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| Caribbean Property Magazine Home / September 2009 / 'Is Offshore Legal? September 2009' | SEND THIS PAGE TO A FRIEND  |
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S E P T E M B E R
 2 0 0 9Issue 32
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IS OFFSHORE LEGAL? |
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| IS OFFSHORE LEGAL? By David Tanzer How many times have you thought about investing or creating a new life “offshore?” What do you need to know before you move your money, or your family, or both, away from the perceived safety of mother homeland? Is it a realistic option? Is it complicated? Is it legal?
First, let’s define “offshore.” Offshore is anything that is not “onshore” within the boundaries of where you presently live. In other words, any place outside your homeland is considered “offshore.” Every country is offshore to every other place. And each jurisdiction has its own ever-changing laws and political aspirations. With over 190 countries worldwide, and over 6 Billion people globally, there is a huge world outside the boundaries of where you call home. How many of those countries, capitals, and leaders can you name or locate on a map right now? To how many have you traveled? And how many cultures do you understand? Here are some interesting global facts that affect your assets every day. If the world was reduced to a village of only 100 people, proportionately, the village would consist of 60 Asians, 14 Africans, 12 Europeans, 5 U.S. and Canadians, 8 Latin Americans and 1 from the South Pacific. Forty nine would be female and 51 would be male, with 82 non-whites and 18 whites. Eighty-nine would be heterosexual and 11 homosexual. Amazingly, 5 of the villagers would control 32% of the entire world’s wealth, and all of them would be U.S. citizens. What’s more, 80 would live in substandard housing, 24 would not have any electricity, 67 would be unable to read, 50 would be malnourished and 1 dying of starvation. Thirty three of our 100 inhabitants would be without access to safe water and 1 would have H.I.V. One would be near death, 2 near birth, 7 would have access to the Internet, and 1 (only one) would have a college education. If you look at our village of 100 from this point of view, the world takes on a whole new meaning. And if you have never experienced a war, the cage of imprisonment, the agony of torture, or a famine, you are better off than 500 million persons in this world. If you can attend a church, synagogue or mosque without any fear or threats of the consequences, you are better situated than almost 3 billion people worldwide.  If there is a meal in your refrigerator, you are dressed in clothes and shoes, live with a roof over your head, you are better off than 75% of the world population. And if you have a bank account with money in your pocket you belong to 8% of the well-provided people in the world – yes, 8%. Since you can read this newsletter, you do not belong to the 2 billion people who can not read.
Asset protection and offshore living and investing should take on a whole new meaning when you look at the world as a village of 100 people and consider their make up. It is true the world is a varied and different place, and offers much to discover and learn. Maybe this is why moving capital and people offshore is so “foreign” to so many people. It shouldn’t be, but I hear the same question repeatedly by those I consider educated and well-reasoned people: Is it legal to go “offshore?” The answer is “yes” it is perfectly legal for most of the western civilized world to move family and property outside of their homeland. And the reasons for going offshore are many. In most cases, even when you continue to live at home, you can legally open up an offshore bank account for increased financial privacy and enhanced asset protection.
Plus, when going offshore you have the opportunity for increased investment protection and diversification from fluctuating currencies, since you have many currency choices rather than limiting yourself to your local currency. You can freely hold US Dollars, or Euros, Swiss Francs, British Sterling, Japanese Yen, or Canadian, Australian or New Zealand Dollars, and most other currencies from around the world.
NATIONS AND BORDERS ARE “ILLUSIONS” DEFINED BY CONTEMPORARY LOCAL POLITICAL AGENDAS. And owning alternative currencies or other global investments can be held right at home, or offshore. International investments make sense because they are in tune with the deepest aspects of reality. Nations and borders are “illusions” defined by contemporary local political agendas. Too frequently those agendas are the flavor of the month determined by the political party in control at the moment. Economics and human nature pass beyond these artificial barriers…. as they should. We call our global actions free trade, but they are more. International investments, global living and multinational trade are nature’s expression of how people should be…human beings trading with one another, not Americans, Canadians, Chinese, Australians, British and so forth using past ideals to separate themselves. If you're thinking of going offshore – your person or your property – you're not only “legally” in the right, you're a lot wiser individual if you take advantage of global opportunities. Your right to go offshore is one of the most fundamental requirements of freedom….. and you don’t need a law to give you that right! Over the long run, nations, politics and borders are illusions, and social and political change is inevitable. It is important to recognize the changes happening before us right now so we can learn to adapt to borders controls and regulatory regimes that interfere with the free movement of people and capital.
And unfortunately, the future appears even more restrictive as more draconian laws and tighter controls are constantly being implemented interfering with the basic right of free movement of persons and property. What is important is that you recognize in advance the pitfalls and traps before going “offshore” to avoid bureaucratic nightmares. Offshore Risk Management If you are concerned about “going offshore” for asset protection, investment diversification, full or part-time living, or for just doing business, it may be helpful to remember that risk is always relative. Jumping out of a second story window is certainly high on the risk scale, but if the building is on fire and you can’t get out any other way, the two-story jump is a lot less risky than staying put. In addition to US dollar concerns, we are only left to speculate on the provisions of future regulations, border controls, and laws on currency controls that may be imposed. However, we can look to recent examples of what might happen to our savings if this occurs. South Africa and Russia are the best (or worst) examples of recent currency controls restricting citizens from leaving their country with local currency. These currency controls are only as recent as the 1990s. And even today in China, its citizens and foreign investors looking to move money offshore are hindered by strict currency prohibitions….how this might change with the Yuan going global is unknown. But these governments have held a heavy hand over foreign exchange mechanisms and exchange rate controls. |
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Worse yet, we are familiar with the horror stories from the 1930's and 1940's as Jews fled Nazi Germany, and Eastern Europeans desperately attempted to save themselves and their money from tyrants. As a student of history, I take the issue of currency controls very serious and as a realistic event that could occur anywhere, at any time, including in the US. Therefore, having at least a portion of your assets offshore is a good starting point for risk management.
