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THE SOVEREIGN SOCIETY OFFSHORE A-LETTER
Your Link to Freedom, Privacy & Prosperity in the Offshore World
Wednesday, August 6, 2003 - Vol. 5 No. 93
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In This Issue:
* COMMENT: Why Offshore Life Insurance is a Superb Investment
* OFFSHORE: Is Haveco Dead? Jersey Job Losses. US Persons with Canadian Trusts. Swiss Find Bhutto Guilty. The American Empire.
* WEALTH: Wealthiest Zip Codes. Ireland Fund Leader. UBS Hedges.
* PRIVACY & RIGHTS: 9 Million Russians Wiretaps. PATRIOT Act Under Legal Attack. US vs. EU Constitution.
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Guest Comment is by COLIN BOWEN, member of The Sovereign Society Council of Experts, and deputy chairman of Isle of Man Assurance Co.,a leading Isle of Man provider of offshore insurance products.
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COMMENT: Offshore Life Insurance; a Superb Investment
Dear A-Letter Reader:
Despite all the talk of "tax reform" in the United States, upon death,the combination of income tax and estate tax can consume 50% or more of a US person's estate. You can avoid these ruinous consequences with several planning techniques, but only life insurance provides these four key benefits:
1. Tax-free build-up of cash value, including dividends, interest,capital gains.
2. Tax free borrowing against cash value.
3. Tax-free receipt of the death benefit.
4. Freedom from estate and generation skipping taxes
These benefits are available in any life insurance policy designed to comply with US tax laws. However, for larger estates, a U.S-tax compliant life insurance policy issued by a carrier outside the US offers 5 additional benefits:
1. Increased asset protection. No protection for life insurance proceeds exists under federal laws. While many states have enacted laws that provide limited protection for life insurance policies, coverage varies from significant to non-existent. In contrast, many offshore juris-dictions provide statutory asset protection for the death benefit and investments held by an insurance policy.
And, as a practical matter, it is much more expensive for a creditor to bring a claim before a foreign court than a domestic court.
2. Access to global investments. Offshore insurance policies provide tax-advantaged access to international asset managers and to offshore funds that are generally not accessible to US investors.
3. Increased privacy. Domestic assets, including life insurance policies, can easily be discovered by private investigators with access to any of the hundreds of "asset tracking" services now existing in the USA In contrast, assets held offshore are off the domestic "radar screen" and cannot easily be identified in a routine asset search. The confidentiality statutes of some offshore jurisdictions are an additional barrier against frivolous claims and investigations.
4. Not reportable as a "foreign bank account." A life insurance policy purchased from a non-US carrier is not considered a "foreign bank,securities or other financial account." This means that there is no requirement to report the existence of or the income derived from an offshore insurance policy to any government authority. However, depending on what country you purchase an offshore insurance policy from, it may be necessary to make a one-time excise tax payment to the IRS amounting to 1% of the policy premium.
5. Currency diversification. Life insurance policies are free to make investments in non-US dollar assets that may gain in the event of future declines in the value of the US dollar.
Needless to say, the IRS is not pleased with a planning technique that simultaneously eliminates federal estate taxes, creates a situation where no US person is subject to tax upon transfer of the assets to the beneficiaries and permits the policyholder to invest in highly lucrative offshore mutual funds without paying tax.
To this end, the IRS recently announced new rules that would limit the tax benefits for investors in hedge funds that are setting up insurance companies in offshore jurisdictions, but that are not operating as life insurance carriers. It also is concerned with foreign insurance carriers that are investing in hedge funds and has promised to more aggressively enforce existing provisions in the US Tax Code that prohibit life insurance investors from managing their own securities portfolio and that require adequate diversification within the policy.
However, these policy changes have been "in the making" for several years. A properly planned and executed offshore insurance policy should not be affected. But, it is essential that you obtain expert tax advice when considering the purchase of an offshore insurance policy.
