Offshore Investing: Smart Ways to Keep Your Money Safe
by Alexander Green, Investment Director
Tuesday, February 24, 2009: Issue #942
Last week's headlines were filled with news of a historic legal crackdown on UBS, the Swiss banking giant and what a 2008 Senate hearing identified as $100 billion in annual tax evasion by American owners of foreign accounts.
Is most offshore activity illegal? Hardly.
According to the World Bank, more than half of the world's personal wealth - over $50 trillion - is stashed in about 60 or so asset and tax havens worldwide.
More than a third of it is in Switzerland. The rest is stashed away in Hong Kong, the Cayman Islands, Panama, Bermuda, the Isle of Man and other protected havens.
What do all these rich people know that you don't?
Plenty. But their secrets are finally revealed in a fascinating new book by Erika Nolan and Shannon Crouch of The Sovereign Society. It's called "Offshore Investments That Safeguard Your Cash: Learn How Savvy Investors Grow and Protect Their Wealth."
Reasons for Offshore Investing
What legitimate reasons could you have for going offshore with your investments? Let me count the ways:
- Are you worried about potential claims against your assets?
- Are you having troubles with difficult business associates, angry ex-spouses or greedy children?
- Does the lack of privacy in your personal financial affairs bother you?
- Are you interested in gaining access to the tens of thousands of publicly-traded securities that are unavailable in the U.S.?
- Are you interested in creating an ironclad estate plan for your loved ones?
- Do you want greater asset protection than an American safety-deposit box offers?
- Are you worried you may not have enough money for retirement?
If you answered yes to any one of these questions - and especially if you answered yes more than once - you should read this book, if only to understand your options.
Let's say, for example, that you are a physician, businessman or comfortable retiree (or that you will be one day). In our litigious society, someone can trip over their own feet on your property and have an ambulance chaser on the line before they even get up off the floor.
Even if the "plaintiff" has no case whatsoever, you can spend tens of thousands of dollars defending yourself and your assets. Or be forced into a settlement.
But as Nolan and Crouch write, "many U.S. lawyers hesitate or refuse to take cases involving defendants who have their cash and assets secured offshore. They recognize the difficulties - indeed, the impossibility - of gaining access to those offshore assets."
Some people, out of a misplaced sense of patriotism, refuse to even consider moving assets offshore. Yet there is nothing illegal or immoral about moving assets offshore. And there are many, many benefits.
Offshore bank and brokerage accounts offer you a wider selection of investments (especially in stronger currencies than our perpetually weak dollar). Estate planning is often smarter and more efficient than what your local lawyer can set up. Business regulations are less cumbersome. You may even want to consider the advantages of dual citizenship and a second passport.
Sound too good to be true? It isn't.
"There are no -we repeat, no - outright and explicit prohibitions against American, British or Canadian nationals engaging in a slew of offshore financial activity. It is legal and legitimate to invest offshore," write Nolan and Crouch. "This book tells you how to obey U.S. tax law and file all the required reports, but ensure that a substantial portion of your assets and investments are located in the place where the best profits are - offshore."
In the end, only you know whether offshore investing is right for you. But you can't be sure until you have all the facts.
Nolan and Crouch's new book is a great place to start.
Editor's Note: Feel free to pick up a copy of "Offshore Investments That Safeguard Your Cash" at your local bookstore. Or grab it on sale now at Amazon for 24% off the cover price. Just click here.
Today's Investment U Crib Sheet
The newest batch of news emerging from the UBS/IRS debacle is that Swiss law prevents it from releasing the names and information on its clients. This throws a wrench in the process for over 52,000 Americans with so called "secret" accounts in Switzerland.
At issue is the IRS law that requires Americans to pay taxes on income wherever it's earned. As most U.S. citizens are aware, when the IRS is involved, it's never a good thing. The IRS' recent crusade has been spurred by a lawsuit that alleges UBS consciously steered Americans to UBS Swiss accounts to avoid IRS taxes.
After their victory, they pushed for the names and account information of the Americans with Swiss accounts.
Time will tell if the Swiss banking system and its notorious secrecy or the IRS and it's endless "we'll get our money somehow" approach will emerge victorious. But the fight should be an interesting one for investors. It also highlights the importance of tax planning of investments.
For the record, hiding it in foreign countries never sounded like an appropriate "plan."
Alex Green showed us how to legally stiff-arm the taxman a few months ago. And Scott Brown followed up with the "Four Easy Steps to Get Your Finances In Order." Stay tuned for more articles on personal finance and keeping your money in check.