1. Home
  2. Why Do the Rich Invest Offshore?
  • Sign up
  • Sign in
Money Talks News
  • Popular
  • Latest
    • Coronavirus
    • Ask Stacy
    • Make
    • Save
    • Borrow
    • Grow
    • Live
    • More
  • Deals
    • Automotive
    • Clothing & Accessories
    • Computers
    • Electronics
    • Everything Else
    • Financial Services
    • Gaming & Toys
    • Health & Beauty
    • Home & Garden
    • Movies, Music & Books
    • Office & Supplies
    • Special Occasion
    • Sports & Fitness
    • Store Events
    • Travel & Entertainment
  • Podcasts
  • Solutions
  • Academy
These Are the 3 Best Used Cars You Can Buy
The 10 Best Outdoor Home Upgrades for Your Money
8 Award-Winning Products That Impressed 40,000 Shoppers
10 Ways Retailers Trick You Into Spending More

Why Do the Rich Invest Offshore?

Have Mitt Romney's offshore accounts sparked a desire to open your own? Here's a bit of background on why the rich invest offshore, and why you probably can't.

Angela Colley • September 10, 2012

           
Photo (cc) by Loren Sztajer

If you’re following this year’s election news, you’ve probably seen Romney come under fire for his offshore accounts. While his campaign isn’t offering explanations for keeping money in places like Switzerland or the Cayman Islands, it’s probably safe to assume he’s not doing anything illegal. But it begs the question: Why do the rich keep money in foreign accounts?

In the video below, Money Talks News founder Stacy Johnson explains why the rich seem to favor offshore banking. Check it out and then read on for more.

Now, more about offshore banking…

Offshore accounts – legal or illegal?

One of the confusing things about offshore investing is that it does often involve breaking the law. For example, strict bank secrecy laws in places like the Cayman Islands and Switzerland allow those with ill-gotten gains to hide their money and thus keep it from being confiscated. Everyone from terrorists to drug smugglers use offshore accounts this way.

So it’s tempting to believe that anyone with an offshore account is doing something illegal. After all, if they weren’t, why would they care about secrecy? But sending your money overseas is no more illegal than sending yourself overseas. And there are logical reasons to do it.

The mechanics

In the past, to open an offshore bank account you would typically either visit the bank in person or use a liaison in the United States. For example, an offshore bank located in Belize or Switzerland works with a law firm in New York. To open an account, you visit the law firm and a lawyer sets up the account on your behalf for a fee.

Today, you also have the option of opening an offshore bank account online or over the phone yourself, eliminating the expense of a liaison. However, because of their complexity and depending on what you’re attempting to do, lawyers can still be necessary to set up and manage an account.

In some cases, investing offshore includes creating a company and incorporating in the host country. In an article recently published by The New York Times, Adam Davidson chronicled how he could have incorporated and started an offshore bank account in 10 minutes for less than $3,000.

The full article is worth reading, but here is a breakdown of what Davidson did. First, he located an offshore bank in Belize that was willing to set up an account through email and over the phone. Then he contacted the bank and got a list of fees, including:

  • $900 for basic incorporation in Belize
  • $85 for a corporation seal
  • $650 to open a bank account in a second country, Singapore
  • $690 to assign an account manager
  • Total startup cost – $2,415

But cost is related to exactly what you’re doing with an offshore account. Some require a corporation, some might even require you to own a home in the country where the account is located. And some accounts may have steep minimums: from $100,000 to a million or more.

The benefits of offshore investing

1. Privacy Under U.S. law, it’s fairly easy for the government, or in some cases even private citizens, to gain insight into your financial activities. But some countries have laws preventing banks from giving out any information about account holders. For example, the Switzerland Banking Act of 1934 makes it illegal for bankers to share any information about your bank account, unless you’re suspected of an offense like drug trafficking or money laundering.

For example, if you’re a famous corporate raider who wants to take over a company, when you start buying stock, small investors could see what you’re doing – big trades are public record. Other investors could then jump onboard and drive the price of your target company higher. An offshore corporate or trust account could shield your identity.

2. Asset protection Since your offshore bank account is protected by privacy laws, that makes it difficult for anyone to find your account or learn how much money you have. That could protect your assets from being seized. For example, if a surgeon is sued for medical malpractice, he might be able to shield assets this way.

3. Higher return The average interest rates on savings accounts have plummeted in recent years. For example, as of Sept. 6, the highest rate Bankrate found on savings and MMA accounts was 1.05 percent, with a $25,000 minimum opening deposit. Other countries might offer higher rates.

4. Tax Deferral Companies can use offshore accounts to defer their U.S. taxes. For example, if you own a company that does business outside the United States, depositing international profits into a U.S. bank account means paying taxes on them. Put those profits in an offshore account, however, and you won’t have to pay taxes until the money comes back into the country.

Bottom line? Offshore accounts can offer advantages for those who can afford them, but the complexity and high cost keep them out of the reach of average people. As Stacy said in the video, they’re another way the rich get richer.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
11 ‘Disposable’ Items You Should Be Reusing
11 ‘Disposable’ Items You Should Be Reusing

Are you throwing away money?

5 States Where Drivers Pay the Most for Car Insurance
5 States Where Drivers Pay the Most for Car Insurance

Auto insurance will cost you more than three times as much in one state compared with another. Here’s how to lower your rates no matter where you live.

9 Foods You Should Never Buy Again
9 Foods You Should Never Buy Again

Make the wrong food choices, and you can ruin your health — and possibly shorten your life.

How to Prepare Your Finances for Retirement in 7 Steps
How to Prepare Your Finances for Retirement in 7 Steps

Here is how to get your finances in shape for your golden years, one step at a time.

15 Things You Should Always Buy at Yard Sales
15 Things You Should Always Buy at Yard Sales

You can save a ton of money — especially if you spot any of these items.

