International Strategies:
Closely Held Insurance Companies (CICs)

You will find that CICs are a nice way to implement an offshore asset protection plan that is different from the traditional offshore LLC or offshore trust.

CICs are generally used more for income tax reduction but because the CIC is set up offshore to save on set-up expenses, it turns into a terrific asset protection tool as well. [THIS SENTENCE DOESN"T WORK -- RUN ON?]

So yes, there actually is a way to save on taxes by going offshore, just not the way some irresponsible people may try to make you believe. And yes, it’s perfectly legal. To read more about how a CIC can be used as an income tax reduction tool, please turn to the income tax reduction section of The Doctor’s Wealth Preservation Guide.

A CIC is just what it sounds like. It literally is your very own insurance company that can sell insurance to a number of different people or entities, although most of the time your CIC will sell insurance to your own small business. The insurances it will sell to your own business are legitimate insurances you can get on the open market, but which would be prohibitively expensive, and not likely to be utilized.

Therein lies the benefit to you: You get to transfer lots of money in premiums to cover an event against which you are already self-insuring — such as Medicare fraud, or sexual harrassment lawsuit — which you are likely never going to have to pay out. Instead it grows tax-deferred under your own management, if you prefer, and comes out taxed at the long term capital gains rate.

So how else does a CIC work as a wealth preservation tool? Well, it is typically created offshore to save on expenses. And because CICs are offshore, they provide the same kind of asset protection as any other offshore company.

Physician Example:

Dr. Smith has a medical patent company in which he owns 100% of the stock. He has generated $2,000,000 of take-home income after expenses from his company, and he does not need the money to live on. He is 58 years old with three children, a spouse, and a net worth including the value of his company of $15,000,000.

Dr. Smith could set up a CIC that could be owned entirely by his children. His company would then purchase $1,000,000 worth of insurance from the CIC for various types of insurance coverage, and Dr. Smith’s company would pay the premium each year.

Several good things are accomplished with this scenario:

1) Dr. Smith transferred $1,000,000 into an offshore CIC which is owned by his children. This transfer was done without income, gift or estate taxes; and with a good claims’ history, the children will be able to keep that money.

2) Dr. Smith did not have to take the money home and pay income taxes on it.

3) Dr. Smith did not have to figure out how to asset protect the $600,000 he would have taken home after tax (in the 40% tax bracket) since the money has not only been transferred to the children’s CIC but is in an offshore CIC.

The money in the CIC is there in the event of any insurance claims, but realistically that money will be used by the children as part of their inheritance.

CICs may not be for everyone, but if you are looking to implement an offshore asset protection plan, you should definitely consider them. Just keep in mind that the CIC must also have, as its primary business purpose, the sale of insurance.

Make sure you have an expert advisor who can counsel you on the proper way to set up a CIC so it will comply with all applicable laws. Just request a free consultation with one of our expert advisors in your area, who can answer all your questions, and order The Doctor’s Wealth Preservation Guide to read much more about CICs.