Why the Best Private Accounts aren't "Offshore"

While, as stated previously, there are many reasons why one might want to move their monies "offshore", for a large majority, often times the most effective offshore locations will be those that aren't thought of as "offshore".



How do we define an "effective" Offshore Location?



By effective, I mean simply, that it does what it was designed to do. For most people going offshore is driven by one or a combination of the following factors:

1. Asset Protection


2. Reduction of Legal Risk


3. Tax Avoidance


4. Diversification of Political Risk


5. Diversification of Banking/Currency Risk

Asset Protection

Asset protection is a complex, ever changing subject and worthy of its own series of articles. Suffice it to say that private offshore accounts can play a significant part of a larger asset protection strategy. This is especially true in jurisdictions where tort law and lawsuits (frivolous and otherwise) are very easy to file, and very expensive to defend yourself against.

Reduction of Legal Risk

that appear to be to be effective, should be completely legal

When we look at these reasons, financial privacy, in most cases becomes a critical component for accomplishing any of these goals. Quite simply, the most effective strategy strategy often incorporates some degree of discretion in your financial activities.

Tax Avoidance

Your offshore tax avoidance strategy should be completely legal. However, to be effective longer term it also helps if your strategy isn't heavily advertised. In other words, you want to be discrete about your activities -- even those that are completely legal. Why? Well, governments, especially those under financial pressure can change tax laws at whim. Those tax laws that seem to be disproportionately benefitting a small group (especially those without significant political leverage) are at greatest risk for being changed to your detriment.



Diversification of Political Risk



Often times, individuals with a lot to lose, will find themselves in a difficult political environment. This can be especially true if you are in developing country and additionally reliant on international relationships between your jurisdiction and one or more G-8 countries. Through no fault of your own, you could find it very difficult to expatriate funds, repatriate funds, or get any international banking services at all.



Diversification of Banking/Currency Risk



Financial Privacy



Most of the reasons that one would want to move funds offshore would be for security/diversification and most of these moves at diverstification and security are undermined when you are high profile with your moves or where your funds are being held.



Moving large (or even seemingly inconsequential amounts of cash) into and out of "known" offshore banking centers can bring an unwanted amount of scrutiny to your financial affairs that go counter to the whole reason for wanting to move some of your nestegg "offshore" in the first place.