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International Asset Protection Planning | Foreign Security Trust | International Variable Life Insurance Program

International Variable Life Insurance Program:

USE - Asset Protection
Capital Gains Tax Deferral
Possible Income Tax Deferral
Estate Tax Planning

International variable life insurance policies are private. Insurance policies are not financial accounts as defined for US 1040 tax reporting purposes. There is no reporting of investments held in such polices plus there is no taxable reportable event created by capital appreciation or income within such policies - so long as they are kept in compliance with the US tax code. In other words they are private and defer tax!

The program starts with a US based Domestic Non Grantor Irrevocable Life Insurance Trust. The domestic trust is the grantor of a Foreign Security Trust (Asset Protection Trust). The trustee of the Foreign Security Trust acting on behalf of the trust contacts an International Life Insurance Company. The purpose of this contact is to purchase a whole life insurance policy on your life. The initial owner of the policy may be the Foreign Security Trust depending on the country in which the insurance company is based. In certain countries there is no need to use the Foreign Security Trust because treaties exist between the insurance company's domicile and the US. The beneficiaries of the foreign trust will be the domestic trust. The beneficiary of the domestic trust will be whomever your client selects.

The International Variable Life Insurance policy now capitalizes and owns an international entity. The international entity is now free to acquire your appreciated assets with no capital gains tax and to sell, reinvest, even receive income on these assets with no US tax recognition. The assets are out of the client's estate at the time of their death. Benefits can flow to the beneficiaries of the domestic trust, under certain circumstances, with no US tax recognition and everything held by the policy is fully asset protected.

With regard to the International Variable Life Insurance Program as it relates to asset protection and tax benefits, you can:

  1. The international system can loan money. To secure the promise to pay the money back, the client can encumber every asset they own, including their limited partnership interest and their general partnership interest. The terms of repayment can be structured to be so unattractive and not subject to any form of prepayment that a creditor (even if they were able to secure the attachment of an asset) would not be able to do anything with the asset. This method has the advantage of further encumbering any of the client's assets under conditions that makes them very unattractive to any creditor.
  2. If the client's business has receivables, they may sell the receivables to the international system on a discounted basis with a number of advantages. Properly structured, the difference (gain) between the discounted purchase price and the actual total payments can be tax deferred. The domestic business can promise the international system that the receivables given as part of the purchase are in fact good receivables, and in order to enforce this promise, can encumber all of the future receivables, and all of the business assets. The final result is your client has taken advantage of a long term tax deferral while creating asset protection for their future receivables that have been encumbered by the business promise to deliver good receivables to the international system.
  3. The client may borrow money from the international system on what is known as a shared appreciation mortgage agreement. This agreement would allow the client to borrow money from the international system while promising to pay the loan back at a lower market interest rate in exchange for the client giving the international system a percentage of the appreciation of the property. This is a very commonly used program with international entities. The result, to the further detriment of any creditor, is the promise to pay back interest plus a portion of the appreciation becomes a lien against any property that is the subject of the shared appreciation mortgage. This is one of the devices that has almost no peer in its ability to deter a creditor from any attachment of an asset that is structured with a shared appreciating mortgage.
  4. The client can sell assets to the international system. Once the assets - non real estate - are owned by the system they can be sold with zero capital gains tax recognition. The monies received can be reinvested, appreciate, and sold with zero capital gains tax recognition. The assets can make profits and for the most part these profits will not be subjected to US taxes.

For more specific information on the International Variable Life Insurance Program contact your local United Wealth Protection Concepts Associate.
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