Overseas (Swiss) Investment Account

[Culture]

This is really out in left field, but I thought I would ask to see what anyone else thinks/knows.

I have been reading Harry Brown and found his writings very interesting. I had not realized that he was possibly the first Bogglehead-esque investment adviser. About the only thing that he recommends that I do not already do is to keep a portion of my assets in an overseas investment account.

"Don't allow everything you own to be where your government can touch it. By having something outside the reach of your government, you'll be less vulnerable — and you'll feel less vulnerable. You'll no longer have to worry so much about what the government will do next."
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While I certainly have no belief that the US government is going to seize all my assets tomorrow, I was wondering if this is even a reasonable option to implement for the typical FIRE investor (say $1.5-3M portfolio). If I was going to do this, I think I would have to be through a Swiss company. This is the only country that has a long-term history of legal, political and financial stability toward overseas investors.

So here is my question: It is realistically possible for this type of (relatively) modest investor to open an investment account investing in Vanguard-style low cost index funds held through a Swiss (or similar) investment company? I am not looking for some type of secret, tax avoiding account. Just a normal account held openly by a legit Swiss investment firm/bank, which does not have branches in the US. I would think that if this was possible one might want to put 25-33% of assets overseas, say $500-750K.

Ordinarily Google is your friend, but there are way too many pages of Swiss banking scams to get this easily answered. Has anyone looked seriously into this? What do you think? Is this a stupid idea? Would Swiss taxes kill it? Should it even be considered?

 

[FIREd]

There is only one problem: many Swiss banks now refuse to do business with US citizens and residents. Too many hassles and liabilities to deal with IRS requirements. Some banks have found ways around this, but it is not simple.

For example, they might require you to have a representative living outside of the US with power of attorney on the account. They will not correspond with you as long as you are on US soil. All transactions and correspondence will have to go through your (hopefully trustworthy) representative.

But this could change. A few days ago Switzerland was removed from the OECD's tax haven gray list. Switzerland agreed to let the IRS seek information about accounts held in Switzerland by US citizens. I believe that this could shift liability from the bank to the account holder and it might help loosen the restrictions on US citizens opening Swiss bank accounts. We shall see...

 

[Ed_The_Gypsy]

For $750k (or even $3M) , I wouldn't risk getting on the gummint's radar. I have read about off-shore stuff (for amusement) and they are watching. You may as well keep it here.

To really put it out of their hands (which is getting REALLY hard these days), you would have to do something like retire to Panama and transfer it to Panama "to buy a house"--if you could get a Panamanian bank to touch it.

Believe me, the Feds are much smarter than you or me in this area. Only congressmen can get away with off-shore accounts these days.

They can take it ALL away from you.

 

[harley]

There's nothing illegal or immoral about keeping money in overseas accounts. As long as you report any income and pay taxes on it, the US couldn't care less. I don't have any details on how or where to do it, though. I'd need to study up. But under the Harry Browne concept, it's not a bad idea. IF (big if) something majorly bad happened in the US and you decided to spend some time elsewhere, I suspect the US gov't would be pretty busy for quite a while, and the small number of (totally legal) overseas accounts would be pretty low on their radar. You would probably have long enough to move the account to a location the US would no longer know about.

(Full disclosure - I voted for Harry for president in 1996 and 2000, so take my advice with a grain or two of salt.)

 

[Maurice]

I would go talk to a private banker at UBS or Credit Suisse. Yes they have operations in the US, but i don't see how that changes things given that you aren't trying to hide money from the US government.

The problem is they may not be interested in only 500-750k. I suspect their minimums are higher.

 

[Ed_The_Gypsy]

Guys,

If Culture is trying to prevent seizure by the US Gov, the account will have to be secret. If they know about it, they can take it some day--no matter where it is.

Harry Browne lived in a different world.

 

[Snidely Whiplash]

I would go talk to a private banker at UBS or Credit Suisse. Yes they have operations in the US, but i don't see how that changes things given that you aren't trying to hide money from the US government.

The problem is they may not be interested in only 500-750k. I suspect their minimums are higher.

Credit Suisse minimum = $1 Million.

 

[Culture]

Guys,

If Culture is trying to prevent seizure by the US Gov, the account will have to be secret. If they know about it, they can take it some day--no matter where it is.

Harry Browne lived in a different world.

Ed,

Not interest in hiding assets or avoiding taxes, but rather doing this above board until/if catastrophe strikes. The proposed scenario would be more along the lines of what Harley suggested. If anything really bad happened in the US, I am certain that I could "disappear" any overseas asses before the government became interested in me. In this event, I would not be living in the US anymore anyway.

BTW, I think this possibility is VERY unlikely. I am not a doom-and-gloomer.

I think the real problem with the whole idea is that I am no where near wealthy enough to make it work. I would want enough overseas to enjoy my idea of a modest lifestyle, which would mean I would need $1.5-2M there. I think I would serious look into this if my net worth was $8-10M. I will never have this much money in today's dollars.

