Your Guide to
Offshore Variable Annuities

By Vernon K. Jacobs, CPA, CLU, FLMI
 

A Consumer's e-Book Guide to the Confusing and Exotic
World of International Variable Annuity Investments

Published by Offshore Press, Inc.


(Please scroll down to find out how you can get this report.)

  • 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.


    Table of Contents

    A Consumer's Guide to

    Offshore Variable Annuities

     
    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.

  • About the Author
     
     

    How You Can Order a Copy of This Report

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    This Report Is Included as Part of Our Online Subscription

    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.


    Warning !

    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.

    Copyright, 2001 by Vernon K. Jacobs

    All rights reserved. Co-Publication rights granted to
    Offshore Press, Inc. and the Sovereign Society.

    Co- Published by

    Offshore Press, Inc. 

    (Formerly Research Press, Inc.)

    PO Box 8137, Prairie Village, KS 66208

    Phone & Fax (913) 362-9667

    jacobs (at) offshorepress.com
    http://www.offshorepress.com


     

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    Sponsored by Offshore Press, Inc. Copyright, 2009, All rights reserved. Offshore Press, Inc., Box 8137, Prairie Village, KS 66208. (913) 362-9667.  Email to Offshore Press   Vernon K. Jacobs, Webauthor .