7 Reasons Why Going Offshore Could Be The Best Strategy To Protect Your Wealth

Hollywood and the news media frequently try and demonize the offshore industry as a place for drug dealers, arms merchants, and tax cheats.

The truth is, regular folks like you and me have many good, honest, and legal reasons to move assets overseas.

Here are some the most beneficial reasons to diversify your investments offshore…

Frequently a consultation at my office begins with someone telling me that his lawyer said he couldn’t pursue some estate planning strategy he wanted to pursue. In my experience, “can’t” either means the lawyer doesn’t know how to accomplish the goal so they say it can’t be done… or it means that the strategy can’t be undertaken in the specific jurisdiction where the lawyer operates.

In either case, the answer isn’t to give up on your estate planning objectives but to find a new lawyer, one open to shopping jurisdictions to find the “right” place to achieve your objectives.

Nearly 70% of the world’s investments today are not available to U.S. investors. This is because the United States SEC claims jurisdiction over the entire world (take a minute to digest this reality) when it comes to the solicitation of any investment to a U.S. person.

Recently a client asked me to review the investment prospectus of an investment fund based in Malaysia. I logged onto the website to read it but was told the administrator detected that my URL was in the United States. As a result, I was prohibited even from reading the prospectus. Furthermore, the investment, I was informed, is “closed” to U.S. investors.

Thanks to the passage of the Foreign Account Tax Compliance Act (FATCA)‎, the U.S. Justice Department probe into convictions of Swiss banks serving U.S. clients. As a result, the current “de-risking” campaign being forced on foreign banks by their U.S. correspondent banks has seen many overseas banks simply refusing to take U.S. customers.

However, financial institutions that will not accept U.S. account holders directly, will consider an account for an international structure even when the beneficiary is a U.S. person. The right kind of legal structure can reopen the door to foreign financial institutions that have decided not to work with U.S. persons.

In most U.S. states, the rule against perpetuities restricts the creation of a “dynasty” trust‎. Yes, you can leave assets to your children or grandchildren but leaving assets for future heirs can be difficult or even impossible depending on where you live.

By contrast, in most offshore jurisdictions and international financial centers, it’s possible to create a trust with a long duration or even allow a trust to go on “forever.” This changes the way you’re able to leave assets for your immediate heirs. Instead of giving children and grandchildren the family’s wealth and hoping they know how to steward it properly for future generations, the trust instrument permits only some or all of the trust “income” to be paid out to the beneficiary, while the corpus stays in the trust and is positioned to generate more income for future generations.

Most people are rightly private about their financial affairs. Sometimes they don’t even want their children to know how much money they have. They may not want to create an expectation in their children’s minds that they will receive a large inheritance, which could affect their children’s approach to earning their own money. They might want the trust assets first and foremost for themselves with only the remaining residual (amount uncertain) to go to their kids.

Whatever the reason, offshore jurisdictions can be very protective as to the identity of both the grantor and any beneficiary. While most U.S. states require that adult beneficiaries be informed of a trust naming them as a beneficiary, this is not the case offshore. You can maintain the privacy of your assets however you deem best with only those specifically authorized informed what the trust document mandates.

I hear it every day from my clients: “I’m worried about the situation in the United States, I’m worried about the U.S. dollar, and want to have a non-dollar nest egg offshore in case things go bad.”

As they say, it’s always smart to hope for the best and prepare for the worst. This is the philosophy of many of my clients, and international structures are the leading strategy for doing just that. By creating an international trust, foundation, or any other structure with a diversified investment strategy, my clients are preparing for a day when perhaps the dollar is no longer the world’s reserve currency.

Even if that day doesn’t come in our lifetimes, it’s just common sense to diversify your investment holdings to include commodities, real estate, stocks, and bonds denominated in other currencies, if only to protect against any future devaluation of the dollar.

You’re worried that no matter what type of legal structure you put in place in the United States, a plaintiff’s attorney and jury could pierce it and take everything that you’ve worked so hard to earn. Litigation fears remain the number one reason folks look to protect their wealth abroad. Lawsuits are still the worry that keep many professionals and entrepreneurs awake at night. That’s why this concern tops my list of reasons to protect your wealth offshore.

Capital flows to where it is treated best. While the United States remains a land of opportunity, the simple fact is that our legal system is broken. Until it gets fixed, capital will continue to look for the ultimate protection that comes from being domiciled overseas.

Until these problems get fixed at the macro level it is incumbent upon anyone looking to protect, preserve, and grow wealth to look to international jurisdictions to protect their own and their family’s assets for now and for the future.

Joel Nagel