 

[MichaelB]

The US gov't cannot access an account subject to the laws of another country, but it can pass a law obligating the US account holder to repatriate the assets or pay taxes on them (tax the assets, not only the income). IOW, an account lawfully established overseas likely does not meet the test of "beyond the reach of gov't".

The only thing to fear is not only your gov't, it is also the gov't of the country where the overseas account has been established.

Banking fees are quite high abroad. Fund fees are also quite high abroad.

If you really want to keep some money "safe from gov't interference", then buy gold coins. Then guns and ammo (to protect the coins).

 

[Culture]

If you really want to keep some money "safe from gov't interference", then buy gold coins. Then guns and ammo (to protect the coins).

This is probably a more realistic option for the "minor" investor. However, the logistics of this scare me. Let's say you are FIREd with a $2M portfolio, and you decide to keep 10% in gold as insurance against financial system collapse. You would have $200k is gold buried in your yard. You would also incur about $20k in transaction fees to buy physical gold. I am not about to plant 180k gold at my house, or spend $20k to buy it. If anyone ever found out I had it, I would be a dead man. I would have to tell someone, as otherwise it would "disappear" when I died. Even 5% would be too scary.

BTW, while I realize holding gold is frowned on by many here (no dividends, no intrinsic value, no way to price, etc), I think that last five years have shown the value of long-term holdings of minor amounts of gold in your portfolio (say 5-10%, I currently hold about 2.5% purchased at about 50% of its current value). OTOH, there is no way I would buy at today's prices. It would have to drop at least 50% before I would buy more.

My wife already tells me that I have too many guns and too much ammo .

 

[free4now]

Good question, and I'd like to know the answer. I remember a while ago briefly considering buying CDs in Iceland to take advantage of the ridiculous interest rates they were paying (glad I didn't). At the time it looked relatively straightforward, although I didn't dig into details.

But overall keeping money overseas seems more likely to cause headaches than stability. The risk of having someone in another country, in a jurisdiction where I may have less legal recourse and access, running off with my money seems to me greater than the risk of Uncle Sam doing so.

 

[MichaelB]

Well, if gold is out, diamonds and such are probably out as well. Back to the original post.

So here is my question: It is realistically possible for this type of (relatively) modest investor to open an investment account investing in Vanguard-style low cost index funds held through a Swiss (or similar) investment company? I am not looking for some type of secret, tax avoiding account. Just a normal account held openly by a legit Swiss investment firm/bank, which does not have branches in the US. I would think that if this was possible one might want to put 25-33% of assets overseas, say $500-750K.

So, you want the advantages of the Swiss safekeeping but with the return opportunities of the US investing climate. Money and asset managers in the “safe” countries seem to want lots of fees to keep your assets secure, and investment opportunities aren’t so hot. Perhaps a brokerage account in the UK. No idea what non-US tax laws say so this may be a poor idea.

Still, my view is you have to choose between hiding your money or assets from the US gov’t or protecting the after tax purchasing power. The former can be done but it is quite difficult to do safely, at low cost and have access to good investment opportunities. The latter is much easier. Not easy - better expressed as less difficult.

 

[Culture]

Still, my view is you have to choose between hiding your money or assets from the US gov’t or protecting the after tax purchasing power. The former can be done but it is quite difficult to do safely, at low cost and have access to good investment opportunities. The latter is much easier. Not easy - better expressed as less difficult.

I think you are probably correct based on the limited investigation I have done.

 

[farmerEd]

Related question: I actually don't feel a need to hide my assets from the govt, (I figure they will find them/take them anyway if they want to), but is there any value in having your assets overseas to protect yourself from legal problems, i.e. you get sued by someone after a car accident and they try to take you for everything you got?

WOuld having your assets overseas help at all?

 

[MichaelB]

Related question: I actually don't feel a need to hide my assets from the govt, (I figure they will find them/take them anyway if they want to), but is there any value in having your assets overseas to protect yourself from legal problems, i.e. you get sued by someone after a car accident and they try to take you for everything you got?

WOuld having your assets overseas help at all?

No.

Edit: sorry for the short answer. It's more like - probably not. easier to protect oneself with umbrella liability policy.

 

[Ed_The_Gypsy]

Related question: I actually don't feel a need to hide my assets from the govt, (I figure they will find them/take them anyway if they want to), but is there any value in having your assets overseas to protect yourself from legal problems, i.e. you get sued by someone after a car accident and they try to take you for everything you got?

WOuld having your assets overseas help at all?

Actually, that is a reasonable idea, IMHO.

Alex Doulis addresses that in My Blue Haven, as I recall. He uses the example of a dentist with concerns about protection from unreasonable lawsuits.

There are also Nevada corporations (but you would want to do some research on that yourself).

There is nothing illegal about establishing a foreign corporation to protect yourself from lawsuits.

