How the Average Joe Can Protect His Dough Part II
Joe's an average American guy. He and his wife Jane live in a three-bedroom tract home in the suburbs with a couple of children. Joe has a solidly middle-class occupation. So does Jane - they both have to work to pay the bills.
Joe and Jane don't worry much about asset protection, privacy and have never invested a dime outside the United States. But one day, they read an article stating that more than 50,000 lawsuits are filed every day in the United States. Of course, John and Jane ignore it, because they "know" that there's nothing "average people" can do to protect themselves from such threats.
Fortunately, that's a misconception. Joe and Jane, and almost every other "average American," can benefit from an integrated program of wealth protection, and protect their privacy to boot. And they don't need to spend a fortune to enjoy these benefits - even if they're interested in diversifying offshore.
Why the Average Joe Should Even Look Offshore
Many countries have enacted laws and regulations that are much more protective of privacy and wealth than the United States. Each offshore jurisdiction is unique, but in general, they each...
1. Protect financial privacy much more than the United States. Financial information enjoys far more protection in most other countries than the United States. Even if there are no "bank secrecy" laws in effect, taking your wealth offshore will take otherwise-visible assets off the radar screen of domestic financial investigators.
2. Lack U.S.-style "civil forfeiture" laws. Most countries view the government seizing your property as a punishment that can only be imposed in a criminal proceeding. That means, unlike the United States, you and your property are presumed innocent until proven otherwise. In most of these countries, law enforcers can only take your property after you've been convicted of a crime.
3. Have procedural rules that discourage frivolous lawsuits. Unlike the United States, Most foreign legal systems discourage or prohibit lawsuits brought on contingency. This means in offshore courts, the attorney bringing the lawsuit is NOT rewarded with a percentage of the assets awarded by the court. Foreign courts also often have a "loser pays" rule in civil litigation and prohibit awarding punitive damages without a criminal conviction.
4. Have set up laws and regulations that are designed to protect wealth. Some foreign jurisdictions have enacted trust laws that make it very difficult to prevail in any claim against the assets conveyed to a properly structured trust. Others accomplish the same objective through insurance contracts. In virtually all cases, assets are better protected, and less visible, than in the United States.
5. Facilitate access to non-dollar-denominated investments. It's possible (although not always easy) to purchase foreign currency CDs and securities denominated in foreign currencies from a U.S. bank or broker. However, numerous restrictions apply, a consequence of laws enforced by the Securities and Exchange Commission, the Internal Revenue Service and other government agencies. Outside the United States, most of these restrictions don't exist, or are less onerous.
How You Can Take Advantage of Such Offshore Perks
If you're a small time investor, you can still take advantage of the opportunities offshore. Here are a few ideas:
1. An offshore commercial bank account. It's still possible to open small accounts in a handful of offshore jurisdictions. While an account of, say, US$20,000 may not be large enough to provide access to the full range of the bank's services, it will generally be sufficient to fund investments in savings accounts and foreign currency CDs. Most of these accounts are available at commercial banks, which means you shouldn't expect personalized treatments you get at a private bank.
2. Offshore safekeeping arrangements. It's also possible to use safekeeping arrangements to hold precious metals or other valuables offshore. There is no minimum investment to qualify for such services, as they are strictly fee-based. These arrangements may be legally non-reportable to the IRS or U.S. Treasury, unless the holdings are sold for a profit. However, persons with less than US$20,000 to protect may find the expense involved in transporting valuables abroad and paying the annual safekeeping fees too high to be practical.
3. Offshore variable annuities. If you're looking for an easy way to provide asset protection, currency diversification and tax-deferred growth, an offshore variable annuity is worth considering. With a minimum investment of around US$50,000, they don't cost a fortune, either. Several offshore jurisdictions provide statutory asset protection for the death benefit and investments held by an insurance policy. It's also much more expensive for a creditor or disgruntled family member to bring a claim before a foreign court than a domestic court.
One disadvantage of an offshore annuity is that you're not allowed to manage the investments within it yourself. If you do, you lose tax deferral. However, you can usually make a non-binding request to the insurance company to purchase particular types of investments or name an outside investment manager.
4. Invest offshore through your IRA. Offshore investments through a self-directed retirement plan are another option. You can purchase offshore stocks and bonds, offshore funds, even offshore real estate through your retirement plan. Unfortunately, most retirement plan custodians won't permit you to place offshore investments in your IRA, but there are a few exceptions. The minimum investment to make this a viable strategy is approximately US$100,000.
If you decide to proceed offshore, remember that for U.S. investors, offshore income or gain is generally not tax-deferred, other than the exceptions I've already mentioned. Extensive tax reporting requirements also exist for many types of offshore investments and contractual relationships.
Finally, no matter what options you choose for your offshore asset protection plan, please don't proceed until after you've consulted with a qualified professional.
