Assets, whether highly appreciated or otherwise, can, in a properly structured transfer, be exchanged for the annuity without attracting most of the regular state charges normally imposed on the transfer of appreciated assets. Once the assets have been transferred to the annuity they may be sold, if desired, and the proceeds applied to the segregated fund without attracting capital gains charges.
In the asset encumbrance strategy that was described earlier, an asset (such as equity in real estate) that is exposed to creditors and potential litigants may be mortgaged and the proceeds of the mortgage used to purchase the annuity. If the mortgage is on the policyholder’s primary residence, the interest portion of the mortgage payment is tax deductible. By properly designing the payment plan of one’s mortgage, it will be possible to purchase an annuity from Paragon International Insurance Ltd. with all, or most, of the amount free from any sort of exactions. This allows for the creation of a savings system that is designed totally by the client and domiciled outside of the United States.