When you’re growing your wealth, you need to always be aware of the different funding and financing models available. Offshore banking provides an incredibly popular option.
Think an offshore account is a surefire way to protect your assets? Guess again. There are a number of easily-avoidable offshore account mistakes that people continue to make.
In the event that an offshore account is necessary, you want to do your homework ahead of time to avoid any pending legal matters that can arise.
These are international bank accounts that let you store your money, grow interest, and take advantage of a host of benefits. Before you open an account, it’s important that you do your due diligence and research all you can.
What are Offshore Accounts?
If you’re new to the world of offshore banking it is important to have a clear idea of what this term really means. For many people, their extent of knowledge when it comes to offshore banking goes as far as the last James Bond movie or their favorite heist flick.
In reality, having an offshore bank account isn’t more glamorous or exciting than opening your standard local bank account. The only real differences you may encounter are the services that are provided by the bank.
The 7 Benefits of Offshore Accounts
Below we’ll dive into some major perks of offshore banking, and why it’s worth your time.
1. You Can Lessen the Blow of Bureaucracy and Political Conflict
As you well know, bureaucracy, changes in laws and ebbs and flows of the market change a lot about the way you bank. Financial institutions are subject to changes and calamities, all of which can trickle down to the customer.
For instance, bank bailouts and controversies surrounding them are a fact of life and can affect your bottom line as a consumer.
When you spread your money out among offshore accounts, it makes it easier for you to dilute the risk involved, and leaves you less subject to bureaucracy and hangups.
2. It Helps to Diversify Your Savings
What’s even better is that you have different avenues for keeping your savings. You may want to earmark different accounts for holding specific types of savings.
For example, you may want to have an account specifically for business savings and another to hold your estimated tax money. Having access to offshore bank accounts maximizes your ability to spread your money around between different savings models.
In fact offshore financial institutions have mutual funds, retirement accounts and other high-yield investment models that you can look into.
3. You’ll Receive Better Interest Rates
Perhaps the biggest immediate perk you’ll see is that offshore bank accounts generally have better interest rate yields.
This means that while your money sits in the account, it is accruing higher returns than you would get with domestic bank accounts. Putting your money in a high-interest bank account lets you get more bang for your buck, as opposed to breaking even.
Foreign bank accounts also generally get you favorable tax rates, which can keep even more money in your pocket.
4. The Offshore Accounts Can Protect You From Lawsuits
We live in a litigious society, and millions of lawsuits are filed every year.
You will need some protection from these potential lawsuits so you can weather the storm. Since the government has the right to freeze your bank account in some situations, having access to an offshore account allows you to get protection from this.
It can be difficult to make moves how you need to when your bank accounts are tied up. Having a couple of offshore accounts will allow you to have more breathing room while you undergo litigation.
5. You Will Learn Different Currencies and Markets
When you bank internationally, it’ll expose you to different currencies.
This allows you the opportunity to grow your business interests internationally and become more aware of world markets. You’ll get an ongoing glimpse at exchange rates and how they affect your business, and will also introduce you to opportunities that you might not have considered.
6. Having an Offshore Account Can Help You Operate an International Business
When you do serious business overseas, you’ll often have an easier road when your bank also has a presence in the country. Your transfers will go through quicker and without holds, and you can visit branches in-person if you’re traveling on business.
It makes it easier for you to send and receive foreign payments when you also have a bank account in the country. This way, your clients and associates will find it easier doing business with you, and there will be fewer holdups.
7. Offshore Accounts are Easy to Use and Access Today
A major perk of opening an offshore bank account is that they are more widely available and easy to access than ever.
With a lot of these bank accounts, you can get set up remotely, just as you would opening many bank accounts in the United States. In most cases, you’ll transfer money from an existing account via electronic transfer, and you can get up and running with your offshore account fairly quickly.
You must be sure that you always report your offshore accounts so you don’t run into tax fraud or other issues that come with the territory. While several people own offshore accounts, some people and businesses run into trouble because they assume they don’t have to report this income.
Prior to opening up an offshore account, one of the best things you can do is reach out to a team of financial professionals that can give you some advice and steer you in the right direction.
5 Mistakes to Avoid When Opening an Offshore Bank Account
While you may think that an offshore bank account is an obvious answer to keeping your money safe and secure, these common offshore account mistakes can have severe consequences.
Read on to take care of yourself, your legal status, and your money. Remember, it’s important to invest time in researching as some of these mistakes can result in the loss of thousands of dollars or even jail time.
1. Opening an Account with the Wrong Mindset
Thanks to Hollywood movies, many individuals operate under the false belief that opening an offshore bank account is something reserved for the rich and famous.
However, the process is fairly affordable and you may not even need to visit the bank in person.
It all depends on where you decide to open your bank account. Those who decide to open a bank account in Puerto Rico will only need to deposit €260 in their personal account of €550 into a business account.
All of this with forms that can easily be sent in by mail. With the help of a courier service, the process can be done relatively quickly and with little headache.
It’s important to get clear on why you want to open an offshore bank account. If you are doing so under the false belief that you can hide your money offshore, it is important to know there are very few grounds to support this claim.
Even offshore banking services may claim that they’re the only way to keep your assets safe. However, this is often without providing any real proof or guarantees. Remember, these banks will say whatever is necessary to get you to bank with them, even if it doesn’t hold much water.
The more you learn about offshore banking the more you’ll be able to establish the truth about hiding funds on what is and isn’t within your jurisdiction.
2. Forgetting About Re-Occurring Costs
While it may be true that opening an offshore bank account is reasonably affordable, there are the transactional and recurring costs that need to be kept in mind.
Depending on the type of bank account you opened, you may be faced with steep fees or monthly transaction costs. If you’ve chosen a good bank all of the transaction fees will be found in the paperwork you received when you first opened the account.
It is important to be aware of these additional costs upfront and to set regular reminders so your money doesn’t become an “out of sight, out of mind” problem.
3. Not Reporting Your Account to Local Tax Authorities
If you think you are free from withholding any money deposited in your offshore accounts, you are strongly mistaken.
If you are caught attempting to hide money in offshore accounts without telling the local tax authorities, you can face steep penalties and even time in prison.
Back in the US, you can even end up paying up to $500,000 or having to serve a serious jail term of up to 10 years.
From where we stand, we would say that it is not worth it.
4. Thinking Offshore Banking is the Ultimate Solution to Protect Your Money
All this may be a quick fix to protecting your current assets, however, it doesn’t mean that it is the best solution that is currently available to you.
In fact, depending on your situation keeping your money within the US may actually benefit your financial situation long one.
It is suggested that you speak with a finance expert before making any decisions. A finance consultant can help you adequately weigh the benefits and disadvantages that come with an offshore bank account.
5. Finding the Right Information that You Can Rely On
When it comes to where you place your money, legal proceedings, and offshore accounts, there is little room to confuse fact with fiction.
It’s important to have the counsel of an experienced financial expert to guide you through the best options for your money. You may find that having an offshore bank account is little more than an overhyped solution.
Get Into Offshore Banking
When you get into offshore banking, the benefits are innumerable. There are a variety of offshore banking accounts that you can take advantage of, but it always pays to know what you’re signing up for.
Before opening an offshore bank account, you should definitely consider getting in touch with some financial professionals that can guide you.
In that regard, we’d love to help you out.
At the Silver Tax Group, we can help you out with planning and managing any offshore assets. We can also protect you and guide you if you get audited or if you run into any other tax related issues.
Always contact us when you need help with your finances, taxes and so much more.
