Private Pension Fund as an Estate Planning Instrument and its income-protective function: commentary on Special Appeal 1,726.577-SP

Abstract

This article aims to analyze the income- -protective function of open private pension plans, as well as their use for succession planning purposes. This financial instrument has significantly expanded in Brazil and has been the subject of extensive judicial rulings. The article examines the regulation of private pension plans in Brazil, identifying potential distortions and interpretative developments. In analyzing Speacil Appeal n. 1,726.577 – SP, the study scrutinizes the arguments that led to the recognition of the multifaceted nature of pension plans— sometimes classified as investments, other times as insurance—determining how accumulated funds should be distributed in the event of death, divorce, separation, or the dissolution of a de facto partnership. Given that case-by-case rulings compromise legal certainty, the article proposes criteria for defining the legal nature of these plans. In this regard, the participant’s behavioral pattern serves as a fundamental guideline. For instance, when contributions are made periodically and consistently over an extended period, the recognition of the insurance nature is imperative. Conversely, any other accumulation pattern may indicate an attempt to shield assets and evade creditors. Despite the necessity of improving Brazil’s private pension regulations to promote long-term savings and restrict premature withdrawals, it is crucial for judges and Courts to establish clear, objective criteria regarding the legal classification of open private pension plans.