As new taxes and mounting debt begin to add up, now more than ever is the time to evaluate how and where we hold our money. What kind of taxes you pay often depend on knowing where your money is. See the following article from International Living for more on this.
Despite all the rhetoric out of Washington these days, you can bet we will see tax hikes this year. They might not be overt. Instead, we could see stealth taxes go up first…parking fees, garbage collection, vehicle registrations and the like.
The U.S.’s fiscal disorder all but guarantees that. And if the fiscal situation gets worse as interest rates march higher on the mountain of debt the government must repay, Congress will have to seek income to keep America’s lights on. That could lead to overt tax hikes later in the year.
And that means you have to start planning now for what happens after 2012. Putting measures in place to protect your wealth takes time, and you should begin the process of contemplating offshore opportunities.
When it comes to taxes, deferring them is almost as good as avoiding them altogether. That’s especially true if you can defer them for an extended period. It’s a function of the “present value” of a fixed sum of money.
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If you have to pay $100 in taxes now, the present value of that payment is $100. But if you can defer that obligation for 20 years, assuming a 5% inflation rate, the equivalent value of that future payment is only $37.69.
Obviously, as tax rates—and inflation—increase, deferral strategies become increasingly valuable. Like annuities…
Income earned with an offshore variable annuity is tax-deferred until you cash in the contract or receive payments from it. The income part of payments is subject to ordinary income tax.
Consequently, an annuity most benefits the part of your portfolio that generates ordinary income rather than long-term gains. And if your retirement is far enough off, ordinary income’s higher tax rate may be a small price to pay for the privilege of years of tax deferral.
You can buy annuities from a U.S. or non-U.S. issuer. Offshore, some of the strongest insurance companies that issue annuities are in the Isle of Man, Liechtenstein and Switzerland.
Laws in these countries provide strong asset protection for beneficiaries of annuities. You also have the benefit of investing outside the U.S. dollar, in a portfolio of non-U.S. securities. While you can’t self-direct your investments, many companies will permit you to select a portfolio manager.
This article was republished with permission by International Living.
