Why You Need an Offshore Bank Account (It’s Not Why You Think)
There are a lot of misconceptions surrounding offshore banking. And if you think owning an offshore bank account is a maneuver only reserved for the likes of Al Capone, James Bond, and Mitt Romney (i.e. tax evaders, international spies, the super wealthy), then think again.
The truth is that there are a number of important benefits to diversifying your assets into foreign accounts. Even for normal folks like you and me.
Ignore the Bad Rap Associated with an Offshore Bank Account
Even though Hollywood & the press like to associate them with crooks, mobsters, and otherwise shady characters, offshore accounts are actually quite common. In and of themselves, they aren’t illegal or immoral or whatever else the media tried to convince you of during the last presidential election.
The name itself came from the fact of the Channel Islands being “offshore” for account holders in the U.K. The term stuck, and today it refers to banks in any place other than the account owner’s home country, whether an island nation or a landlocked country like Switzerland or Luxembourg.
Despite their questionable reputation, an offshore bank account can be an excellent tool for the savvy investor. They’re of particular importance in a time when U.S. regulations and controls are becoming more stringent and restricting, all in the name of preventing terrorism.
Here are a few of the benefits they provide:
In the U.S., the walls protecting your personal financial activities are becoming more and more transparent. Any number of governmental agencies can easily gain information on your accounts, a trend that’s becoming even more common thanks to bills like the Patriot Act.
Not so with international banks. While foreign financial institutions are required to report to the IRS on their U.S. account holders, your information is generally much more private. Particularly if you own the account under the name of a foreign corporation or partnership.
Why Does This Matter?
Say, for instance, you’re wanting to buy up stock in a company you plan to take over. In the U.S., large trades like this are public record, and such activity could attract the attention of other investors who could then follow suit, driving up prices. Buying through an offshore bank account could help protect your identity.
Another benefit of the privacy associated with offshore banking is the ability to protect the funds you have deposited in offshore accounts. In the incredibly litigious environment in the U.S., lawyers don’t think twice before suing you for all you’ve got.
But since U.S. courts don’t have jurisdiction overseas, your foreign accounts could be safe from the whims of the court. The same is true for any inexplicable government seizure of your assets.
Who Benefits from This Advantage?
This kind of protection could be beneficial to those whose occupations or activities put them at high risk for lawsuits, such as physicians who could be sued for malpractice.
Lower Taxes and Fees
Foreign banks generally have lower operating costs and overhead than their domestic counterparts, and that savings is generally passed on to you, the customer, in the form of lower fees.
An offshore bank account also offer some tax advantages, although not to the extent that you might be thinking. Americans are required to report and pay taxes on income earned anywhere in the world, and the punishments for failing to do so are severe. So evading (or fudging on) tax liabilities is not the goal I’m talking about here.
So What Are the Tax Savings?
The tax benefits are realized more so in the sense of avoiding or deferring taxes associated with conducting business from a foreign account. If you have an account in the country where you’re investing, interest can be paid gross without the withholding tax that might be imposed on a U.S. account.
This one’s pretty self-explanatory. Due to the aforementioned lower operating costs, foreign banks can often offer much better interest rates on savings and money market accounts than those in the U.S. And, no, I’m not surprised your domestic bank has failed to mention that recommendation.
What’s more, you can also often find lower rates on personal and business loans as well.
Who Could This Help?
Well, anyone really. From someone who’s looking for a better alternative to low-risk low-interest U.S. savings accounts to someone who wants to move to the tropics and open up a small business.
Less Political Risk
Many U.S. citizens have concerns about America’s financial situation and where the country’s headed. As a result, many are embracing the opportunity for “jurisdictional diversification.”
Ambiguous privacy laws leave U.S. citizens subject to search and seizure with little justification. The national debt is growing at alarming rates, and Americans’ retirement money has become the government’s latest target. It’s easy to understand why many would be in a hurry to get their funds offshore.
Who Does This Motivate?
Anyone who doesn’t want their assets frozen, seized, or redistributed. Or at least those who want to have some money set aside to hire an attorney if they do wake up to find all of their domestic accounts frozen.
Greater Investment Opportunities
Having an international account often makes it much easier for individuals to enter the global market and access a variety of investments. While the U.S. places legal restrictions on a number of transactions, those regulations won’t be a problem offshore.
What’s more, you’ll absolutely need an account in any country where you intend to invest, live, work, or even visit frequently.
How Does This Help You?
The U.S. has a special way of making transactions, even those that aren’t illegal, so much of a hassle that they might as well be.
Take IRAs, for example. While real estate is an ideal investment vehicle for long-term retirement accounts, the overwhelming amount of bureaucracy associated with most U.S. custodians and brokerage firms makes it next to impossible to purchase land with IRA money.
By changing to a Self-Directed IRA, you can have the freedom to transfer those funds offshore and invest in whatever you choose. You can find out more about our experience with raw land investment and why it’s such a great option by downloading our free ebook, Pay Dirt.
Explore these and other opportunities for getting the best return on your investments by broadening your horizons to include offshore options.