The Benefits Of Going Offshore

Not Only For The Absurdly Wealthy Or The Ridiculously Criminal

Dec. 12, 2011, Panama City, Panama: Going offshore is not illegal, and it is not wrong. In the current global investing climate, it is pragmatic and sensible. Taking your assets, your investments, your business, and yourself offshore in the current global investing climate is survival.

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Dear Live and Invest Overseas Reader,

In the 70s and 80s, only the absurdly wealthy or the ridiculously criminal went "offshore." Typically, they went in search of tax loopholes or places to sanitize ill-gotten gains.

This explains why, even today, if you tell someone you're opening a bank account in another country or incorporating your business in another jurisdiction, he's likely to assume that you're hiding something. At one time, that was a safe assumption, because, at one time, most people "going offshore" were, in fact, hiding something...from the government...from a soon-to-be ex-wife...

In the 70s and 80s, when all those folks with their questionably gotten gains were looking for ways to preserve them, an entire industry developed around the idea of going offshore. This industry was populated mostly by attorneys who specialized in complicated tax loopholes that really only made sense for the super-rich. If you had a few million dollars, you could hire one of these attorneys to set up one of their tax loophole strategies for, say US$50,000, and you'd save maybe US$100,000 a year in taxes.

That was a good deal for you and a good deal for the attorney, but a bad deal for Uncle Sam. Which is why, in 1986, most of those U.S. tax loopholes were closed, leaving a bunch of attorneys used to earning high fees scrambling to figure out what to do next.

They moved on to complicated structures for asset protection...again targeted to the super-rich. Much of the time, the structures were intentionally complicated with confusion the primary objective--maybe confusion for the IRS so the would-be tax-payer could avoid paying tax...or maybe confusion for the client so the attorney could justify his high fees.

When I talk about "going offshore," that's not what I'm meaning.

Here's the starting point for this conversation: It isn't illegal to go offshore because all "going offshore" means is doing something outside your home country. If you're an American, this can mean opening a bank account in Belize, for example, or incorporating your business in Panama. If you're a Brit, it can mean taking advantage of tax advantages in the United States (which is one of the world's biggest tax havens...only for the rest of the world, not for Americans).

Here's the second important thing to understand about all this: In today's screwed-up global economy, "going offshore" is something you should consider if you have any assets at all. It's a different world than in the 70s and 80s, and, in today's world, you need to do whatever you can to take control of whatever you've got.

If you're an American, you aren't going to be able to do this in the United States. That's the simple evolving reality. You're going to have to look at options in other countries. Options offshore.

Your strategy does not have to be complicated, but it must be based on diversification.

It can be as simple as opening a bank account in another country. This could be your first step, and maybe it's the only step you'll ever need. Or maybe it'll lead to the development of a strategy that will eventually have your assets, your investments, your business interests, and your life well diversified around the world.

Finance 101 used to teach us that diversification had to do with spreading your investment capital among stocks, mutual funds, maybe some bonds, and cash in the bank. Today's definition of diversification--my definition of diversification--includes stock, bond, metal, real estate, and commodities holdings, but spread over several countries and several currencies.

It includes holding residency in more than one country, so that, should you find yourself in a place where things become no longer bearable, you have an option for where to move next.

It includes holding your assets in structures that protect them while also (very important) minimizing the global tax effects.

Diversified in this way, you can minimize the effects of any single or localized crisis you may encounter.

The average person, though, isn't going to go from wherever he is right now...to a fully diversified strategy overnight. I've been working at this for more than 19 years. Unfortunately, you don't have that kind of time. World events, triggered by massive national debt in the United States and elsewhere, are making it harder and harder to do the kinds of things I'm talking about, especially if you're an American.

What you need to do right now is to recognize that going offshore is not illegal or "wrong." In the current climate, it's pragmatic and sensible. It's survival.

This is the starting point for the conversation I'm going to take up in my new Simon Letter service, in which I'm going to show you how to diversify your life internationally (let's stop calling it going offshore), starting from very simple strategies (opening a bank account in another country, say) to more complicated ones. Your personal strategy can be as sophisticated as you need or as simple as you want, but, for pity's sake, do something.

Don't just sit on the sidelines waiting for the other shoe to drop.

Lief Simon

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