Forget Everything You Know About Insurance

Wednesday, October 25, 2006
Vol. 8 No. 213

In Today's Letter:
Comment: Forget Everything You Know About Insurance
Offshore: Trivia Challenge
Wealth: The Three Drunks
Currencies: The Dow Matches Crude Oil Prices?

Forget Everything You Know About Insurance

Today's comment is by Marc-André Sola, a member of The Sovereign Society Council of Experts and managing partner of NMG International Financial Services, Ltd., specializing in offshore life insurance and annuities.

Dear A-Letter Reader:

I just finished meeting with a wealthy client who was concerned about the future of his home country. Like many of you, he worried about his native country's economic and political future. Not to mention the gradual erosion of his personal and financial freedom.

Like many Sovereign Society members I've spoken to, he's read a substantial amount of literature about international investing. And now he's somewhat confused. He realized that it's not so easy for him to go abroad. First he experienced that some foreign banks, mutual funds, and other investment providers would not accept him as a client due to his citizenship. Then he got caught up in the web of legal structures, tax implications, reporting requirements etc...

Like my client most of you may find it difficult to get started abroad. Especially, if you want to do things right. It is a real challenge avoiding the political, legal, reporting, and tax traps.

There is one very simple solution to these problems, which allows you to get started offshore immediately. It provides the comprehensive protection you are looking for, is easy to set up and is fully flexible if you choose to combine it with a structure - i.e. a trust or foundation. What is this unique solution? It's an offshore variable life insurance or variable annuity policy.

Forget everything you know about life insurance and annuity policies. Nobody - including me - really likes insurance. The policies I am talking about can be used as a simple holding structure, a gateway to investing abroad, a one-stop shop to cover your needs.

Here Is How It Works:

You sign an application with an offshore insurer and wire the money to the insurer's account. The insurance company will then invest the funds with the bank and asset manager according to the agreed strategy.

Access To The Entire Global Investment Universe

As Larry Grossman discussed yesterday, most foreign mutual and hedge funds will not accept Americans as clients for the simple reason that they fear being in conflict with the SEC. But, an offshore insurer may invest in any foreign investment on your behalf without any citizenship limitations. All mutual funds, hedge funds or other investments are now available to you through the policy. Welcome to the investment universe without any of the negative CFC (Controlled Foreign Corporation) or PFIC (Passive Foreign Investment Company) rules!

The
Sovereign Society's Offshore Advantage Seminar

Serious Asset Protection

Correctly structured this offshore insurance policy will protect you from creditors, twelve month after you set it up. It cannot be seized or attacked in any bankruptcy proceeding. Even if a U.S. judge orders the seizure of your policy, it will never happen. The policy is protected by law, especially in ideal jurisdictions like Liechtenstein or Switzerland.

Speedy Estate Planning

You may plan your insurance policy so it's completely separate from your ordinary estate. Upon your death your beneficiaries get immediate access to the funds without having to wait for a certificate of distribution at the end of the probate. Designations can be made very similar to a trust.

Additional Tax Benefits

If correctly structured a policy allows your funds to grow tax deferred. There are no negative tax consequences due to the PFIC or CFC rules, where capital gains tax may be turned into income tax and where you might have a tax penalty on top. It is extremely important to tailor the policy according to the rules of the IRS in order to ensure that the taxes for your variable annuity or variable life policy remained deferred under U.S. law.

Greater Flexibility

These policies are very flexible. They can be adjusted as needed and they can also be transferred to and combined with other legal structures you may want to set up later.

In a nutshell: No matter if you have US$100,000 or US$100 million, an offshore policy can allow you to get started abroad immediately. You get access to first class investments without suffering adverse tax consequences...all while enjoying complete asset protection by law. For further information come meet me in person next month in Puerto Vallarta, Mexico at The Sovereign Society's Offshore Advantage Seminar.

MARC-ANDRE SOLA, Partner at
NMG International Ltd.
Switzerland

P.S. In Lesson 5 of the brand new book, Offshore Advantage: A Beginner's Guide to the Offshore World , The Sovereign Society research team provides a crash course in both offshore annuities and offshore life insurance policies (and the differences between them). All of our attendees at next month's Offshore Advantage Seminar, in Puerto Vallarta, Mexico will receive a copy of this brand new book with their admission. It's not too late to reserve your seat at this event. Click here to learn more.

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*Offshore*
Offshore Trivia TRUE or FALSE: An offshore annuity can be used to defer taxes, access the off-limits offshore investments, and protect your assets, but unfortunately these policies are extremely complicated and difficult to set up. Scroll down to the very bottom of the A-Letter for the answer.

Wealth/Investments

The Three Drunks and the Sober Driver

Over the last decade I've always referred to the U.S. dollar, euro, and yen as the "three drunks," wobbling and stumbling to find support. They're all intoxicated with debt.

Today I'm focusing on the euro.

I have a hard time believing Italy and France legitimately joined the Euro-zone in 1999. I can't help but think both countries, and possibly others, fudged their books to gain admittance.

A few years ago, Greece joined the single European currency after successfully keeping its debt ceiling below the strict 3% criteria imposed by the Maastricht Treaty. I also have a hard time believing the Greeks didn't fudge their books, either.

In order to join the Euro-zone in 1999, the original members had to maintain a debt-to-GDP ratio of less than 3%; today most countries, including Germany, Holland and France, have breached that limit while the Italians are closer to 5% of debt-to-gross domestic product (GDP).

In my eyes, this whole business of imposing spending limits makes no sense, especially amid an economic slowdown when governments should boost spending to get the economy going again. But that's another argument altogether.

But despite these travails of the euro and multi-staged growth cycles for many of its members, the euro will probably survive. To kill it would mean significantly higher interest rates for countries with high debt, like Italy, Germany, the Balkans and Greece. So the drunken euro is here to stay. But unlike the once-mighty German Mark and Swiss franc, today's European currencies are structurally weak, plagued by debt and monetary policies designed to squeeze innovation and growth.

Personally, I'll stick with gold - the one sober driver among all these "drunks." You can't print gold and it's no one else's liability. I'm sticking to my long-term forecast of $2,500 an ounce by 2015, if not sooner.

ERIC ROSEMAN, Investment Director

P.S. Lesson 4 of The Offshore Advantage: A Beginner's Guide to the Offshore World explains how to play these international currencies plus answers lingering questions about all offshore investments. Ever wondered what separates a hedge fund from a mutual fund? Or exactly why the U.S. government doesn't let you invest in certain offshore investments? Or how you invest in global stocks and bonds? We explain all this and more.

Privacy&Rights

Why Does the Dow Match Crude Oil?

Lately, crude oil and the Dow Jones Industrial Average have been a mirror image of each other. I suspect that lower energy prices are helping corporate profit expectations (for users of materials) and are allowing U.S. consumers greater discretionary spending. That's because whatever Mr. Consumer doesn't spend to propel the car stays in the wallet).

The Fed has to be pleased about the way this is playing out. The wealth boost from stocks is helping to counter the hit from housing. Lower metals and energy are likely lowering inflationary expectations, while acting as a tax cut for business and consumers alike.

The question is: At this point, why would the Fed rock this boat? Answer: It's in their nature.

JACK CROOKS, Currency Director

Offshore Trivia Answer: FALSE: While it's true an offshore annuity defers taxes, gives you access to offshore investments, and provides ironclad asset protection, these policies are usually relatively simple to set up.

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