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DEFERRED VARIABLE ANNUITIES
The best way to achieve
significant income tax minimization and iron-clad asset protection is
through the use of foreign commercial annuities and foreign
variable life insurance issued by offshore independent corporations that are engaged in the business of
selling annuities and insurance polices to general public.
We have implemented this
strategy for high-net-worth clients, including investors, venture
capitalists, executives, entrepreneurs and other individuals who receive
significant investment income and wish to minimize income taxes and
protect their assets from attacks by future creditors.
This strategy provides
significant tax savings in a tax-compliant manner.
The primary financial
structure for this strategy to reduce tax on investment income is an
independent foreign annuity company. The foreign annuity company,
which is registered in a secure and confidential foreign jurisdiction in
conformance with the laws of that jurisdiction, will protect the assets
owned by that corporation and held in that jurisdiction from attack by
United States or other creditors.
In addition, such a foreign
corporation, having no U.S. shareholders, is entirely exempt from tax on
capital appreciation of U.S. investments and is also exempt from tax on
all non-U.S. income.
Confidentiality of corporate
activities is assured by the laws of the jurisdiction in which the annuity
company is established. Certain offshore jurisdictions limit the exchange
of information to criminal investigations only.
Such jurisdictions also
provide criminal penalties for unauthorized disclosure of confidential
information, do not provide for the recognition of foreign judgments and
contain a very short statute-of-limitations period for the commencement of
actions in local courts based upon foreign claims.
Additionally, such
jurisdictions exempt insurance and annuity assets and proceeds therefrom
from attachment in satisfaction of civil judgments. Such foreign
jurisdictions also exempt the annuity company from virtually all local
taxes.
The foreign annuity company
may enter into an agreement to purchase securities or other appreciated
assets from you, in return for a commercial annuity. The agreement
may provide for annuity payments to be made during your life. The amount of such payments
will depend on the earnings produced by the underlying annuity fund's
investments.
In order to provide
additional security to you with regard to the future annuity payments to
be made by the foreign annuity company, the company may transfer the
assets received from you (or the proceeds of their sale) to an independent
foreign irrevocable insurance trust.
The beneficiaries of this
trust would be your heirs, who would also be the beneficiaries of the
annuity contract in the event of your death. This trust may purchase
private placement variable life insurance from an international insurance
company.
The life insurance policy
will insure your life and pay death benefits to the irrevocable insurance
trust. Your heirs, as the beneficiaries of the irrevocable insurance
trust, would receive payment of such death benefits from the trust, free
of all taxes.
If the life insurance policy
is purchased from a foreign insurance company, the assets of the policy
(cash value derived from premium payments and investments) may be held by
the insurance company in a segregated asset account.
The assets in such account
would not be deemed the general assets of the insurance company and they
would therefore be protected from claims by any creditors of the insurance
company.
Such an account could be
managed by an independent investment advisor of your choice.
Income earned by this account
would also be free of taxes. The irrevocable insurance trust may have the
right to borrow the cash value of the insurance policy from the insurance
company.
The trust may, in turn, lend
money to the annuity corporation. The annuity corporation may use the loan
proceeds to fund annuity payments to you.
In addition, insurance company may also make tax-free loans to you or your family members.
This plan may result in the
removal of significant assets from your estate and therefor, a significant
reduction in estate taxes.
The plan may also result in
the minimization or deferral of capital gains taxes on appreciated assets,
as well as the mitigation of income taxes on future investment income.
Funds borrowed by you from a
foreign insurance company would be received by you tax free.
Minimal taxes may be due in
the United States on each annuity payment as it is received by you.
Finally, this plan will
provide complete asset protection on all assets held offshore.
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