In the above examples, individuals who looked to flee with their money with a pre-planned exit strategy and assets titled in an international structure - such as an International Trust - did not have the same financial concerns of those who did not plan proactively. With history as our teacher, I can see no better way to protect assets than titling them in an International Trust structure and hold at least some of your assets outside your home country. If you suddenly needed to move assets across borders and were prohibited, how would you live? Those with money are always more welcome in a host country than the indigent will be. Even if you don’t have a good reason to leave your homeland today, there is always peace of mind in knowing that you could, if it ever becomes necessary. Putting all of your eggs in one basket potentially poses great risk. Many of the major international banks and insurance companies operating offshore are far more conservative in managing their portfolios - and far less susceptible to failure - than US financial institutions. Many banks located “offshore” are highly rated investment quality, some with AA and higher ratings than even the best US banks could ever achieve. It may surprise you that deposits to $1 million in AA rated banks are government backed in Australia and New Zealand; both Western cultures being at the crossroads to Asia. This is similar elsewhere, and is because many offshore banks must conduct their banking affairs with fiscal responsibility. AN IMPORTANT REASON IN THE PAST FOR PLACING SOME FUNDS OUTSIDE OF YOUR HOME COUNTRY WAS DUE TO THE ONGOING LITIGATION EPIDEMIC.
An important reason in the past for placing some funds outside of your home country was due to the ongoing litigation epidemic. As a former US litigation attorney myself, and a former judge, I can attest to the ridiculous claims and results that too frequently arise from the US judicial system. Today, however – more than ever before – holding assets globally in a changing world order is essential. Protection from US dollar currency devaluation, threats of more regulations and currency controls, government deficits, social problems, and more, can be achieved from global diversification. International Planning should be an important part of your planning strategy, if not already. And hopefully you too will discover that offshore living and investing is not so foreign after all.
Those who mind their own business - with their nose to the grindstone - and are thrifty, too often find themselves unsuspectedly on the short end of the deal. The hard-working individuals who have accumulated some assets, or who have become financially independent, need to start with setting aside at least a small nest-egg offshore, where it will be safe from the vultures in our society. Keeping options open is smart forward thinking. Is the US Dollar Becoming Irrelevant? Numerous readers of our free newsletter service have asked for more details about the new global currency which China, Russia, Brazil, India and other countries are suggesting to replace the US dollar. What China proposes is an expansion of the use of something called special drawing rights (SDRS), which was introduced by the International Monetary Fund back in 1969. These drawing rights were issued to support the 1945 Bretton Woods fixed currency exchange rate regime which collapsed in 1971 (when President Nixon removed the US dollar from the gold standard). The value of these SDRs are currently based on a basket of four currencies, the US$, Yen, Euro, and Sterling. China has proposed expanding this basket to include the currencies of all major economies. Countries would entrust a portion of their SDR reserves to the IMF. The value of these SDRs would “float” with the broad basket of these currencies, and the SDRs would eventually replace the existing reserve currency, the US dollar.
Obviously, the introduction of this new global currency would be devastating for the US dollar. Countries, who are now obliged to invest a majority of their currency reserves into the US$ to settle international trade (think oil and gold, for starters), would no longer have to buy them. And the US treasury market, where much of these reserves are parked, would also suffer.
Personally I don't think this poses an immediate danger to the US$, as the proposal would require significant cooperation among global trading partners and the US will likely rally support to fight it. But it is something to keep a close eye on, particularly as it was met with surprising support from US Treasury Secretary Timothy Geithner. During the past decade China and Japan stockpiled huge reserves on the back of the US consumers, who eagerly bought goods produced in Asia. China holds a surplus $1.9 trillion, and Japan a surplus of $1 trillion (both with a T), as of Q1 2009. But US consumers are cutting back, and global trade has slowed dramatically as a result. Both Japan and China will therefore have smaller trade surpluses in 2009 and 2010, and therefore less money to invest back into the US treasury market. Nonetheless, these surpluses are staggering compared to the growing US deficits. THE CHINESE ARE PLANNING ON LAUNCHING THE YUAN AS AN INTERNATIONAL CURRENCY NEXT MONTH…ITS INTENTIONS ARE TO FIND A SUBSTITUTE FOR THE US$
In the meantime, the Chinese are also planning on launching its currency, the Yuan, as an international currency next month. Its intentions are to find a substitute for the US$ for international trade settlement. Unfortunately, this fall in global reserves and the Chinese Yuan going international, coincides with a big increase in funding needs by the US Treasury to pay for bailouts, stimulus packages, and ever increasing pay-as-you-go social programs.
And the beginning of the baby boomers retirement is not well-timed. Avoiding lawsuits, identifying the best and worst jurisdictions for offshore trusts, international banking, wealth preservation and privacy, living offshore with tax free income, border and currency controls and trends, dual citizenship and second passports, new global tax burdens, denouncing U.S. citizenship, avoiding common asset protection problems, and much, much more, are just a few of the topics covered in our free newsletters. |
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Author : David Tanzer, International Lawyer, Adjunct Professor of International Law, former judge, and retired trial litigator, is the author of the Offshore Living & Investing and How to Legally Protect Your Assets. His books represent years of research and cover many topics of current interest. For more information visit www.DavidTanzer.com where you can register for a free newsletter. To order books call 1-970-872-8304. |
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