In 1986, I walked into the main Credit Suisse branch in Chicago and told the doorman I wanted to open a Swiss bank account. I was led to a private office overlooking the Chicago skyline and was asked for my minimum deposit. Being just 31 at the time, I played it conservative and started with just $2,000 (about $4,300 in today’s dollars).
I was asked to fill out a one-page form and provide a copy of my driver’s license. I gave him a check and away I went. It took all of 20 minutes.
In 1986, “offshore” was still exotic. It was something regular people didn’t really do. How things have changed in 29 years.
There are many reasons for taking yourself or your assets offshore today. Here are the most common reasons:
- Protection from predatory government. Some clients have concerns about possible confiscation of retirement plans and what they see as an anti-rich mentality these days in the U.S.
- Protection from foreign exchange controls. While the government has never directly restricted moving capital offshore, there’s no guarantee it won’t in the future. Given the financial challenges facing the U.S., it’s always a possibility.
- Access to investment and business opportunities not available in the U.S. More than half of the world’s stock-investment opportunities—as measured by capitalization—exist outside the U.S. And while you can access some non-U.S. shares through a U.S. broker, you’ll wind up with stock that’s harder to sell (and at more unfavorable terms) than by going directly to the source.
- Protection from professional liability and other claims. Domestic strategies to protect against frivolous or excessive law suits aren’t always effective in today’s U.S. courts. Properly using entities like offshore limited-liability companies and trusts makes it much easier to ensure that your assets are truly protected from nearly any threat.
- Tax-savings opportunities. Mention “tax savings” and “offshore” in the same breath and the average person thinks you’re trying to cheat the taxman. But the truth is, there are legitimate ways to save taxes offshore. You can invest your IRA offshore and get the same tax benefits as you would here in the U.S. A legitimate international business that you control can legally exclude the profits from U.S. tax. And, if you live outside the U.S. full-time, your first $99,200 of income each year is tax-free in the U.S.
While it is true that more money equals more options, offshore is not just for the rich.
For example, Rachel is a 37-year-old successful single mother, she works full-time and has built up a net worth of about $200,000. Half of that money is in an IRA. Rachel’s biggest concern is possible confiscation of her retirement funds. She worries the U.S. government may force her to invest in things she doesn’t want to—such as government bonds.
Even though Rachel isn’t working with a lot of capital, she still has quite a few options. For example, she can:
- Set up an offshore bank account and earn a higher interest rate than you can Stateside.
- Start trading internationally using an offshore brokerage account.
- Purchase property overseas.
- Store precious metals in a secure offshore location.
- Set up basic asset-protection structures like an international limited-liability company (ILLC).
Setting up an ILLC is what Rachel did. She took her IRA offshore and formed an ILLC. Doing so gave her a level of protection and financial privacy not available in the U.S. Having an ILLC makes it much more difficult for the U.S. government to force her to do anything she doesn’t want to do.
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