Should I Get An Offshore Account?
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People choose to open an offshore account for many reasons. They may be looking for better rates. They may be taking advantage of more stringent privacy laws. The offshore account may be set up with the purpose of sheltering some of your earnings for tax minimization efforts. Or, you may have business dealings in one or more foreign jurisdictions and wish to have funds set up in bank accounts in the country in which your international business is located. When reviewing the possibility of setting up an offshore account, here are some things to consider.
Research operating costs
There are often account charges attached to your bank account for such items as check purchase, maintenance, minimum balance failure. This is true of both onshore and offshore banks. However, you may find that foreign banks have additional fees ans charges that affect the balance in your account. You may be hit with an assessment for each transaction that occurs, currency conversion fees and even more charges. These items may be perfectly acceptable to you given your banking needs, but you should find out exactly what the fees will be on your account before signing on the dotted line.
Protection
In a U.S. bank your money is protected by the federal government through the Federal Deposit Insurance Corporation. Even if a bank defaults, your funds are safe, up to $100,000 per account. In an offshore bank there may be no such level of protection. The level of security for your money may be very good, but it may also be nonexistent. Do your research about what you can expect in terms of security before placing your funds. Talking to the bank personnel will help you in your decision, but take the time to do some online research as well.
Legal issues
Assets held in an offshore bank account do not fall under United States law. If you are concerned about losing assets during a divorce or other court proceedings, you can exempt them by placing them in a foreign bank account. The practice in these areas may be somewhat different the the law, so be sure to find out what U.S. pressure on offshore nations has accomplished in the past. Most nations do not want to fight the economic pressure of the United States.
Set up requirements
Offshore banks sometimes have very different authorization procedures. These procedures will vary from jurisdiction to jurisdiction, as would be expected. In the United States, usually establishing a bank account requires identification documents such as a driver’s license and social security number. Of course, you are expected to make an initial deposit. Offshore banks may require significant additional documentation, including authorization documents from authorities in the United States. Foreign banking institutions sometimes require significant initial deposit amounts. There may be difficulty in withdrawing any funds for a longer period of time than a U.S. bank would require.
Privacy
The lure of more privacy for your banking transactions is what draws many people to establish an offshore bank account. This factor should be carefully considered. The privacy barriers are sporting holes in some jurisdictions and openly disregarded in others.
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