In my last entry I discussed special estate tax needs of Foreign Nationals and how life insurance can be an effective answer. Aside from estate tax liability, there are also some other uses of life insurance issued by U.S. insurers that are attractive to foreign nationals.
International investors often look for safe, secure U.S. based assets in which to deposit funds. American life insurance policies may be an effective choice. The low pricing, stability and long term guarantees offered by U.S. carriers are typically not available off shore. If the investors primary goal is the transfer of assets to heirs at death, then the lifetime death benefit guarantees offered by many Universal Life contracts is appropriate.
If long term cash value accumulation is also important, then either using Indexed Universal Life structured with minimum death benefit, or Participating Whole Life using paid-up addition riders can be considered. As with all life insurance policies issued by U.S. companies, there is no income tax due on cash value accumulation during the life of the insured and death benefits are not only free of income tax, but in most instances policies on foreign nationals would also avoid Estate Tax, even if the policy is owned by the insured.
Long Term Care benefits on life policies may be payable overseas, but typically only for U.S. Citizens and green card holders.
It is always easier for a foreign national to qualify for a U.S. life insurance policy if the medical exam is performed in the United States by the paramedical service authorized by the company. However, offshore exams may be available on a limited basis. The amount of insurance available for foreign nationals can be up to $35 Million per life subject to financial justification.
Though I have provided a broad brush of taxation, solicitation and tax laws are complex in this area. You will want to deal with an agent who understands the nuances and consult with your own advisors on international taxation issues.
Coming up…an eight decade look back.
