Switzerland: Swiss Asset Protection For Offshore Investors

Last Updated: 13 November 2000

Lack of financial privacy leaves wealth visible to government bureaucrats and lawsuit-happy predators. In the U.S., judging from current trends, there will be on average at least three lawsuits filed per minute per state in 2000. In an environment where "everybody sues everybody," not only does the quality of life suffer but so does private entrepreneurship. Every investor should devise a plan for safeguarding his or her wealth -- before the system allows someone else to have it.

Protection Under Swiss Law.

Swiss law provides investors with an effective and straightforward vehicle for protecting assets. How does it do this? Swiss insurance law gives assets invested in Swiss annuities and life insurance policies recognized by the supervisory authority, the Federal Office for Private Insurance ("Bundesamt für Privatversicherung") protection from creditors under certain conditions.

Specifically, if a non-resident of Switzerland purchases an annuity from a Swiss insurance company and designates his spouse or his descendants as beneficiaries of or irrevocably designates any other third party as beneficiary, this insurance policy is protected by Swiss law against any collection procedures instituted by the creditors of the policy owner and it cannot be included in a Swiss bankruptcy procedure. Even if a foreign judgment or court order expressly orders the seizure of such policy or the inclusion in the estate in bankruptcy, it may not be seized in Switzerland or included in the estate in bankruptcy. If the policy owner has designated his spouse or his descendants as beneficiaries of the policy, it is protected from his creditors irrespective of whether the designation is revocable or irrevocable. The owner cannot be forced by creditors to redeem the policy to pay off debts.

These provisions of Swiss insurance law have been tested in Swiss courts and have been generally accepted for decades.

Life insurance policies and annuities linked to mutual funds and derivatives are also protected from creditors in this manner. It is therefore possible to invest in diversified portfolios for asset protection as long as these are structured as insurance policies or annuities.

Legal entities and natural persons can be designated as beneficiaries. With certain annuities and insurance companies, the policy holder may be a legal entity. The person insured, however, must in all cases be a natural person. For investors who have need for offshore trust strategies, Swiss insurance investments can be seamlessly integrated into such strategies for added protection.

Privacy And Wealth Preservation.

Why have more than 35% of all worldwide private assets been invested in or through Switzerland?

In Switzerland, the right to privacy and the right to protect wealth for the family are traditional virtues supported by the Swiss people and their government. As a result, banking secrecy and asset protection have been enshrined in Swiss law. A tradition of maintaining client confidentiality has been part and parcel of the success of Swiss banking through many generations – even before banking secrecy was enacted in 1934. The stringent law applies as well to Swiss insurers. Insurance companies may not disclose information about policies to anyone other than the owner, including government authorities.

These laws are deliberately designed to keep insurance proceeds safe and sound for their owners, and completely out of the reach of anyone else!

Safety For Your Investments.

Switzerland is virtually synonymous with stability. Its longevity (more than 700 years old!) and neutrality (at peace with its neighbors for many centuries) will re-assure investors. Throughout its almost 150-year history, no single Swiss insurance company has failed nor has a claim been forfeited.

For full lawsuit protection, investments must be outside an investor's legal jurisdiction, both in principle and in practice – and inside a long-established, stable country that discourages frivolous and inventive litigation. Going to a jurisdiction that discourages unnecessary litigation is an assurance of fair treatment and an environment that is not changing constantly as new precedents are set -- the laws protecting investors today will still be there tomorrow.

An Alternative To Offshore Trusts.As shown in Table 1, a Swiss asset protection strategy is a viable and affordable alternative to offshore trusts.

Table 1: Swiss asset protection versus offshore trust


Swiss Asset



Protection Strategy

Offshore Trust







Foreign jurisdiction






Tax-free locally



Owner retains control



Established legal principles



Simple and inexpensive to obtain



* but only insofar as trust assets are not invested locally

** depending on the investment decisions of the trustee

The basis of a trust is the transfer of ownership to a trustee. In contrast, a Swiss policy holder is the owner and retains full control so long as he or she remains solvent.

In general the legal process which a creditor or claimant must undertake is an arduous one:

First a creditor must know a policy exists in Switzerland and which company is the contractual partner. Then he must come to Switzerland, hire a Swiss attorney, who works on an hourly fee basis only (average US$250 per hour), and make an initial deposit for his services. The creditor must have a specific claim, based on an enforceable judgment or on a recognition of debt. The legal process can then begin in which, most importantly, it must be proven that fraudulent conveyance is involved before the Swiss court can declare a policy invalid.

Additionally, the "duress provision" of Swiss law prevents owners from acting under creditor duress by giving weight to an owner's "true intent."

A Swiss asset protection strategy provides many benefits without the cost and headache of dealing with tailor-made offshore structures in various jurisdictions. It is a simple choice for investors as well as investment advisors and legal or tax practitioners, who themselves are exposed to potential litigation due to the complexity of these structures and constantly changing laws.

As Swiss asset protection specialists, JML Portfolio Management Ltd. can structure any insurance investment to specifically comply with the conditions as required by Swiss law. This includes addressing issues regarding the policy holder's solvency and intentions vis-à-vis creditors.

The icing on the cake is that insurance and annuity contracts are not subject to Swiss withholding tax unlike bank accounts and other Swiss registered fixed-income instruments. Under certain conditions, they also enjoy tax-deferred status for U.S. residents and are exempt from US withholding taxes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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