Joe's an average American guy. He and his wife Jane live in a three-bedroom tract home in the suburbs with a couple of children. Joe has a solidly middle-class occupation. So does Jane - they both have to work to pay the bills.
Joe and Jane don't worry much about asset protection, privacy and have never invested a dime outside the United States. But one day, they read an article stating that more than 50,000 lawsuits are filed every day in the United States. Of course, John and Jane ignore it, because they "know" that there's nothing "average people" can do to protect themselves from such threats.
Fortunately, that's a misconception. Joe and Jane, and almost every other "average American," can benefit from an integrated program of wealth protection, and protect their privacy to boot. And they don't need to spend a fortune to enjoy these benefits - even if they're interested in diversifying offshore.
Why the Average Joe Should Even Look Offshore
Many countries have enacted laws and regulations that are much more protective of privacy and wealth than the United States. Each offshore jurisdiction is unique, but in general, they each...
1. Protect financial privacy much more than the United States. Financial information enjoys far more protection in most other countries than the United States. Even if there are no "bank secrecy" laws in effect, taking your wealth offshore will take otherwise-visible assets off the radar screen of domestic financial investigators.
2. Lack U.S.-style "civil forfeiture" laws. Most countries view the government seizing your property as a punishment that can only be imposed in a criminal proceeding. That means, unlike the United States, you and your property are presumed innocent until proven otherwise. In most of these countries, law enforcers can only take your property after you've been convicted of a crime.
3. Have procedural rules that discourage frivolous lawsuits. Unlike the United States, Most foreign legal systems discourage or prohibit lawsuits brought on contingency. This means in offshore courts, the attorney bringing the lawsuit is NOT rewarded with a percentage of the assets awarded by the court. Foreign courts also often have a "loser pays" rule in civil litigation and prohibit awarding punitive damages without a criminal conviction.
4. Have set up laws and regulations that are designed to protect wealth. Some foreign jurisdictions have enacted trust laws that make it very difficult to prevail in any claim against the assets conveyed to a properly structured trust. Others accomplish the same objective through insurance contracts. In virtually all cases, assets are better protected, and less visible, than in the United States.
5. Facilitate access to non-dollar-denominated investments. It's possible (although not always easy) to purchase foreign currency CDs and securities denominated in foreign currencies from a U.S. bank or broker. However, numerous restrictions apply, a consequence of laws enforced by the Securities and Exchange Commission, the Internal Revenue Service and other government agencies. Outside the United States, most of these restrictions don't exist, or are less onerous.
How You Can Take Advantage of Such Offshore Perks
If you're a small time investor, you can still take advantage of the opportunities offshore. Here are a few ideas:
1. An offshore commercial bank account. It's still possible to open small accounts in a handful of offshore jurisdictions. While an account of, say, US$20,000 may not be large enough to provide access to the full range of the bank's services, it will generally be sufficient to fund investments in savings accounts and foreign currency CDs. Most of these accounts are available at commercial banks, which means you shouldn't expect personalized treatments you get at a private bank.
2. Offshore safekeeping arrangements. It's also possible to use safekeeping arrangements to hold precious metals or other valuables offshore. There is no minimum investment to qualify for such services, as they are strictly fee-based. These arrangements may be legally non-reportable to the IRS or U.S. Treasury, unless the holdings are sold for a profit. However, persons with less than US$20,000 to protect may find the expense involved in transporting valuables abroad and paying the annual safekeeping fees too high to be practical.
3. Offshore variable annuities. If you're looking for an easy way to provide asset protection, currency diversification and tax-deferred growth, an offshore variable annuity is worth considering. With a minimum investment of around US$50,000, they don't cost a fortune, either. Several offshore jurisdictions provide statutory asset protection for the death benefit and investments held by an insurance policy. It's also much more expensive for a creditor or disgruntled family member to bring a claim before a foreign court than a domestic court.
One disadvantage of an offshore annuity is that you're not allowed to manage the investments within it yourself. If you do, you lose tax deferral. However, you can usually make a non-binding request to the insurance company to purchase particular types of investments or name an outside investment manager.
4. Invest offshore through your IRA. Offshore investments through a self-directed retirement plan are another option. You can purchase offshore stocks and bonds, offshore funds, even offshore real estate through your retirement plan. Unfortunately, most retirement plan custodians won't permit you to place offshore investments in your IRA, but there are a few exceptions. The minimum investment to make this a viable strategy is approximately US$100,000.
If you decide to proceed offshore, remember that for U.S. investors, offshore income or gain is generally not tax-deferred, other than the exceptions I've already mentioned. Extensive tax reporting requirements also exist for many types of offshore investments and contractual relationships.
Finally, no matter what options you choose for your offshore asset protection plan, please don't proceed until after you've consulted with a qualified professional.
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