You Want To Be Private… But Not Too Private
A banker friend in Belize who speaks at many of our live events likes to ask the following question as part of his presentation:
“What happens to your bank account (in Belize) if you and your banker—and only you and your banker—know about its existence… and then you die?”
If you’re an American, that shouldn’t be a possibility.
If you’re an American with a bank account in Belize, you are obliged by U.S. law to report the existence of that account to the IRS if it contains US$10,000 or more during any tax year. (You do this by listing the account on your annual FBAR form.)
But let’s put that aside.
What if you have this account in Belize, and no one but you and your banker at the bank in Belize know that it exists? And you die.
In that case, the account would remain active until someone came along to claim it. That’s the law in Belize. The government can’t confiscate the account, not ever. Not after a year or 10 years or even 100 years. So, 100 years later, if someone somehow finds out about the account and shows up at the bank in Belize able to prove that he is your descendent, the account and the money you had in it are his.
While the fact that the government can never confiscate the contents of a bank account, no matter how long it lays dormant, is a benefit of banking in Belize, the question highlights a bigger issue…
As you structure your offshore life with the intent to protect your assets, you need to build in an exit strategy. That is, you need a contingency plan that can be put into effect should something happen to you.
And, eventually, something is going to happen to all of us.
Protect Your Assets
Most people have their attorneys keep copies of their wills and other documents. Seems simple and straightforward, but what if no one else knows the name of your attorney or how to contact him. Or maybe you have several attorneys in different countries managing different aspects of your life, but your heirs know about only one of them.
It’s akin to having a bank account in Belize that no one but your banker knows about. It’s the only way to guarantee complete privacy, but it’s also a risk.
The solution could be as simple as telling your parents and/or your children the name and contact details of a central attorney and then making sure that attorney has knowledge of and access to all documents and information related to the location of all your assets. Or you could keep a list of bank accounts and assets in a safe somewhere and tell your kids how to get to it if they need to.
Even with just a few assets offshore, organization is the key. Assuming you care that your heirs are able to access their inheritance, you’ll need to keep track of everything in a way they can access.
An apartment in Buenos Aires, a bank account in Belize, and an investment account in Europe is a straightforward plan, the kind of plan you should aspire to.
But your heirs won’t have a clue how to reap the benefits of any of it when you’re not around… unless you inform and educate them in advance.
“Lief, as a fairly new reader of your Offshore Living Letter I was intrigued at your March 28, 2016, edition discussing the possibility of investing my IRA funds into real estate. I have a couple of questions:
“1) I have discovered that my local credit union bank account will accept my SEP IRA as a deposit account, not linked to the stock market. They informed me it would be managed by me. Does that mean ‘self-directed’?
“2) Would I need to create an LLC to invest in U.S. real estate?”
Really, all IRAs are self-directed. It’s the custodian that matters when it comes to investing in non-traditional investments like real estate in another country. Financial institution custodians like your credit union generally limit investments to financial investments that they sell. Therefore, you need a more open-minded custodian that allows for real estate investments overseas.
One such custodian that we recommend is Midland IRA.
Regarding the use of an LLC, it makes investing in foreign real estate easier and quicker. Otherwise, you have to go back to your custodian for approval for each property you want to buy. This can slow things down, meaning you can risk losing a deal.