The trick is to find a country where you can do that without losing your shirt to the locals. There is an old saw about How do you have a million dollars in Belize? Answer: Come in with 2 million.

And I just saw where the British government rescinded home rule for the Turks & Caicos Islands because of corruption. They have been a favourite tax haven for Canadians. It has been said that T&C should be made part of Canada. (They use the US dollar, by the way.) Don't know how this wil affect their banking practices, though.

 

[Ed_The_Gypsy]

Oh, yeah. I forgot to mention that I could get a monetary reward for turning a tax-patriot in.

 

[DangerMouse]

If you have any more than $10,000 US in an account overseas you have to file a form with the US government detailing the establishment name and address and the account number. I know this to be true because we had to complete one today for our Australian holdings. It made me feel very uncomfortable having to pass our account information to the US government. We do declare the income we receive each year so I have no fear of the IRS coming after us, I just don't like this information being out there.

 

[Meadbh]

If you have any more than $10,000 US in an account overseas you have to file a form with the US government detailing the establishment name and address and the account number. I know this to be true because we had to complete one today for our Australian holdings. It made me feel very uncomfortable having to pass our account information to the US government. We do declare the income we receive each year so I have no fear of the IRS coming after us, I just don't like this information being out there.

I've had to file one of those forms once, and I don't even live in the US. I was mightily miffed, I can tell you. Seems Homeland Security is (or at least was) paranoid that people moving large amounts of money anywhere in the world might be funding Al Qaeda. (I think not.)

I have looked into the tax haven question in the past, and the information age and globalization has made it almost impossible to legally sequester funds anywhere. Governments are on to all the old tax havens and are signing tax treaties with them one by one. The risks now outweigh the benefits. As for limiting liability, perhaps a holding company might work?

 

[DangerMouse]

Having to provide account numbers with addresses has made us feel really jittery. We are actually thinking of buying a property so we can move the money out. I am going to check with our bank in Australia to find out what information they will provide to the US government on our accounts. It does bother me as we do declare the interest and pay the tax. I would prefer if they spend their efforts trying to identify those who are hiding the money in tax havens.

 

[nun]

For the regular US citizen investor overseas investments are a minefield.

1) You must pay the IRS tax on any gains as US citizens are taxed on their worldwide income.

2) If you have $10k or more overseas you have to declare it to the Treasury. There are very stiff penalties if you don't do this.

3) More to the point of your actual question, Passive Foreign Investment Company, PFIC, (ie foreign mutual funds) are taxed at very high rates, basically to discourage US citizens from using offshore funds. See the link below

http://www.offshorepress.com/offshoretax/otpfic.htm

Unless you are very sophisticated (ie understand about foreign trusts, PFICs etc) or have enough money to pay those that are sophisticated, stay away from this

 

[mark500]

You won't find any low cost investing with the Swiss. At least, not as low as Vanguard.

 

[Culture]

Thanks to everyone for the feedback. It is pretty clear that this is not fpor me at this point in life.

 

[harley]

Culture, just as a side issue, how about this? You mentioned burying gold in your back yard a few posts ago. I agree that wouldn't be a very good idea, and I also agree that this isn't the time to buy. But if what you are looking for is a low(ish) cost way of having a money stash the gov't doesn't know about and can't sieze, how about buying gold (at a future decent price) and putting it into a foreign (Swiss, Caymans, Brazilian, etc) safe deposit box? I don't know any details about cost, but I suspect it would be reasonable. And if you went with a fairly reputable overseas bank it should be pretty safe too. Obviously it wouldn't grow except at normal gold rates, but if the US gov't goes to hell and you need to grab your money and run, I suspect it would have a pretty high value at that point.

Anybody want to shoot holes in this plan? Feel free, I'm here to learn.

 

[brewer12345]

Culture, just as a side issue, how about this? You mentioned burying gold in your back yard a few posts ago. I agree that wouldn't be a very good idea, and I also agree that this isn't the time to buy. But if what you are looking for is a low(ish) cost way of having a money stash the gov't doesn't know about and can't sieze, how about buying gold (at a future decent price) and putting it into a foreign (Swiss, Caymans, Brazilian, etc) safe deposit box? I don't know any details about cost, but I suspect it would be reasonable. And if you went with a fairly reputable overseas bank it should be pretty safe too. Obviously it wouldn't grow except at normal gold rates, but if the US gov't goes to hell and you need to grab your money and run, I suspect it would have a pretty high value at that point.

Anybody want to shoot holes in this plan? Feel free, I'm here to learn.

AKA, the "last plane out" account. I would imagine this would be the easiest way, but you generally have to declare any cash or valuables (gold) that you move between borders, so preumably more than one gummint will no that you moved either a wad of folding money or a hunk of gold to a particular place. I suppose you could be a gold smuggler and not report it, or bring a small enough amount of currency that would not meet the reporting threshold (making multiple trips perhaps), but these seem alternately like asking for legal trouble and a PITA.