Advantages Of Having An Offshore Annuity
There are many advantages to purchasing an annuity from a foreign annuity company. One advantage of a foreign annuity is the asset protection it provides. Once funds are sent to the annuity company, those funds are not subject to U.S. jurisdiction. This means that funds held in the foreign annuity will be inaccessible to a U.S. court and to U.S. creditors seeking to enforce a judgment. The process of reaching the assets in the foreign jurisdiction is extremely difficult. Various foreign jurisdictions do not recognize judgments issued by U.S. courts. Moreover, various foreign jurisdictions statutorily exempt annuity policies from attachment or restraint. Thus, creditors are deterred and assets are protected by the foreign annuity.
Secondly, the foreign annuity company, having no U.S. shareholders, is exempt from tax on capital appreciation of U.S. investments and is also exempt from tax on all non-U.S. income. In other words, accruals on the funds within the annuity policy can be tax-free.
A third advantage of an offshore annuity is investment flexibility and diversification. Foreign annuities have access to investments not available to U.S. investors. By purchasing an offshore annuity, a U.S. investor broadens his or her investment portfolio and is exposed to earnings previously unavailable. Furthermore, the purchaser of a foreign annuity may determine the annuity terms which best fit his or her needs, such as whether annuity payments should be deferred until retirement (thus prolonging tax-free accruals).
Lastly, the purchase of an offshore annuity is neither taxable nor reportable to the I.R.S., unlike the opening of an offshore bank account. Moreover, the earnings generated by an offshore annuity are not reportable to the I.R.S. Clearly, purchasing a foreign annuity has many benefits: asset protection, investment diversification, and tax minimization.