ByLuigi Wewegeis the Senior Vice President, and Head of Private Banking ofCayeInternational Bank
Creating a viable financial plan involves more than coming up with a set of goals and opening a couple of accounts at the local bank or brokerage. In order to leverage your assets and help them grow over time, it makes sense to diversify your portfolio in a number of ways.
While you never want to let go of your domestic bank and investment accounts, it’s wise to consider how offshore banking can help you build greater financial stability. Here are some of the more important reasons to include banking offshore as part of your overall financial strategy.
1. Stable International Banking Services
Did you know there are banking systems around today that have never failed? Others are so stable that even during the most difficult of economic periods, they remain viable. Choosing to deposit funds in some type of term account or a demand deposit account is one way to take advantage of that stability.
The nice thing is that if you keep the account balances over a certain amount, the earnings you receive from those balances will add up as the year’s pass. With the term deposits, you always have the option of rolling them over for another term if you like.
The stability of some international banking jurisdictions often has to do with the laws that apply in the country where your accounts are housed. Simply put, there are nations with laws that are particularly friendly for individual depositors as well as businesses. With a little time and effort, you can find the best institution and country for your international financial activity, and rest assured that the money is safe.
2. Keep Your Assets Safe from Legal Action
It’s no secret that we live in a litigious society. Even if you’re not guilty of the alleged activity, there’s no guarantee that the court will always side with you. If a judgment is rendered that’s not in your favor, all or at least most of your domestic financial assets are at risk. In some cases, you may be wiped out and have to start all over again.
Here’s something that you need to know about the assets that you place in offshore accounts: they are outside the reach of any domestic lawsuit. It’s not possible for the legal system to demand that you liquidate assets held in international banks or investment accounts. If the worst possible scenario does come to pass and your domestic assets all go to satisfy legal settlements, you will still have your international assets to begin again.
3. Protection from Tax Agencies
What happens if you run into trouble with a domestic tax agency? Depending on the nature of the issue, many of your assets could be seized in order to settle a tax debt. That includes the balances in bank accounts, the funds in your investment accounts, and even any real estate that you own. It won’t matter to the agency if the issue came about due to identity theft or some other action outside of your control. Your domestic assets will be fair game.
This is another area where international accounts can protect you. Those assets are usually outside the reach of any domestic tax agency. Unless there is ample evidence of criminal activity on your part, the laws underpinning financial activity within the country where your international accounts reside protects those assets from seizure. This helps to avert what would otherwise be a personal financial disaster.
4. Favorable Interest Rates Offered in Specific Countries
What about the returns on the funds you place in international accounts? From offshore savings accounts to term deposits to demand deposit accounts, the possibility of earning a significant amount of interest is there. While the rates will vary between institutions, account types, and even the laws that govern financial accounts in different countries, you stand to consistently earn a reasonable return.
How does that compare to what you could earn by placing the same amount of funds in domestic accounts? You’re likely to find that the interest rates will be at least as good as what you can lock in at home. Don’t be surprised if you find that an offshore account would earn a higher rate of interest than any of your domestic accounts. In this sense, offshore banking helps you build more financial security. That will come in handy at any time, but it’s especially helpful when one of your goals is to set aside funds for your retirement years.
5. AdvantageousCurrency ExchangeRates
Currency exchangesare an investment option with the potential to generate significant returns. While somewhat fast-paced, the ability to trade currencies in real-time can help you amass wealth that you can then tuck away in something other than investment accounts. If you’re using funds in an offshore account for this purpose, you may find yourself with some advantages over trading with the use of local currency.
It all boils down to the rate of exchange between two currencies. You may find that the currency in the nation where your accounts are based are performing quite well compared to a different one. Use it tosecure currencythat’s currently lower but is expected to increase against other currencies shortly. Hold it long enough for that to happen, then convert it into the currency that’s local to your offshore account.
While you have to move quickly, this can be a quite lucrative way to invest.
6. Safeguard Against Political Shifts
There is a definite connection between the political direction of a nation and the economy. If the shift begins to undermine key elements of that economy, it will have a negative impact on your domestic holdings. Assets that you thought were secure and would continue to appreciate in value, such as real estate, may become almost worthless. What you thought was a sound financial cushion ends up being quite a bit thinner.
One way to protect yourself from the impact of political shifts is to invest part of your assets in offshore accounts. Choose a nation that has a proven track record of being stable economically and politically and deposit funds within that banking system. What’s happening at home will have little to no impact on the balances in those accounts. That allows you to continue accumulating assets for your future.
7. Insulate Finances from Natural Disasters
Hurricanes, tornadoes, floods, and other types of natural disasters can also weaken an economy and put your domestic assets at risk. While they may recover in the future, that’s not something you can be sure will happen. That’s why it makes sense to have at least some of your wealth safeguarded from whatever type of disaster happens at home.
With offshore banking and investment accounts, you can rest assured that your assets are safe. No matter how long it takes to get things back to normal at home, your offshore accounts will continue to consistently provide returns in the years to come. That provides peace of mind as well as ensuring your financial security remains intact.
8. Easy Access to Funds When Traveling Abroad
Spending time abroad is great, but it can also present certain financial challenges. How easy is it to draw on funds from your domestic accounts? In some cases, the combination of time and the fees involved could complicate your travels.
Did you know that offshore accounts that are based in certain nations are relatively free of these types of issues? While there may still be some fees, you could find it easier to get money when it’s needed. That can come in especially handy if you have some sort of medical need arise while you’re traveling.
You may also find therate of exchangeis more favorable, something that will certainly make the trip more pleasant.
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