7 Reasons to Open an Offshore Bank Account

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KEY POINTS

  • Offshore bank accounts have a sketchy reputation, but there are some reasons you might want to open one.
  • Offshore banking is well regulated and you will need to provide personal information to open an account.
  • An offshore bank account can help you relocate, provide money to relatives in another country, and allow you to diversify your assets.

There are a number of legitimate reasons why you might want to.

Offshore banking got some unwanted publicity back in 2016, with the release of the Panama Papers -- a document leak that detailed how a prominent Panamanian law firm helped its clients launder money and avoid taxation for years on end. Thanks to this and many, many pop culture depictions of tax dodges and cheats with money stashed around the world, you may have an idea that offshore bank accounts are sketchy and not a legitimate way to store assets. This doesn't provide the complete picture, however. Offshore bank accounts have several advantages that make them worth considering.

What is an offshore bank account?

An offshore bank account is an account you open in a country you don't live in. Having a bank account elsewhere means that you'll be able to do your regular banking business in another currency. Offshore banking isn't just the purview of the rich; anyone can open an account in another country.

You'll be asked to provide proof of your identity and place of residence to ensure that rules and regulations around taxation and declaration are followed. A bank in another country may also want to know why you want to open an account there, and it may need references from your current bank (this could take the form of bank statements). These rules benefit you, as you definitely don't want anyone to think that you're trying to break the law in opening an offshore account. So why might an offshore bank account be of interest to you?

1. Easier relocation

Perhaps you're planning to relocate to a new country in the next few months or years. It will be a smoother transition for you if you've already got some money ready and waiting for you in your new home.

2. You're supporting someone in that country

If you have a child who is living in another country for school, or has moved for a job and is just getting their feet under them financially, you might want the ability to provide financial support more cheaply/easily than having to wire money to them internationally from your American bank account.

3. You get paid in a foreign currency

Maybe you have a job as a freelancer for a company headquartered in another country. It might be easier for your employer to pay you in that country's currency, as opposed to USD.

4. You own property in another country

If you own a vacation home on foreign soil (ooh-la-la), it will likely be a lot easier to pay for maintenance, repairs, and taxes in the currency of that country.

5. You want to save money on taxes…or earn more money on your savings

There may be tax benefits to having money in an offshore account (although this will depend on your individual tax circumstances). And in some countries, you'll earn higher interest on your savings account than you would here.

6. You want to take advantage of potentially safer/more stable banking

Sometimes, banks fail. If you keep your money in an FDIC-insured bank account in the U.S., you'll be covered for up to $250,000. Some banks outside the United States have been commended for their safety and stability, so as we march forward into an uncertain world, it might pay to look at offshore accounts for this reason.

7. You want to diversify your assets

It's wise to diversify your assets. If you have all your money in one type of investment, it's much riskier. Like the old saying goes, don't put all your eggs in one basket.

If you meet some of the above criteria, or will in the future, you might find that opening an offshore bank account could benefit you. As with any big financial move, do your research ahead of time and go into it with your eyes wide open.

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