{"id":131794,"date":"2021-01-28T09:30:57","date_gmt":"2021-01-28T16:30:57","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=131794"},"modified":"2024-02-24T13:22:42","modified_gmt":"2024-02-24T20:22:42","slug":"offshore-banking","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/offshore-banking","title":{"rendered":"Offshore Banking 101: What You Stand To Gain (& What To Watch Out For)"},"content":{"rendered":"

The average person\u2019s knowledge of an offshore bank account typically comes from a television crime drama. If you know a little more than the average person, you may have gotten some details from an “info dump” or scandal or a scandalous “leak” like the Panama Papers.<\/p>\n

With the drama and intrigue, it’s no surprise that offshore bank accounts have a bad rap. But I’m here to tell you this: ordinary real estate investors can open perfectly legal offshore accounts as part of an airtight asset protection strategy.<\/p>\n

I should know\u2014I help them do it all the time!<\/p>\n

Let’s be clear: There are no laws on the books in America preventing a citizen from owning an offshore bank account. A citizen (with the help of their attorney who should always be consulted for these matters), is able to open an overseas account without any explanation. You can use these accounts to hold assets, take advantage of foreign banking privacy laws, protect yourself from legal liability, or even prevent a lawsuit altogether.<\/p>\n

But what about those stories about criminals trying to hide shady dealings, launder money, or commit fraud? Yes, shady people can absolutely use an offshore account to disguise or commit their crimes. That\u2019s on them, though\u2014not the account. Many countries have adjusted their local laws to curtail this kind of abuse and to protect their reputations.<\/p>\n

Related: <\/em><\/strong>Considering Moving Abroad? Here\u2019s How Taxes Work<\/a><\/em><\/p>\n

So repeat after me: There\u2019s nothing inherently wrong or illegal about an American real estate investor with an offshore account!<\/p>\n

Now that we have that out of the way, let’s talk about how you might go about setting up an offshore banking account the right way.<\/p>\n

As you might expect, there are legal considerations to take engaging in major financial transactions of any sort, especially international ones, so having a trusted legal professional who can assist you is key. Our job is to help you avoid those hidden pitfalls with banking or financial regulations. And those pitfalls can be hard to see if you aren’t careful!<\/p>\n

4 Benefits of Offshore Banking<\/h2>\n

Because every country and its financial regulations are different, you\u2019ll find that privacy and other perks of an offshore account vary by country. That said,\u00a0 there are some common threads. It\u2019s important to evaluate your specific needs before selecting a country to host your account so you can be sure they are able to meet them.<\/p>\n

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  1. \n

    Stability<\/h3>\n<\/li>\n<\/ol>\n

    Currency fluctuations and destabilization happens much more often than you think. Much was made in the late 2000s about the wild swings Zimbabweans<\/a> were seeing in the value of their money. It got so bad their government was simply changing the written value of their paper money, even printing multi-trillion dollar notes, to combat rapid hyperinflation!<\/p>\n

    Many Americans think we are immune to this situation, but our banks have been overleveraged and in crisis multiple times in just the past two decades. In fact, in a 2018 analysis of bank stability<\/a> ranked U.S. institutions in the bottom of the top 50 in the world, with just five American banks making the list.<\/p>\n

    An offshore account at one of these more stable institutions, or in a country with tighter banking regulations, can protect your financial assets from civil conflict, creditors, and worldwide uncertainties.<\/p>\n

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      Currency Diversification<\/h3>\n<\/li>\n<\/ol>\n

      In addition to stability, having a financial portfolio with a diversity of currencies can insulate you further from fluctuations. This kind of diversity appeals to many real estate investors, but insufficient research can end up costing you a lot of lost income. Always consult a pro on these matters.<\/p>\n

      Related: <\/em><\/strong>Don\u2019t Get Conned! 11 Crucial Questions to Ask About New Investments<\/a><\/em><\/p>\n

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      1. \n

        Asset Protection<\/h3>\n<\/li>\n<\/ol>\n

        Americans file one lawsuit for every dozen adults every single year. The more successful you become as a real estate investor, the more like you are to be on the receiving end of one of these lawsuits. In light of that, it\u2019s no wonder many investors are stashing their assets in an offshore account to protect them from potential litigation. Rather than just hiding your assets within another entity structure, this literally moves it out of reach to another country. (Foreign-held assets are much more difficult to \u201cgo after\u201d than domestic assets.)<\/p>\n

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        1. \n

          High-Yield Interest<\/h3>\n<\/li>\n<\/ol>\n

          Rather than banking with the same dozen or so institutions as everyone else in the states and seeing the same interest rate as everyone else, an offshore account lets you choose from the entire world of finance for the best return. A qualified financial advisor can assist in helping you find the high-interest savings account you\u2019ve been looking for, especially in a country with a lower rate of inflation than your home country.<\/p>\n

          Ready To Learn More? Scammers Are There To ‘Help’<\/h2>\n

          Start researching offshore banking options and you’ll very quickly see that there are\u00a0scammers looking to take advantage of Americans who don\u2019t know the law or regulations. These scammers will reach out with the promise of \u201cdirect banking services,\u201d meaning via email, personal message, or something you click on or download to access.<\/p>\n

          There\u2019s a zero percent chance these offers are legit. Rather, these are phishing\/spearphishing messages targeted at real estate investors to collect your personal, sensitive information. The easiest way to handle an unsolicited offer like this is to Google the company and, if your suspicions are indeed correct and they are phishing, report them as spam within your email client and move on.<\/p>\n

          Before ever opening an account, it\u2019s absolutely vital that you research the legitimacy of your overseas bank. Read reviews\u2014especially from other foreigners\u2014about their services and determine if they can actually meet your needs.<\/p>\n

          FATCA and Your Offshore Account<\/h2>\n

          The Federal American Tax Compliance Act (FATCA) of 2010 is the law you should know inside and out before you begin your journey into offshore banking.<\/p>\n

          I’ve broken down the basics for you:<\/p>\n