Sign up for our free newsletter!

Join our many free newsletter subscribers building wealth and destroying debt:

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
10 Things Frugal People Never Buy
10 Things Frugal People Never Buy

If you’re a true tightwad, the mere thought of spending money on these items gives you the willies.

10 Useless Purchases You Need to Stop Making
10 Useless Purchases You Need to Stop Making

You might as well flush your money down the loo if you spend it on these things.

The 16 Cars Most Likely to Last 200,000 Miles
The 16 Cars Most Likely to Last 200,000 Miles

One automaker takes half the spots on a list of the longest-lasting vehicles.

7 Social Security Rules Everyone Should Know by Now
7 Social Security Rules Everyone Should Know by Now

Confusion over Social Security is a shame, considering how many of us will need this money badly.

9 Shopping Mistakes to Avoid at Costco
9 Shopping Mistakes to Avoid at Costco

Are you missing out on serious savings at your favorite warehouse club?

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

They don’t make coffee makers like this anymore.

11 Products Now in Short Supply Due to the Pandemic
11 Products Now in Short Supply Due to the Pandemic

Many goods we take for granted have become tough to find in 2021.

7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

14 Things You Should Stop Buying in 2021
14 Things You Should Stop Buying in 2021

These convenient household products come with hidden costs that you might not have considered.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

Is Writing a Check Still Safe?
Is Writing a Check Still Safe?

Every time you pay by check, you hand your bank account numbers to a stranger.

6 Ways to Protect Your Retirement Accounts From Hackers
6 Ways to Protect Your Retirement Accounts From Hackers

Imagine having $245,000 stolen from your retirement account — and not being reimbursed.

8 Things You Should Replace to Improve Your Life Today
8 Things You Should Replace to Improve Your Life Today

Being frugal isn’t smart if you put off replacing these items.

This Is the Most Dependable Car Brand in the U.S.
This Is the Most Dependable Car Brand in the U.S.

This brand’s vehicles are least likely to give drivers repair headaches, according to J.D. Power.

7 Hidden Sections of Amazon Every Shopper Should Know
7 Hidden Sections of Amazon Every Shopper Should Know

These little-known departments of Amazon are gold mines for deal-seekers and impulse shoppers alike.

7 Income Tax Breaks That Retirees Often Overlook
7 Income Tax Breaks That Retirees Often Overlook

Did you realize all these tax credits and deductions exist — or that they apply to retirees?

9 Millionaires and Billionaires With Surprisingly Frugal Habits
9 Millionaires and Billionaires With Surprisingly Frugal Habits

Some of the world’s richest women and men drive modest cars, clip coupons and love a bargain.

7 Social Security Benefits You May Be Overlooking
7 Social Security Benefits You May Be Overlooking

There’s more to Social Security than retirement benefits.

13 Amazon Purchases We Are Loving Right Now
13 Amazon Purchases We Are Loving Right Now

These practical products make everyday life a little easier.

View More Articles

Sign up for our free newsletter!

Join our many free newsletter subscribers building wealth and destroying debt:

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.

Sign up for our free newsletter!

Simple ways to make, save, and grow your money daily:

  happy subscribers    

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Podcasts

Every week our podcasts bring you lively money discussions that will give you a few laughs along with advice that will make you richer.

Money with Stacy Johnson

Listen/Subscribe

Must Read

A few of the best stories from our Emmy Award winning editorial team.

It’s Worth Paying Extra for These 14 Items
It’s Worth Paying Extra for These 14 Items
3 Easy Ways to Get Laundry Soap for Nearly Nothing
3 Easy Ways to Get Laundry Soap for Nearly Nothing
13 Things Seniors Can Get for Free — or Almost Free
13 Things Seniors Can Get for Free — or Almost Free
8 Reasons Your Parents Had an Easier Retirement Than You Will
8 Reasons Your Parents Had an Easier Retirement Than You Will
MTN Solutions Center

A curated selection of helpful products and services we recommend for our readers.

Find help with:
Making Extra Money Credit Card Debt Tax Debt Student Loan Debt Credit Restoration Debt Collectors Social Security
Find the best:
Financial Adviser Credit Card Budget Personal Loan Mortgage Purchase Mortgage Refinance Savings & CDs HELOC Cell Phone Plan Travel Deals
Sign up for our free newsletter!

Join our many free newsletter subscribers building wealth and destroying debt:

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Popular Topics
  • Retirement Investment
  • Surveys for Money
  • How to Make Money Online
  • Emergency Stockpile
  • Free Movie Streaming
  • Senior Discounts
Connect
  • Memberships
  • About
  • Contact
  • Careers
Media
  • Advertise
  • Television
  • Where We Air
  • Scripts
  • Sitemap
Legal
  • Terms
  • Privacy
  • Cookies
Editorial
  • Fact-Checking Policy
  • Ethics Policy
  • Corrections Policy
  • Ownership & Funding Info

Do Not Sell My Personal Information

© 2021 Money Talks News. All Rights Reserved.
‭1 (833) 669-8557 | 1732 1st Ave #26661, New York, NY 10128

Advertising Disclosure: This site may be compensated in exchange for featured placement of certain sponsored products and services, or your clicking on links posted on this website.

View This Page Without Ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Help us produce more money-saving articles and videos by subscribing to a membership.

Sign up for our free newsletter!

Join our happy subscribers and sign up for our free newsletter! You'll get:

  • Tips and advice from our expert money reporters. (Our average experience is 18 years!)
  • Unexpected ways to make more and spend less, delivered to you daily.
  • The best deals and coupons to save on everything you buy.
  • A free copy of our eBook '208 Ways to Save Money Every Day' and our video consumer finance course 'Life or Debt', together a $49 value!

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.