The Paragon Asset Protection Strategies and Tax-Deferred Variable Annuity Plan utilizes two strategies to protect exposed assets from the claims of creditors and other prospective litigants – exchange of assets and encumbrance of assets.
EXCHANGE – The individual utilizing this strategy protects his exposed assets by transferring ownership of them out of his personal name into his separate offshore annuity account. In effect he exchanges or trades these assets for an annuity contract. Once in the annuity account, these assets are effectively beyond the reach of creditors. The annuity holder then chooses an investment advisor to manage the annuity account. This strategy is most appropriate for protective moveable assets such as stocks, bonds, certificate of deposit, ownership of a business, precious metals or notes receivables. Assets in the account may be sold or exchanged for other assets and still remain beyond the reach of creditors of the court Several valid strategies exist for ensuring that these transfers do not incur excise or other taxes liabilities. Some are simple; others require fairly extensive tax planning.
ENCUMBRANCE – This strategy is appropriate for an individual who has fixed assets, such as real property, which he wishes to protect but does not wish to dispose of. The individual utilizing this strategy retains title to the property in his name, but encumbers it with a mortgage or other charge in favor of a mortgage company, bank or financial institution. If the total value of an asset is encumbered, it becomes very unattractive to a creditor or litigant searching for assets to attach. This encumbrance should always be registered in accordance with the law of the jurisdiction in which the property is located. The proceeds of the mortgage are placed in a separate annuity account to be managed by an investment advisor chosen by the owner of the annuity contract. Since the annuity is part of the security of the lending institution, investment decisions require the approval of the lender. When setting up an encumbrance annuity, care must be taken to show that consideration is received and that the debt on this consideration exists and is being duly serviced.
The asset protection features of the annuity are enhanced where the annuity insurance is owned by an offshore insurance trust in an asset protection jurisdiction such as Belize. In this jurisdiction the assets of a trust, including the annuity, cannot be attached to satisfy the judgment of any foreign court or even to satisfy claims brought in a Belize court that are based on the law of any foreign jurisdiction including the claims of foreign creditors and spouses. This enhances the asset-protection features of the annuity. It also provides certain estate tax planning advantages; these will be dealt with later.
Paragon National Building Society can provide the mortgage financing for this annuity purchase program. The mortgage may be constructed, within certain limits, on repayment terms customized to the policyholder’s wishes. This program allows the individual to leverage his real estate equity under very favorable terms and with security for his assets.