309 lines
17 KiB
Plaintext
309 lines
17 KiB
Plaintext
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ASSET PROTECTION USING SWISS ANNUITIES
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Growing the wealth is important, but so is
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protecting it from false claimants, and Switzerland
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excels at this. Almost anybody with wealth in the U.S.
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is at risk, as discussed in the early sections of
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this report. With everything that can happen to
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savings, it is nice to know that there is something,
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somewhere, nobody can touch.
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According to Swiss law, insurance policies --
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including annuity contracts -- cannot be seized by
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creditors. They also cannot be included in a Swiss
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bankruptcy procedure. Even if an American court
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expressly orders the seizure of a Swiss annuity account
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or its inclusion in a bankruptcy estate, the account
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will not be seized by Swiss authorities, provided that
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it has been structured the right way.
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There are two requirements: A U. S. resident who
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buys a life insurance policy from a Swiss insurance
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company must designate his or her spouse or
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descendants, or a third party (if done so irrevocably)
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as beneficiaries. Also, to avoid suspicion of making a
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fraudulent conveyance to avoid a specific judgment,
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under Swiss law, the person must have purchased the
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policy or designated the beneficiaries not less than
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six months before any bankruptcy decree or collection
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process.
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The policyholder can also protect the policy by
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converting a designation of spouse or children into an
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irrevocable designation when he becomes aware of the
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fact that his creditors will seize his assets and that
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a court might compel him to repatriate the funds in the
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insurance policy. If he is subsequently ordered to
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revoke the designation of the beneficiary and to
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liquidate the policy he will not be able to do so as
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the insurance company will not accept his instructions
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because of the irrevocable designation of the
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beneficiaries.
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Article 81 of the Swiss insurance law provides
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that if a policyholder has made a revocable designation
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of spouse or children as beneficiaries, they
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automatically become policyholders and acquire all
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rights if the policyholder is declared bankrupt. In
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such a case the original policyholder therefore
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automatically loses control over the policy and also
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his right to demand the liquidation of the policy and
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the repatriation of funds. A court therefore cannot
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compel the policyholder to liquidate the policy or
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otherwise repatriate his funds. If the spouse or
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children notify the insurance company of the
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bankruptcy, the insurance company will note that in its
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records. Even if the original policyholder sends
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instructions because a court has ordered him to do so,
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the insurance company will ignore those instructions.
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It is important that the company be notified promptly
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of the bankruptcy, so that they do not inadvertently
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follow the original policyholder's instructions because
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they weren't told of the bankruptcy.
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If the policyholder has designated his spouse or
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his children as beneficiaries of the insurance policy,
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the insurance policy is protected from his creditors
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regardless of whether the designation is revocable or
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irrevocable. The policyholder may therefore designate
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his spouse or children as beneficiaries on a revocable
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basis and revoke this designation before the policy
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expires if at such time there is no threat from any
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creditors.
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These laws are part of fundamental Swiss law.
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They were not created to make Switzerland an asset
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protection haven. There is a current fad of various
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offshore islands passing special legislation allowing
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the creation of asset protection trusts for foreigners.
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Since they are not part of the fundamental legal
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structure of the country concerned, local legislators
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really don't care if they work or not. And since most
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of these trusts are simply used as a convenient legal
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title to assets that are left in the U.S., such as
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brokerage accounts, houses, or office buildings, it is
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very easy for an American court to simply call the
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trust a sham to defraud creditors and ignore its legal
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title -- seizing the assets that are within the
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physical jurisdiction of the court.
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Such flimsy structures, providing only a thin
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legal screen to the title to American property, are
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quite different from real assets being solely under the
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control of a rock-solid insurance company in a major
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industrialized country. A defendant trying to convince
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an American court that his local brokerage account is
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really owned by a trust represented by a brass-plate
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under a palm tree on a faraway island is not likely to
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be successful -- more likely the court will simply
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seize the asset.
