Annuities and Life Insurance
Investors can also acquire privacy and legal immunity via offshore annuities and life insurance policies. Again, these are just like their domestic counterparts, with offshore life insurance policies paying out to U.S.-based beneficiaries upon death. With annuities, offshore insurance companies invest the premiums to create a string of payments to designated beneficiaries for either a predetermined period or for the life of the client.
Vrijhof helps clients set up annuities in Liechtenstein, Switzerland’s tiny neighbor, whose insurance laws, he says, offer the highest level of asset protection and privacy in the world. “Most annuities are done out of Liechtenstein,” Vrijhof explains, adding that they can be set up as easily as a trust. Like their domestic counterparts, offshore annuities can be fixed or variable. With a fixed annuity, the insurance company agrees to make payments of a set amount for the contract period. With variable annuities, payouts depend on the performance of the investment strategy. “The only major attractiveness to American investors of offshore life insurance and annuities is that they allow deferred taxation,” Bauman explains. Income earned from an annuity is tax-deferred until the contract is liquidated or payments begin. So if the annuity pays out at death, then tax on the income earned is not paid until that point.
John Ferry is an Edinburgh, Scotland-based financial journalist and a senior correspondent for Worth. john.ferry@blueyonder.co.uk Illustration by Stephen Webster
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