Integrated wealth management with an insurance company-based solution
By adding an insurance company to the equation, a wealth management strategy can provide features not included in a regular bank account. Americans are welcome to establish a legal and US tax-compliant DVA or PPLI policy, the value of which is based on the policy's underlying investment portfolio, which can be managed by Swiss SEC RIAs if they are designated to do so (or another designated asset manager).
Some of the policy's features are:
- No investment restrictions
- Tax-deferral on growth (until withdrawals are made)
- No Swiss withholding taxes
- No onerous PFIC (passive foreign investment company) taxes
- Asset protection against creditors and in case of bankruptcy
- Estate planning without probate, beneficiaries cannot be contested
- An alternative to costly and complex trust structures
In order for the policy to be US tax compliant it may not be self-directed. While the policyholder can choose a general strategy, an asset manager needs to be designated to make any and all specific investment transactions. In addition, the underlying investment portfolio must adhere to the IRS diversification rule:
No more than 55 percent of the value of the total assets of the account is represented by any one fund/investment;
No more than 70 percent of the value of the total assets of the account is represented by any two funds/investment;
No more than 80 percent of the value of the total assets of the account is represented by any three funds/investment; and
No more than 90 percent of the value of the total assets of the account is represented by any four funds/investment.
Often insurance-dedicated funds or other portfolios are implemented which are not directly available to the general public.
The integrated wealth management solution incurs an establishment fee and an annual administration fee charged by the insurance company, and the asset management fee and banking charges of your designated asset manager and custodian bank fees.
If you choose a policy including biometrical risks you may achieve even more tax efficiency and estate planning benefits.
IRA funds may be invested and a 1035 tax-free exchange from an existing US policy is possible.
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As there is a slight chance that listing the Swiss insurance brokers which provide insurance policies to American clients on AW ★ SWITZERLAND may be viewed as "direct solicitation in US jurisdiction", they are not listed here. For further information just click here and send a message.
U.S. taxpayers are required to pay a one-time 1% Federal excise tax on the purchase of a foreign insurance policy with Form 720 Quarterly Federal Excise Tax Return (unless the foreign insurance carrier (e.g. in the Bahamas) has elected to be treated as a US taxpayer according to section 953(d) of the US Internal Revenue Code).
Form 8938, Statement of Specified Foreign Financial Assets, is required when completing your US Individual Income Tax Return and is attached to Form 1040. The Form 8938 filing requirement is in addition to the FBAR filing requirement.