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But with the Swiss annuity, the insurance policy
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is not being protected by the Swiss courts and
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government because of any especial concern for the
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American investor, but because the principle of
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protection of insurance policies is a fundamental part
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of Swiss law -- for the protection of the Swiss
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themselves. Insurance is for the family, not something
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to be taken by creditors or other claimants. No Swiss
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lawyer would even waste his time bringing such a case.
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Swiss annuities minimize the risk posed by U. S.
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annuities. They are heavily regulated, unlike in the
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U.S., to avoid any potential funding problem. They
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denominate accounts in the strong Swiss franc, compared
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to the weakening dollar. And the annuity payout is
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guaranteed.
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Swiss annuities are exempt from the famous 35%
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withholding tax imposed by Switzerland on bank account
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interest received by foreigners. Annuities do not have
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to be reported to Swiss or U.S. tax authorities.
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A U.S. purchaser of an annuity is required to pay
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a 1% U.S. federal excise tax on the purchase of any
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policy from a foreign company. This is much like the
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sales tax rule that says that if a person shops in a
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different state, with a lower sales tax than their home
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state, when they get home they are required to mail a
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check to their home state's sales tax department for
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the difference in sales tax rates.
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The U.S. federal excise tax form (IRS Form 720)
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does not ask for details of the policy bought or who it
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was bought from -- it merely asks for a calculation of
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1% tax of any foreign policies purchased. This is a
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one time tax at the time of purchase; it is not an
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ongoing tax. It is the responsibility of the U. S.
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taxpayer, to report the Swiss annuity or other foreign
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insurance policy. Swiss insurance companies do not
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report anything to any government agency, Swiss or
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American -- not the initial purchase of the policy, nor
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the payments into it, nor interest and dividends
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earned.
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Special Advantages of Swiss Annuities
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* They Pay Competitive Dividends and Interest.
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* No foreign reporting requirements. A swiss
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franc annuity is not a "foreign bank account," subject
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to the reporting requirements on the IRS Form 1040 or
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the special U. S. Treasury form for reporting foreign
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accounts. Transfers of funds by check or wire are not
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reportable under U. S. law by individuals -- the
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reporting requirements apply only to cash and "cash
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equivalents" -- such as money orders, cashier's checks,
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and travellers' checks.
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* No forced repatriation of funds. If America
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were to eventually institute exchange controls, the
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government might require that most overseas investments
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be repatriated to America. This has been a common
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requirement by most governments that have imposed
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exchange controls. Insurance policies, however, would
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likely escape any forced repatriation under future
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exchange controls, because they are a pending contract
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between the investor and the insurance company. Swiss
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bank accounts would probably not escape such controls.
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(To the bureaucrats writing such regulations, an
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insurance policy is a commodity already bought, rather
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than an investment.)
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* Instant liquidity. With the Swiss Plus plan,
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described later, an investor can liquidate up to 100%
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of the account without penalty (except for a SFr500
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charge during the first year.)
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* Swiss safety. As already discussed, Switzerland
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has the world's strongest insurance industry, with no
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failures in 130 years.
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* No Swiss tax. If an investor accumulates Swiss
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francs through standard investments, he will be subject
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to the 35% withholding tax on interest or dividends
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earned in Switzerland. Swiss franc annuities are free
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of this tax. In the U. S., insurance proceeds are not
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taxed. And earnings on annuities during the deferral
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period are not taxable until income is paid, or when
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they are liquidated.
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* Convenience. Sending deposits to Switzerland is
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no more difficult than mailing an insurance premium in
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the United States. A personal check in U. S. dollars
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is written and sent overseas (50<35> postage instead of
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29<32>). Funds can also be transferred by bank wire.
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* Qualified for U.S. Pension Plans. Swiss
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annuities can be placed in a U. S. tax-sheltered
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pension plans, such as IRA, Keogh, or corporate plans,
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or such a plan can be rolled over into a Swiss-annuity.
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(To put a Swiss annuity in a U.S. pension plan, all
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that is required is a U.S. trustee, such as a bank or
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other institution, and that the annuity contract be
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held in the U.S. by that trustee. Many banks offer
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"self-directed" pension plans for a very small annual
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administration fee, and these plans can easily be used
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for this purpose.)
