Diversification is arguably the one necessary element to any investment portfolio. Whether you are a high-net-worth individual aiming to preserve your assets or someone primarily concerned with providing for the next generation, diversifying your holdings will be beneficial.
There are many ways to diversify, but there is no denying the appeal of foreign insurance and annuities.
Explore the ways that foreign insurance and annuities can boost your portfolio, preserve and protect your assets, and help you enjoy greater financial freedom and peace of mind.
Foreign Life Insurance
Roughly 60 percent of Americans have some form of life insurance. While many of these policies are domestic, a smart option can also be foreign life insurance. By placing assets into an offshore insurance wrapper, a type of foreign insurance, they are no longer legally under your control or jurisdiction. While the policy must still adhere to U.S. Federal Government taxation regulations regarding the ratio between premium and death benefit and the minimum diversification within the policy, you will be able to maximize U.S. tax deferral on the buildup of the growth.
Having a foreign life insurance policy can be a smart way to enjoy peace of mind and to provide for loved ones in the future. In addition, this is a way to prevent asset erosion. It may also be possible for you to borrow against the value of your life insurance policy. This allows you to leverage the value of assets without being personally responsible for their taxation, giving you the best of both worlds within your portfolio.
Understanding the Foreign Annuity
An annuity is a regular distribution from a specific source of income. That might mean a foreign insurance policy, or it could mean a foreign trust or fund. Annuities are appealing in large part because of their stability.
An annuity might pay out monthly or annually, providing you with a set income for the foreseeable future. With a foreign annuity, there are changes to your obligation as a citizen and as a taxpayer.
If you live in the United States and receive income through a foreign annuity, you may be subject to taxation in that foreign jurisdiction rather than your own. If you then pay those taxes, you may be eligible for a foreign tax credit in the United States. This is not necessarily a straightforward process, and it can vary from one destination to the next. However, for those willing to put in the effort and time, it can be an effective way of receiving a steady, stable income with a reduction in taxes.
Annuity Payouts in Foreign Currencies
Individuals who hold domestic annuities will typically receive their annuity payments in a single form of currency: The U.S. dollar. That may not be problematic for some, but others may wish to hedge their bets against the dollar or diversify enough to protect themselves.
Fortunately, one advantage of a foreign annuity is that you can set it up to disperse payments in the currency of your choice. If you live, work, or vacation in one specific country, for example, you could opt to have your annuity pay out in the local currency. Alternatively, you could opt for annuity payments in currencies with a long-term history of stability, such as the Swiss franc.
Eliminating Statewide Restrictions on Investment
If you live in the United States but have foreign insurance or annuities, you will still be subject to federal laws with regard to taxation and policy diversity. However, you won’t be subject to specific state rules. This might not seem like a big difference, but it absolutely can be. That is because individual states have restrictions on foreign investments and the makeup of foreign insurance structures.
If you happen to live in New York, for example, there are restrictions that limit how many mutual funds may be included in your insurance structure. With a foreign insurance policy, you are free to have as many funds as you would like. This gives you greater freedom when putting together a foreign trust, insurance policy, or any other annuity structure.
Protecting and Preserving Specific Assets
All investors should carefully consider their financial goals when it comes to offshore planning. Putting together foreign insurance and annuities can take time, and it is important to determine whether that time will be well spent in this venture.
Think carefully about why and how you want to care for your assets in this way. For many men and women, taking these steps is necessary to safeguard personal wealth and prevent the erosion of hard-earned holdings. Taxation rates vary from country to country and from one wealth bracket to the next. Through careful planning and the use of offshore and foreign financial vehicles, it is possible to preserve more of your assets today and in the future.
Passing Wealth Along to the Next Generation
One of the most common reasons to pursue foreign insurance and annuity opportunities is to better provide for the next generation. This is especially true for high-net-worth individuals of a certain age. At some point, it becomes less about providing for yourself and more about ensuring that your loved ones have access to the resources they will need for the future. Establishing an annuity and investing in a foreign life insurance policy gives you peace of mind that your dependents will always have your financial protection.
If you are serious about protecting your assets, then foreign insurance products, including annuities, may be appealing options. Caye International Bank, headquartered on Ambergris Caye island in Belize, helps customers set up foreign insurance products with a bank account.
Contact Caye today to find out more information about setting up your bank account to arrange for the purchase of your foreign insurance products.