Life insurance remains one of few remaining opportunities for offshore estate tax planning combined with asset protection and tax deferral. And, without major changes in US federal legislation, I expect these advantages to remain for the foreseeable future.
Colin G. Bowen, Douglas, Isle of Man
E-MAIL: colinb@ioma.co.im
LINK: http://www.ioma.co.uk
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COMMENT LINKS:
* Benefits of international life insurance policies.
LINKS: http://www.ioma.co.uk/products-ivlp.htm
http://www.expatica.com/germanymain.asp?pad=193,209,&item_id=7083
* Treasury and IRS to close insurance loophole for hedge funds.
LINK: http://www.tax-news.com/asp/story/story.asp?storyname=12829
* Some hedge funds silver lining in IRS insurance ruling. LINK:
http://online.wsj.com/article/0,,BT_CO_20030728_002122-search,00.html
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* OFFSHORE *
HAS THE SOVEREIGN NATION OF HAVENCO FAILED?
A widely publicized project to transform a man-made platform in the
English Channel into a 'safe haven' for controversial Web businesses
has failed due to political, technical and management problems, one of
the company's founders said." Others dispute that it has folded.
LINK: http://news.com.com/2100-1028_3-5059676.html?tag=fd_top
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JERSEY, ISLE OF MAN JOB LOSSES CONTINUE
Crown Dependencies suffer from new financial restrictions.
LINK: http://www.newsmann.com/updocs/Redundancygh.gif
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U.S. PERSONS WITH CANADIAN TRUSTS IN FOR A SURPRISE
IRS imposes new reporting requirements, forms to be filed. LINK:
http://www.canada.com/saskatoon/starphoenix/info/business/story.html?id=D16D15B8-F9B9-4A38-8F2A-A378ED6F193D
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FORMER PAKISTANI HEAD GUILTY OF MONEY LAUNDERING
Benazir Bhutto denied charges of corruption; Swiss disagree. LINK:
http://www.swissinfo.org/sen/swissinfo.html?siteSect=105&sid=4098186
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CAN AMERICA RULE THE WORLD?
Gulliver unbound: or is the US the new Roman Empire?
LINK: http://www.smh.com.au/articles/2003/08/05/1060064182993.html
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* WEALTH *
THE MOST EXPENSIVE ZIP CODES IN THE U.S.A.
Location, location, location; zip, zip. zip.
LINK: http://www.forbes.com/home_asia/2003/07/11/cx_bs_0711home.html
ZIP LIST LINK: http://www.forbes.com/2003/07/10/cx_bs_0711homez.html
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IRELAND IS MONEY MARKET FUND LEADER
DUBLIN: Of 252 money market funds; Ireland hosts 159.
39 in Luxembourg, and 33 in the Cayman Islands.
LINK: http://www.tax-news.com/asp/story/story.asp?storyname=12864
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U.B.S. BOOSTS HEDGE FUND RESEARCH
UBS, world's biggest asset manager, boosts hedge fund research. LINK:
http://www.forbes.com/home_europe/newswire/2003/08/05/rtr1048973.html
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I.R.S. JOINS WITH STATES TO FIGHT TAX EVASION
Internal Revenue Service to work with states to track down tax cheats.
LINK: http://www.charleston.net/stories/080503/wor_05taxes.shtml
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* PRIVACY & RIGHTS *
RUSSIAN POLICE WIRETAP CHAMPIONS
MOSCOW: Police listen in on 9 mil calls, eavesdropping digitally. LINK:
http://australianit.news.com.au/articles/0,7204,6851007^15322^^nbv^15306,00.html
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LEGAL ATTACKS ON USA PATRIOT ACT GROWING
Lawsuits being filed everywhere challenging law.
LINK: http://www.wired.com/news/business/0,1367,59863,00.html
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TWO CONSTITUTIONS; A MORE PERFECT UNION?
The head of the Cato Institute compares the US Constitution
to that proposed for the European Union. LINK:
http://www.techcentralstation.be/2051/wrapper.jsp?PID=2051-100&CID=2051-080403M
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