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How To Diversify Your Financial Life Offshore

06 Oct
How To Diversify Your Financial Life Offshore

How To Diversify Your Financial Life Offshore

The Ideal Globally Diversified Financial Life

What would an ideally globally diversified financial life look like?

I could imagine as many answers to that question as people asking it. However, I’d also identify key common denominators that should be part of any global diversification strategy.

If you’re just getting started at this, here’s the most important thing to understand: This doesn’t have to be as complicated as you may fear. The upsides to spreading your time and your money across multiple borders are more relevant and more important right now than they’ve been in our history. The good news, though, is that going offshore is also more easily managed right now than ever (with some exceptions…see today’s letter to the editor from a reader wondering about the practical complications of FATCA).

You may have heard of the “Five Flags” strategy for diversifying offshore. This is not literal. You may not need (or want) five flags. Maybe you need only two or three…or perhaps your circumstances require six or seven.

Each flag is a different piece of your life puzzle. Ideally, you want to bank in one country (where you can feel reasonably secure your deposits are safe), reside in another (where you want to spend time), run your business in a third (where entrepreneurs are respected and incentivized), hold a passport (and maybe a second passport) elsewhere, and divide your available capital, however much you have, among at least two or three different countries, invested ideally in real assets, including and especially real estate…

Open an operating bank account in the country of your “backup” residency where you also invest in a second home you’re able to rent out when you’re not in residence yourself, keep another bank account in another country where you’re able to accumulate capital beyond U.S. prying eyes and the reach of litigation attorneys, and have gold on deposit in a third jurisdiction…That could be an ideally diversified situation for someone…and more than ever required for someone else. It depends on what you’re trying to accomplish, understanding that your agendas and objectives will evolve over time. As you work toward creating a customized structure to protect yourself and to maximize opportunities, remain open-minded and flexible. Plant your flags based on your current circumstances, but don’t plant them in concrete. You’ll likely want to be able to move them around from time to time.

Remember that, strictly speaking, “going offshore” simply means doing something in another country. For an American, going offshore means investing, banking, or doing business outside the United States. If you’re British, going offshore means operating beyond the UK. Etc.

Nothing so scary about that.

Considering Your Offshore Strategies

The trouble starts when you consider specific “going offshore” strategies—setting up a trust in another jurisdiction, for example, or establishing a foreign corporation to hold real estate assets.

My advice is to start small and to keep things as simple as possible. You don’t have to figure out an umbrella strategy of corporations and holding companies straightaway. The truth is, most of the complex structures many offshore attorneys promote aren’t necessary for most people, not immediately and not long term. Attorneys and service providers recommend them because that’s how they make money. More isn’t always better…except for the guys selling the structures.

Maybe all your going-offshore plan will ever require is an overseas bank account. So I recommend that as a first step. Plant your first flag offshore by opening a bank account in a jurisdiction you’re comfortable with.

Keep in mind that the country where you choose to do your banking need not be the country where you’re living, where you’re doing business, or where you hold citizenship. These are all separate agendas, different flags to plant, perhaps among different jurisdictions.

My preferred jurisdictions right now for an offshore bank account include Belize, because it is largely ignored and therefore remains under-the-radar. In addition, this is one of the few countries worldwide that continues to respect its tradition of bank secrecy.

It’s possible to open an account in Belize long distance, and, at at least one bank I know, you can open an account with an initial deposit of as little as US$500. In other words, this is a good option if the amount of capital or level of assets you’re interested in diversifying offshore qualifies as modest.

If your holdings are greater, another jurisdiction I prefer might make more sense: Andorra, understanding that banks in this country require relatively large minimum deposit amounts (US$250,000, for example).

I began building my own offshore diversification plan about 17 years ago, when I left the States and moved my family and my business to Europe (first to Ireland and then to Paris). At the time, my decision to “go offshore” didn’t have anything to do with a concern over global market, economic, or political uncertainties. It had to do with curiosity, wanderlust, and a desire for adventure and discovery.

Those things all remain very good reasons to seek out a new life in a new country. However, the world has changed in these past 17 years. I’d say that this idea of spreading your life and your assets around is more important today than it was when I began my own overseas adventures. The current state of affairs Stateside startles me and makes me glad my life, my family, my business, and my assets are well diversified beyond U.S. borders.

Lief Simon

How I Distinguish Myself From Other Offshore Guys

Several readers have written to ask how my event in Belize this month will compare with other wealth, offshore, and asset protection conferences they’ve considered. At a certain level, we offshore guys are all covering the same beat. However, I’d say my events distinguish themselves in two ways…

First, I’m speaking from more than a decade-and-a-half of personal experience at this. I’ve opened bank accounts, big and small, in more than 10 different countries. I’ve lived in seven and established full-time legal residency in two. I’ve acquired a second passport, started businesses in 7 countries (as an aside, not the same 7 I’ve lived in), invested in real estate in every possible form in 23, and currently hold real estate investments in 15. I’ve set up foreign LLCs, formed corporations, managed estate issues, and paid taxes (or filed tax forms indicating, fortunately, that I owed no tax) in another dozen jurisdictions. Meantime, I remain an American abroad, meaning I’m filing U.S. tax returns each year and making sure I’m fully compliant with ever-changing IRS and FATCA requirements. I’d say I know more about the tax and IRS-filing burdens of the nonresident American than anybody else you’re likely to meet. Well, I can think of four guys with as extensive and as broad experience as I’ve had covering this beat. They’re all good friends, and two of them will join me in Belize for this month’s conference.

I speak from real-world, real-time experience that includes great and extended success and also some less-than-successful efforts and strategies undertaken, all of which I’m happy to share with attendees at my conferences.

Second, the experts and speakers I invite to join me on stage for my conferences are also advising and speaking from real-world personal experience. I’m not going to introduce you to researchers or editors whose only knowledge of any of this is theoretical. In this world, theoretical knowledge is all but useless and sometimes dangerous.