• If you want access to foreign investment funds without having to pay punitive taxes on the distributions from those funds, your best choice is to invest through an offshore variable annuity.

• If you want to have strong asset protection but you can't afford the high cost of a foreign trust, then the offshore variable annuity is an excellent alternative.

If you want maximum and legal offshore privacy, you need to consider an offshore variable annuity.

However -- variable annuities may result in higher taxes when the funds are distributed , as compared to simply investing the same funds in various stocks or other capital gain assets. One of the most common incentives to invest in a variable annuity was to be able to invest the annuity assets into stocks rather than fixed income investments. Until the 2003 tax law, that was a pretty good reason. But the 2003 tax law reduced the top tax rate on qualified dividend income and long term capital gains to 15%. Income distributions from an annuity will be taxed as ordinary income and subject to tax rates of up to 35%. Investing annuity assets  in stocks or other long term gain assets may result in having to pay a higher tax rate because of the annuity. My report on offshore variable annuities was written before the 2003 tax law and does not discuss this issue.

 

Offshore annuities are one of the few ways that U.S. citizens and residents can invest outside the U.S. without incurring substantial tax reporting obligations and punitive taxation. Investors in an annuity contract issued by a foreign insurance company are entitled to the same tax deferral benefits as with a domestic annuity -- with the exception of a fixed return deferred annuity issued by a foreign company. Only an immediate annuity or a variable annuity offers tax deferral. Since few people are interested in immediate annuities (which begin annuity payments within one year of issue), this report focuses on offshore variable annuities and certain life insurance contracts that are treated like annuities for tax purposes.

This is a 39 page in-depth report on offshore variable annuities, with a directory of the available products that are compatible with U.S. tax laws regarding annuities. The report is also organized as an "e-book" on our subscriber's web site.

The report was written by Vernon Jacobs, a CPA who is also a Chartered Life Underwriter and Fellow of the Life Management Institute. He was a senior financial executive for a substantial life insurance company for 12 years and has been licensed to sell variable annuity and life insurance products. However, he let his insurance and securities licenses lapse in order to work as a fee only tax consultant, licensed as a CPA. He understands these complex products but does not receive any kind of commission in order to promote them to his clients or readers.

One of the reviewers of this report called it "The Definitive Guide to Offshore Variable Annuities". Jay Adkisson, an attorney (www.falc.com) who works extensively with international insurance products sent us a memo saying,

Your stuff on offshore annuities is really first-rate. You should consider
publishing your materials in one of the major law reviews.

If you have any interest in moving some of your assets offshore and obtaining tax deferral without having to pay huge fees to establish a foreign trust and to prepare expensive tax returns every year, the offshore variable annuity is the solution.

The printed report is available for $47 with a money back guarantee that we will refund your money if you are not totally satisfied that this information is worth many times the price. The preparation of the report represents well over 100 hours of research and drafting. The price includes first class shipping in the US and Canada.

An e-book edition is available for just $29.

The complete report is also available on our subscriber's web site -- which includes a number of other in-depth research reports on related subjects.

How To Order The Printed Report

Scroll down the Page for Details of the Contents of This Report.

 
An Introduction To Offshore Variable Annuities

What's an Annuity?

The parties to an annuity contract

Qualified and non-qualified annuities

Commercial and private annuities

Single and flexible premium annuities

Immediate and Deferred Annuities

Fixed Return and Variable Return Annuities

Life or period certain annuities

Domestic or foreign (offshore) annuities

Tax Free Switching of Investment Funds

Two Periods of Tax Deferral for Contract Owners

Income Tax on Distributions

Extra Tax on Distributions Before Age 59-1/2

Policy is an Asset of Your Estate

Asset Protection

Tax Free Exchanges - Tax Code Section 1035

Life Insurance Policies That Are Taxed Like Annuities

Life insurance provides income tax free benefits

Life insurance may be excluded from your estate

Policy loans may be tax free

The single premium tax shelter

The cost disadvantages of life insurance

Variable Life versus a Variable Annuity

The Benefits of Offshore Variable Annuities

Enhanced Asset Protection

Greater Privacy

Income Tax Deferral for Offshore Investors

Avoidance of U.S. Withholding

Lower Regulatory Expenses Than in U.S.

No State Premium Taxes

No Federal Income Taxes on Insurer

Lower Marketing/Distribution Costs

Access to Foreign Investments and Funds

Private Placement Policies

Lower Cost Than Offshore Trusts

Pre-Expatriation Planning

The Disadvantages of Offshore Variable Annuities

1% Excise Tax on Premiums Paid to Foreign Insurers

Quarterly Form 720

Reporting Financial Accounts on TD F 90-22.1 & Form 1040, Schedule B-III

Ordinary Income Instead of Capital Gain

Less Liquidity

Deferred Income Tax and Estate Tax at Death

Policy Must be Owned by an Individual

Lack of Detailed Information about Companies & Products

Restrictions on Investment Choices

Must Go Offshore To Make A Purchase

Surrender Charges for Early Withdrawals

10% Penalty Tax for Early withdrawals

Partial Distributions and Loans Usually Fully Taxable

Limitations on Tax Free Exchanges

Gift tax on transfers to non-spouse

Due Diligence for Offshore Variable Annuities

Investment Suitability Criteria

Compliance with U.S. Tax Law

Tax suitability criteria

Diversification considerations

Analysis and Ratings of the company

Analysis of the Product

Evaluation of Alternatives

Evaluation of the Host Jurisdiction

Some Technical Issues

Taxation of Foreign Annuity Contracts

Withholding on Payments To Foreign Entities

Investment Diversification Requirements

Wrap Around Annuity Rules

Company & Broker Information

Note: Some offshore insurance companies are very sensitive about incurring the "wrath" of the U.S. Securities & Exchange Commission or getting into a dispute with U.S. state insurance departments. They therefore prefer not to be named in any public information as a source of products that are designed to meet the tax requirements for U.S. investors. We have therefore included selected products but have listed them under the name of a broker rather than under the name of the applicable insurance company - when requested.
 

Comparative Table of Vendors

Aaii Group, Inc.

• Hampton Insurance Co., Ltd.

• Isle of Man Assurance

• JML Group (2)

• NMG International Financial Services Ltd. (2)

• PanAmerica Capital Group, Inc.

• Smallwood insurance Co., Ltd.

About the Author
 
 

How You Can Order a Copy of This Report

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You can subscribe to our online research report library for $240 a year through our online e-store. Our subscribers have access to an extensive database of asset protection, offshore tax and domestic tax articles and reports on our subscriber's web site. The Guide to Offshore Variable Annuities is an "e-book" that is also available on our subscriber's web site.

The U.S. tax laws are in a constant state of change due to new laws enacted by Congress, new or revised regulations or rulings issued by the IRS, and new court cases. The information in this report was current -- to the author's knowledge -- as of December 31, 2000.

Significant changes in the U.S. tax laws applicable to variable annuity contracts and specifically to the treatment of annuities issued by foreign insurance companies will be published in the International Wealth Protection Monitor, a twice monthly e-mail newsletter published by Offshore Press.