Do you work in a profession that is at high risk for lawsuits? Do you worry about creditors taking advantage of your wealth? Do you want to take a trip to a beautiful destination and write it off as a tax deduction? This is an exciting episode where we explore the idea of using international asset protection strategies and offshore banking. Learn some of the top reasons people consider these strategies for protecting their wealth.
Reaping the Benefits of International Asset Protection and Offshore Banking
The Benefits of International Asset Protection and Offshore Banking
Offshore banking is the term that is commonly used to describe what essentially is international banking. Basically, if you use the services of a bank that is not based in your home country, then you have an “offshore” or international account. There are several reasons that make offshore banking an attractive choice for businesspersons and private individuals. I’ll discuss some of those advantages in a moment, but first I’d like to clear the air from some of the negative connotations that too often go hand-in-hand with the term “offshore banking.”
Removing the Stigma
Whereas once upon a time you could walk into a Swiss bank with a suitcase full of cash and open an untraceable bank account with no questions asked, legislation in recent decades has eliminated any real possibility of using international banks or financial centers for tax evasion. That simply can’t be done anymore. Another stigma mistakenly associated with international banking is the allegation that financial centers are frequently used for money laundering by people who are mixed up in drug trafficking and in financing terrorism. I can say from the years of experience that I’ve had in the international banking industry that it simply isn't true. Very rarely do people come knocking on the bank’s door looking to do anything of the kind and, on the extremely rare occasion that they do, they are quickly declined by the banks, which are meticulous about doing their due diligence.
Businesspersons: Tax Efficiency and Currency Flexibility
Who does use the services provided by offshore banks? I’ll divide my answer into two groups: active businesspersons and corporations, and private individuals seeking to protect their assets, diversify their options, and find new opportunities. I’ll start with businesspersons and corporations.
An American businessperson or corporation in a partnership with a foreign-based counterpart will often look to offshore banks for tax efficiency. Financial centers, such as Belize, take zero tax from corporations that are set up in their jurisdiction, allowing the owners to be taxed for their profits only by their home country—by the United States for Americans, by Germany for Germans, and by Japan for Japanese, facilitating global business.
A second factor that makes offshore banking attractive for international businesspersons is their currency flexibility, which can be crucial to facilitating smooth business operations. In American banks, for example, it can often difficult to arrange to keep funds in any currency other than the US dollar, which can be onerous if your business is being done in Germany or Japan and, consequently, not in dollars. At banks at international financial centers, on the other hand, you can just check a box and have your funds in five different currencies at a time, if you should so choose.
Devaluation Protection, Asset Protection, Currency Diversification, and Investment Options
The second group of people who often opt to keep offshore accounts are private individuals. If you live in a country such as Venezuela, which suffers from a weak currency and an unstable economy, offshore banking provides you with protection from rapid devaluation and other risks of banking at home. Many people in Latin American countries, including countries that currently are economically stable, opt to keep at least some of their funds offshore so as not to be caught off-guard if things take a turn for the worse and the currency becomes rapidly devalued. While rapid devaluation may be less of a concern for American and other Western investors, many of those who use offshore banking do so to benefit from the asset protection, currency diversification, and access to investments that it offers and that would otherwise be closed to them.
Asset protection is important for a variety of reasons, one of which is that more and more individuals are at risk due to rising litigiousness. The legal trend in the United States and elsewhere in recent years has been increasingly favorable towards plaintiffs who seek court orders to freeze the assets of lawsuit defendants. Doctors, contractors, and other professionals in the US and elsewhere who are vulnerable to litigation often choose to keep at least some of their financial assets in offshore accounts to ensure that they won’t face a situation in which all of their assets have been frozen—which could happen if they are all under domestic jurisdiction—and keep an emergency fund available and liquid in an offshore account.
As noted above, it is hard in most domestic banks to keep funds in currencies other than the local one. For long-term investors, that lack of diversification can be deterring since their primary goal is to preserve and grow the value of their assets over the course of generations. Therefore, like international businesspersons, retired Americans who may have chosen to live in a country with an arcane, inefficient banking system may choose not to keep a large bank account in that country. Instead, they will prefer to bank elsewhere using an international banking account to maintain and grow the value of their savings.
Many Americans also maintain offshore accounts to provide them with access to foreign investments that would otherwise be closed to them. American legislation in recent years has mandated that any foreign investment funds that have American investors must comply with US reporting requirements. Many foreign investment funds simply opt not to accept American investors as a result, so as to avoid the bureaucratic headache of compliance with US demands. Offshore banks provide a way around that obstacle, allowing Americans to use the non-American offshore bank to invest indirectly on their behalf.
Offshore Banking: A Useful Strategy to Keep What's Yours
The fact is that capital flows to where it is treated best. The financial systems of many Western countries, including that of the United States, can be quite restrictive. As a result, many look overseas for greater flexibility and protection for their hard-earned assets. Having the right structures and strategies in place are important in order to enable you to keep what is rightfully yours. International banking together with smart planning can be a significant and valuable avenue for you to maintain the control over your wealth that you deserve.
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Today's Guest: Joel Nagel
Attorney Joel Nagel is an American lawyer, speaker, writer, and strategic thinker. He is best known for being the founder and managing partner of Nagel & Associates, LLC. Nagel specializes in international commercial transactions, international law, asset protection, and estate planning. He has served as the keynote speaker at many conferences and seminars and writes prolifically, having been featured in numerous publications.
Education Born in Pittsburgh, Pennsylvania, Joel Nagel grew up speaking both English and German. Nagel's bilingual skills paved the way for his future career in international law. He attended Allegheny College, where he completed a double major in German language and political science. He then continued his studies abroad as a Fulbright Scholar. Returning to America, he completed a law degree at West Virginia University and a master’s degree in international law and taxation law at Georgetown University, graduating with honors.
Professional Background Nagel got his professional start at the U.S. Department of Commerce and went on to work for Buchanan Ingersoll as an attorney. In 1992, he opened his own specialty law firm and has since become expert in the handling of international investments, estate planning, asset protection, and global commercial transactions. Joel Nagel has served on the board of over 15 companies, including in Belize as chairman of the board of Caye International Bank, which was recently named Best Private Bank in Latin America. In that position, Nagel provides the bank with guidance as to best practices and has played a crucial role in establishing the bank's reputation as one of financial responsibility, diversified funding and revenue structures, and customer support. Currently, Nagel has over 30 years of experience in international commercial transactions and business, asset protection, and tax planning.
Philanthropy Attorney Joel Nagel serves on the board of several philanthropic organizations, including the Nicaragua Development Corporation, which helps improve life in Nicaragua by building health clinics. Nagel has also been an integral part of the Pittsburgh Rotary Club for over 25 years, serving in various positions such as president, district governor, and foundation chairman.
Personal Life Joel Nagel married his high school sweetheart, Dr. Susan Entress Nagel, and they have seven children. They live together in their home in Sewickley, Pennsylvania.
Joel's Online Presence:
- Kirk Chisholm | Innovative Wealth
- Barbara Friedberg | Barbara Friedberg Personal Finance
- Glen Wagstaff | Intervivos, PLLC