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Opening an offshore bank account is a matter which should be discussed in detail with a financial advisor such as Estate Street Partners & possibly a lawyer, depending on your individual circumstances & reasons for wanting the account. There has been negative press involving owners of offshore accounts who abuse the bank services to launder money or commit other forms of fraud (tax evasion, hiding money for divorce purposes, etc).

CONS OR DISADVANTAGES OF OFFSHORE BANKS

Offshore banks also require large sums of money as deposit, & there can be substantial annual membership & maintenance fees if you do not understand all the terms of the agreement. A knowledgeable advisor will help reduce your risk by informing you of any changes to domestic & foreign banking laws. Right. When choosing an offshore bank you have a number of banks to select from, even though the most common & sought after accounts are in Switzerland & the Cayman Islands due to their size & reputation.

If you feel that an offshore account is right for your situation, there’re many questions you should discuss with your advisor when selecting a bank:

1. What services does this bank offer?

2. How will you access your money? (check book, debit card, etc)

3. Are there fees associated with withdrawing money from the account?

4. How easy is it to transfer funds, & is your money secure if the bank goes under?

ADVANTAGES OF OFFSHORE ACCOUNTS WITH GOOD INTEREST RATES

Many offshore banks offer personal services similar to those offered by domestic banks. In addition to a regular savings account, you may have the option of a debit or credit card from which to withdraw funds. So… Some countries will also sell you a mortgage & offer loans from your offshore account.

Since offshore banks are not regulated in the same manner as domestic banks, the interest rate on your loan will be at a much more competitive rate than here in the United States. There is more. The offshore banks are competing for business which will hopefully bring revenue to their country, & with lower overhead costs than domestic banks they’re able to offer higher interest rates on deposits.

COMPANY BENEFITS IN OFFSHORE BANKING AND LOANS

Large US-based companies are also taking advantage of the benefits associated with offshore bank loans. Companies will be afforded the same rights of privacy as an individual account holder, & they will be allowed to finance their operations at a much more reasonable rate than if they kept strictly domestic accounts.

Since offshore banks are not government regulated to the same extent as domestic banks, they can offer a wider variety of investment options to companies & individual persons searching for a higher rate of return than what’s typically offered with US Mutual Funds.

HOW PATRIOT ACT, IRS, QUALIFYING INTERMEDIARY REQUIREMENTS AFFECT YOUR OFFSHORE ACCOUNT AND PRIVACY

One of the advantages of having an offshore bank account used to be the anonymity that was guaranteed with it… Unfortunately, following the terror attacks of 9/11 many offshore banks are volunteering any information requested by domestic governments if they suspect criminal activity.

The Patriot Act allows authorities to actually seize bank accounts & assets reportedly belonging to criminals. There is more. The Internal Revenue Service (IRS) has also initiated the Qualifying Intermediary Requirements which gives the government access to the names of all individual persons receiving US-funded investment income. Offshore banks are working closer to authorities to adhere with stricter money laundering legislation, & these banks will often volunteer information to police if there is questionable activity in your account.

IS OFFSHORE BANKING TAX-FREE?

You should be fully aware that offshore bank accounts are not tax-free. And so… So far so good. While you may select to withhold information from the IRS in an attempt to escape paying taxes, you’re under legal obligation to report all income earned from foreign accounts with the exception of an annuity.

You may not actually be forced to pay taxes to the offshore bank for interest earned on your deposit, & they may select not to disclose financial information to the US government. However, if it’s discovered you committed perjury on your taxes the consequences will far outweigh the immediate benefits of evading taxes. Right. With stricter laws being enforced due to threats of terrorist attacks, & the rise in money laundering for drug rings, it will become increasingly more hard to hide funds in offshore accounts.

Consulting with a financial advisor may help you avoid legal problems associated with a poorly planned offshore bank account. Ideally, your account should offer competitive rates of return for your investments, competitive interest rates on loans, security, & confidentiality.

author bio – Rocco Beatrice, CPA, MST, MBA
award-winning estate planning, trust expert
MS – Taxation, Master of Science Taxation
MBA – Management / Taxation
BSBA – Management / Accounting
CPA – Certified Public Accountant

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Original article posted here: Offshore Bank Account
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