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* No Load Fees. Investment in Swiss annuities is
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on a "no load" basis, front-end or back-end. The
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investments can be canceled at any time, without a loss
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of principal, and with all principal, interest and
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dividends payable if canceled after one year. (If
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canceled in the first year, there is a small penalty of
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about 500 Swiss francs, plus loss of interest.)
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Swiss Plus
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A new Swiss annuity product (first offered in
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1991), SWISS PLUS, brings together the benefits of
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Swiss bank accounts and Swiss deferred annuities,
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without the drawbacks -- presenting the best Swiss
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investment advantages for American investors.
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SWISS PLUS, is a convertible annuity account,
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offered only by Elvia Life of Geneva. Elvia Life is a
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$2 billion strong company, serving 220,000 clients, of
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which 57% are living in Switzerland and 43% abroad.
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The account can be denominated in the Swiss franc, the
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U.S. dollar, the German mark, or the ECU (European
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Currency Unit), and the investor can switch at any time
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from one to another. Or an investor can diversify the
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account by investing in more than one currency, and
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still change the currency at any time during the
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accumulation period -- up until beginning to receive
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income or withdrawing the capital.
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Although called an annuity, SWISS PLUS acts more
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like a savings account than a deferred annuity. But it
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is operated under an insurance company's umbrella, so
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that it conforms to the IRS' definition of an annuity,
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and as such, compounds tax-free until it is liquidated
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or converted into an income annuity later on.
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SWISS PLUS accounts earn approximately the same
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return as long-term government bonds in the same
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currency the account is denominated in (European
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Community bonds in the case of the ECU), less a half-
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percent management fee.
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Interest and dividend income are guaranteed by a
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Swiss insurance company. Swiss government regulations
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protect investors against either under-performance or
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overcharging.
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SWISS PLUS offers instant liquidity, a rarity in
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annuities. All capital, plus all accumulated interest
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and dividends, can be freely accessible after the first
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year. During the first year 100% of the principal is
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freely accessible, less a SFr500 fee, and loss of the
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interest. So if all funds are needed quickly, either
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for an emergency or for another investment, there is no
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"lock-in" period as there is with most American
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annuities.
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Upon maturity of the account, the investor can
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choose between a lump sum payout (paying capital gains
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tax on accumulated earnings only), rolling the funds
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into an income annuity (paying capital gains taxes only
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as future income payments are received, and then only
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on the portion representing accumulated earnings), or
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extend the scheduled term by giving notice in advance
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of the originally scheduled date (and continue to defer
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tax on accumulated earnings).
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Contact Information
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The only way for North Americans to get
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information on Swiss annuities is to send a letter to a
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Swiss insurance broker. This is because very few
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transactions can be concluded directly by foreigners
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either with a Swiss insurance company or with regular
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Swiss insurance agents.
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When you contact a Swiss insurance broker, be sure
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to include, in addition to your name, address, and
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telephone number, your date of birth, marital status,
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citizenship, number of children and their ages, name of
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spouse, a clear definition of your financial objectives
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(possibly on what dollar amount you would like to
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invest), and whether the information is for a
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corporation or an individual, or both.
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So far one firm specializes in dealing with
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English speaking investors, and everybody in the firm
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speaks excellent English. They are also familiar with
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U. S. laws affecting the purchase of Swiss annuities.
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Contact:
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Mr. Jurg Lattmann.
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JML Swiss Investment Counsellors AG, Dept. 212,
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Germaniastrasse 55
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8031 Zurich
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Switzerland
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telephone (41-1) 363-2510
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fax: (41-1) 361-074, attn: Dept. 212
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A Swiss annuity for a portion of your assets can
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add a useful pillar to your overall protection plan,
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because it is something completely separate from your
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structure of family limited partnerships and living
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trusts, and has its own independent set of protective
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rules. It also adds an extremely important
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diversification into a "hard money" asset.
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