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What about captive insurance companies for professionals and business owners? Can you expand upon them?

We speak to many groups of business owners and professionals about asset protection and tax-favored wealth planning, and we are often asked about international captive insurance companies. ‘Captives’ or tax-exempt closely held insurance companies (CICs) are useful for both asset protection and tax deferral – provided they are suited to your economic needs, and you qualify for their considerable tax benefits. The CIC is a legitimate insurance company. It is licensed to write insurance in the U.S. and registered with the IRS. Though based in international jurisdictions, international CICs sell more than a third of the total commercial insurance sold within the United States. Many Fortune 500 companies have long used CICs to protect their excess cash, to gain tax advantages, and to lower their own insurance costs. Now individuals, smaller business owners and professionals also take advantage of CICs by setting up their own.

By owning your own CIC, you can insure all or a portion of your business or professional practice from significant risks – such as malpractice or other liabilities or losses for which you would typically carry insurance. By insuring yourself through your own CIC, you get a present year tax deduction on the premiums and you can pay any claims with pre-tax dollars out of the CIC’s loss reserves. Your CIC can insure low liability risks, or your CIC can transfer risk to another reinsurer. You would then have little economic risk while enjoying significant tax benefits. Whether you own a CIC as an individual professional, business owner or member of a group you can take a significant deduction each year and grow your funds in the CIC completely tax-free. You can later reclaim the funds and pay only long-term capital gains tax. This three-tier tax advantage is unavailable through pensions, IRAs or other retirement plans.

In addition to its tax benefits, the CIC offers superb asset protection. Your CIC can supplement your existing liability policy. This ‘excess’ malpractice protection also gives you the security that you won’t be wiped out by a lawsuit in excess of your present coverage. Also, the pre-tax premiums paid to your own CIC are protected from the creditors of your business or professional practice. You accomplish all this without losing control of your international funds. If you own a business or professional practice with $400,000 or more in annual profits, consider forming your own captive insurance company.

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The Presser Law Firm, P.A. - Asset Protection Attorney
Located at 6199 N. Federal Highway Boca Raton, FL 33487. View Map
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