Wikimedia

The idea of opening an offshore bank account may conjure up thoughts of 007 with a suitcase full of foreign currency or of mobsters having somebody whacked in the Caymans.  But the reality of opening and maintaining an offshore account couldn’t be farther from those scenarios.

There are a number of misconceptions surrounding offshore accounts and those who hold them.  (They aren’t limited to crooks, spies, and the super wealthy.)  They offer a number of unrivaled benefits over domestic options, but they can also be a bit of a hassle.

For instance, using an offshore account is the perfect way to open up your investment options to include non-traditional alternatives, like international real estate.  On the other hand, there are serious implications if you fail to follow IRS reporting guidelines on your foreign accounts.

To help you decide if an offshore account is right for you, here are a few reasons you should (or shouldn’t) consider opening one.

Don’t Open an Offshore Account If…

You’re Planning to Do Something Illegal

You’ve seen the movies. The bad guys never come out on the good end of that deal. Don’t assume that most people who bank offshore are doing something illegal and getting away with it. That’s just not the case.

Instead, people opt to bank overseas to take advantage of better privacy, more favorable interest rates, political and economic stability, and other benefits.

You’re Trying to Avoid Paying Taxes

See above.  The penalties for tax evasion are fierce, and they’re often even steeper for offshore offenders.  Not to mention, the perks that sparked the offshore craze are virtually a thing of the past.

While some tax benefits do still exist, they’re far from the perceived notion that any money on foreign soil is out of Uncle Sam’s reach. U.S. citizens are taxed on their worldwide income.  However, foreign account holders can enjoy benefits like tax exemption on U.S. investments when operating through their foreign corporation.

You’re Bad with Paperwork

Even if offshore account holders have no tax liability for their overseas funds, there is still a stack of paperwork that must be filed: Schedule B, TDF, FBAR.  Failure to report offshore accounts can result in hefty fines and even jail time.  

Neglecting to file the FBAR alone can cost you $10,000 and up to 10 years in prison. That’s for a NON-willful violation.  And you don’t want to know who gets to decide what is or isn’t willful.  Hint: It won’t be a jury of your peers.

The paperwork isn’t overly complicated but it’s not something that you can skip.

Your Deposit Would Barely Cover the Start-up Costs

While simple checking and savings accounts with foreign banks have generally low minimum balance requirements and little to no fees, anything more complicated may involve considerable costs.

For instance, if you’re hoping to buy property or do business overseas, you’ll likely need to set up a foreign corporation to do so.  This will involve legal fees, registration costs, and possibly even minimum deposit requirements.

Breezy Baldwin

Do Open an Offshore Account If…

You Want to Impress Your Friends on Your Next Overseas Vacation

One of the perks of owning an offshore account with an international bank is the ability to access your money anywhere in the world.  Forget exchanging currency or carrying around wads of cash.  With an ATM card from your overseas bank, you can walk up to any participating teller machine and withdraw funds in the local currency.   

You’re Concerned About Your Financial Privacy

Foreign banks offer account holders the highest level of confidentiality, a benefit that’s no longer a reality in the U.S.  As a result, facts such as customer identities, shareholder information, and other private details are much safer overseas.

This feature is important for investors who wish to keep aspects of their business dealings, such as stock purchases, a secret.  Illegal activities, such as money laundering and drug trafficking, are clear exceptions to this rule.

You Need to Protect Your Assets

Many U.S. residents opt to protect a portion of their wealth by transferring it to an offshore account and holding it in the name of a trust, corporation, or other entities. Doing so makes those funds less susceptible to seizure.

Examples of situations where this would apply might be in the event of a foreclosure, lawsuit, or other domestic dealings.

You Want More Investment Options

One of the biggest benefits of opening an offshore account is the access it gives to a variety of investments. From simple options like higher interest savings accounts to foreign CDs and other instruments, there is a wealth of options available to foreign account holders.

Owning an offshore account allows you the freedom to take advantage of non-traditional options that aren’t offered by U.S. financial institutions.  It also allows you to engage in transactions, such as real estate purchases, that wouldn’t be possible without an account in that country.

An increasingly popular option among U.S. citizens is foreign real estate. While not usually an option through a typical investment firm (although it’s perfectly legal), land investments are entirely possible through Self-Directed IRA funds held in a local LLC.

Land investments are one of the easiest ways to profit abroad, and they’re something we’ve researched extensively during our time in Latin America. You can find out more by downloading our ebook, Pay Dirt, where we’ve outlined our blueprint for investing in raw land.

This is just one of the many options you have if you readjust your financial sights on the incredible opportunities available abroad. Learn more about your overseas options. Your friends are sure to be impressed.