Lief Simon advises: Going offshore can be a big, scary idea. In fact, thanks to the well-publicized stories of criminals who have indeed taken their ill-gotten gains offshore, many people think that going offshore is illegal. This is not true, of course. For the record, there is nothing at all illegal about taking whatever youve got and placing it or investing it in another country, even (at least not yet) if youre an American. Although, if youre a U.S. person, going offshore does come with a long and growing list of compliance factors and restrictions. The truth is that, not only is going offshore not illegal, it is also, in todays world, the most important agenda item for all of us, a practical necessity of our age. To understand why diversifying in this way is so important given the world we live in, consider Argentina. Over the last century, Argentinas economy has been a roller coaster, with wild ups and downs to do with inflation, currency restrictions, price freezes, and other economic woes and complications. Holding at least some of your cash in a bank in another country is a more and more sensible idea all the time no matter who you are or what countrys passport you carry. For some reason, the U.S. government thinks that its okay to continue to increase its debt as long as the output of the country is growing faster than that debt. Maybe I missed that in my Econ101 class as a strategy for long-term stability. Recognizing the reality of the current fiscal state of the U.S. government, where would the money come from to bail out U.S. banks from another crisis? More to the point, why would you, as an investor, as a citizen, choose to sit around to find out the answer to that question? Whether you believe its possible the U.S. government could implement a one-time tax as they did in Cyprus or not...whether you think the liquidity ratio of your banking system is adequate or not (it likely isnt)...whether youre worried about currency controls or not...you should have some of your money, at least part of your nest egg, sitting in another jurisdiction. That is to say, the first, easiest, and most pragmatic step everyone should take for going offshore is to open a bank account. For us Americans, thanks to FATCA and the related new IRS rules for foreign banks to comply with FATCA, it is getting harder and harder to take this simple step. The unfortunate reality right now is that many banks around the world wont open an account for a U.S. citizen. Some will, and I suspect that more will accept U.S. clients again after they have had a chance to sift through the FATCA mess. Meantime, again, despite everything that is going on right now, it is not illegal for an American to have a bank account offshore. However, as an American with a bank account offshore, you end up with reporting requirements. At a minimum, you have to indicate on Schedule B of your Form 1040 that you have an account offshore. If you have more than US$10,000 in aggregate in financial accounts offshore, youll also have to complete the Foreign Bank Account Report. If you live in the United States and have more than US$50,000 (US$100,000 if you file a joint return) in foreign financial assets (which includes bank accounts), then youll also have to complete Form 8938. That all may seem complicated, but it isnt. Its not difficult. Its paperwork. And, as intimidating as it can seem at first, I beg you: If youre an American, dont let the growing compliance concerns and expanding restrictions scare you away from opening the offshore bank account you probably should have. The downside risk is too great and growing. Whether its the U.S. economy, the collapse of the dollar, another U.S. banking crisis, or some other right-now-maybe-unnamable calamity, you need to diversify. It is the only way to take control of your future and to protect yourself and your family long term. A bank account is the first step, but there are others you can consider.
Posted on: Thu, 23 Oct 2014 05:58:44 +0000
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