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Adam Starchild

One of the unhappy facts of financial life in a lawsuit- happy society such as the United States is the increasing danger of being sued. And if you should have the misfortune to wind up on the receiving end of some courtroom debacle, it could easily cost you your life savings.

One of the best ways to protect yourself against such a calamity is to invest in a vehicle that will be beyond the reach of North American courts. One such vehicle is a Swiss annuity.

Swiss annuities can even be used to shield assets from a bankruptcy proceeding. That is because the rights of an insured U.S. person subscribing to a Swiss annuity policy are deemed to be located at the domicile of the Swiss insurance company -- that is, Switzerland, not the United States.

Even if a U.S. court specifically orders the seizure of assets in a Swiss annuity -- or orders that they be included in, say, a bankruptcy settlement -- such an annuity will be protected under Swiss law.

The only way a creditor can seize such an annuity is if the purchase of the policy -- or the designation of the beneficiaries -- is found to be a fraudulent conveyance under Swiss law.

Fraudulent conveyance takes place only: (1) if the insured person bought the policy or named the beneficiaries less than six months before the bankruptcy decree was issued -- or six months before some other collection action; or (2) if the insurance policy was bought or the beneficiaries chosen with the clear intent of damaging creditors.

Of course, such intent cannot be proven if the policy was purchased and the beneficiaries named at a time when the insured person was solvent or when no creditors claims were outstanding. Nor can it be proven if your policy is not written for an excessively large sum relative to the insurance needs of your family.

Another item that can make an important difference in the amount of asset protection a Swiss policy provides is the designation of beneficiaries. Beneficiaries may be named on a revocable or irrevocable basis.

As long as your beneficiary is your spouse, it doesn't matter whether he or she is named on a revocable or irrevocable basis. In either case, your asset protection remains intact.

However, if your beneficiary is a third party (that is, neither a spouse nor a descendent), the designation must be made on a irrevocable basis. If not, the policy can be seized by a creditor.

Note that an annuity or life insurance policy can involve up to four parties, each of which can be in a different country or jurisdiction. The four parties are:

  1. the insured individual. If he is not the policy owner, he does not have any rights. When he dies, the contract matures and benefits are paid to the beneficiaries.
  2. the policy owner or policyholder. He chooses the policy options and designates the beneficiaries who are paid upon the death of the insured person. The policyholder may be an individual, a corporation, or a trust.
  3. the beneficiaries. These may be individuals, corporations, or trusts. However, if asset protection under Swiss law is your concern, your beneficiaries should only be individuals -- preferably your spouse and/or children.
  4. the premium payer. This may safely be an individual, corporation, or a trust.
Note that a properly written Swiss annuity policy affords better protection than Swiss bank accounts -- or Swiss securities accounts. Swiss life insurance policies also make great estate- planning vehicles -- regardless of the risk of bankruptcy or asset seizure.

If you would like more information, there is one Swiss insurance broker dealing with North American clients. Contact:

JML Jurg M. Lattmann AG
Swiss Investment Counsellors
Germaniastrasse 55, Dept. 212
CH-8033 Zurich, Switzerland
telephone: +41 41 368 8233
fax: +41 41 368 8299; Attn: Dept. 212

About the Author
Adam Starchild is the author of over a dozen books, and hundreds of magazine articles, primarily on international business and finance. His articles have a appeared in a wide range of publications around the world -- including Business Credit, Euromoney, Finance, The Financial Planner, International Living, Offshore Financial Review, Reason, Tax Planning International, Trusts & Estates, and many more.

More information on Swiss annuities and other Swiss investments is available at Fortress Switzerland.

Copyright © 1993, 1997 by Adam Starchild
The Investor's Library has reprinted this copyrighted article with the permission of the author.

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