Using an offshore insurance company for insurance activities

Modern estate planning is designed both to meet present known concerns and to provide the flexibility to adapt to future contingencies. Regardless of the point in time, there will be needs for cash to meet financial requirements - taxes, debts, income replacement to name but a few.

Insurance as a financial product is in a unique position to meet these real life financial needs. When using offshore insurance in offshore holding vehicles, this important financial product becomes an even more powerful planning tool.

Recent developments in US tax law also allow limited liability companies to be easily treated as partnerships under the check-the-box rules. With some offshore jurisdictions providing special or heightened creditor protection for limited liability companies, the use of an LLC--which for US tax purposes, is treated as a partnership--becomes an outstanding insurance planning platform.

While the life insurance trust has significant restraints and limitations, such as irrevocability, a limited liability company structure is a flexible arrangement and allows changes to be made in the future that were not contemplated when the policy of insurance was first acquired.

As a further refinement, an insurance limited partnership or LLC can be utilized as part of a plan to be funded by monies set aside in an IRA. In this way, insurance may be acquired using pre-tax dollars.

The important point to note is that insurance is not only a valuable financial product, but there are a number of legal entities that can be used offshore to serve as insurance policy-holding structures.

• Low interventions on the part of authorities and institutions
• Lower capital requirements than in the case of other jurisdictions
• Tax aspects, they are often exempted from all forms of direct taxes
• Tax on profits are replaced with lump-sum taxes
• Low establishment fees
• Low license fees
• Liberal requirements connected with the operation of the insurance company
• Offshore insurance companies are often not subject to foreign exchange restrictions
• Licenses are easily available in a number of offshore jurisdictions
• In a number of countries no obligation of capital adequacy maintenance
• Possibility of concluding all types of insurance policies, including life policies Offshore insurance companies can be used for two basic types of activities:
• For proper insurance, security, reinsurance or other similar activities or tax planning purposes
• Using an offshore insurance company for insurance activities