safeguards the assets in accordance with the applicable framework.

Beneficiary clause : Organises the transfer of assets upon death.

Will : Complements the estate planning arrangements.

Assets held directly may, upon death, require the liquidation or transfer of multiple securities positions.

With life insurance, the objective is instead to organise the assets around a single wrapper, to which a beneficiary clause is attached.

The beneficiary clause, matrimonial property regime, law applicable to the estate, any rights of forced heirs, and taxation should all be considered together from the outset.

Additional advantages

In summary, the purpose of this Luxembourg life insurance structure is not simply to benefit from CapitalatWork’s investment management performance. Rather, it is to combine professional investment management with estate planning, alongside the arrangements made before a notary.

In addition to flexibility in financial management and the estate planning dimension, Luxembourg life insurance policies offer a number of specific advantages:

• the security triangle, a mechanism designed to protect policyholders’ assets, combined with the super-privilege mechanism;
• the possibility of offering policies in many countries, with the applicable tax treatment to be assessed according to the policyholder’s country of residence;
• the portability of the policy if the policyholder changes their country of residence. In such cases, the insurance company assesses the destination country to determine whether portability remains appropriate and feasible. Where applicable, an amendment to the policy may be signed to ensure continuity and preserve the policy’s original inception date;
• the availability of capitalisation contract solutions from Luxembourg insurers.

CapitalatWork’s teams are at your disposal to discuss financial management solutions within Luxembourg life insurance policies and how they can be integrated into your estate planning strategy.