Are offshore or Swiss accounts a real thing?
December 14, 2017 7:56 AM   Subscribe

Partner and I have modest assets we want to protect from the possibility of either of us experiencing an illness/medical condition that would destroy a reasonable retirement for the other.

I can’t see paying hundreds of dollars a month for some kind of insurance, that would probably end up not providing that much, er, well… insurance against being bankrupted.

I saw first-hand what catastrophic illness did to some people I loved: they were completely wiped out financially.

So, what other avenues are there for protecting a portion of our hard-earned and frugally-managed savings? Offshore bank accounts? Swiss bank accounts? Some kind of trust? Something I just haven't heard of yet?
posted by dancing leaves to Work & Money (18 answers total) 4 users marked this as a favorite
I mean, yeah, hiding assets in foreign banks and shell companies a is an actual thing, but this type of behavior is usually only utilized by extremely wealthy people, solely for the purpose of avoiding paying taxes, not avoiding being bankrupt by health problems.

I think it's safe to say that if you're at risk of a medical situation bankrupting you, you don't have enough money to 'appropriately' utilize offshore systems to protect that money.

I'm not saying there aren't ways to shield yourself from bankruptcy in the event of a serious medical condition, but I would imagine that finding good, better insurance that does cover you completely in such a situation, would be cheaper than hiring the necessary lawyers and making your money largely illiquid by moving it 'offshore.'

Steps like 'moving to a country with socialized healthcare' would likely be more realistic and cheaper in most instances, than trying to utilize and access dark finance systems.
posted by furnace.heart at 8:27 AM on December 14, 2017 [11 favorites]

Swiss accounts and offshore trusts are definitely a thing though they are getting MUCH more highly regulated. However they are expensive and don't make sense for people who aren't already sort of wealthy. They're also seen as a sketchy tax dodge which, well, you can see how you feel about that within your own moral calculus.

The US insurance system sucks but "good health insurance" is the answer here. The other answers include

- not being married (for this specific situation, not a general statement on marriage)
- moving (as fh says)
- a generation skipping trust if you have kids (consult a lawyer, this stuff is tricky)
- socking money away with other people (dicey but can work, consult the proper authority people)

There are still terrible things that can happen to insured people in the US, but the better your insurance, the less likely this is to happen and paying more for insurance is going to be less money than maintenance of a Swiss account. I do not want to be an apologist for insurance here; at the same time if you only have a small set of non-optimal options this is one of the best middle class options.
posted by jessamyn at 8:33 AM on December 14, 2017 [6 favorites]

So, what other avenues are there for protecting a portion of our hard-earned and frugally-managed savings? Offshore bank accounts? Swiss bank accounts? Some kind of trust? Something I just haven't heard of yet?

Some kind of trust. You probably want to go to a trust and estate lawyer about this. They can tell you exactly what sort of trust, and how it's administrated, and can set it up for you.

There are some other more cumbersome and/or exotic options, too, like buying into an annuity. But in any case, I don't think a Swiss bank account is actually what you're looking for.
posted by static sock at 8:39 AM on December 14, 2017 [5 favorites]

Why not sit down with an accountant or independent financial advisor and find out exactly what's available for people in your situation and tax-bracket and state? While MeFi may be a great source for ideas and tips, this is a case where you want the best possible information tailored to your exact specifications. One meeting won't break the bank, and will give you a much better idea of what exactly is the best avenue for you to take.
posted by ubiquity at 8:41 AM on December 14, 2017 [1 favorite]

So, what other avenues are there for protecting a portion of our hard-earned and frugally-managed savings? Offshore bank accounts? Swiss bank accounts?

Do you hear yourself? You are literally asking if you can arrange to illegally hide assets from creditors. Talk to an accountant and a lawyer by all means, but switch your common and moral sense on first.
posted by praemunire at 8:51 AM on December 14, 2017 [8 favorites]

I would phrase it like, "I've seen first hand the devastation that a catastrophic illness did to someone financially. Is there anything I can do legally to limit my exposure to a similar event and what is the consequences of such actions."
posted by mmascolino at 8:58 AM on December 14, 2017 [12 favorites]

I'd also add owning a home. In many states, your home is a protected asset.

Having 6-8 months of savings (or more) was very helpful for me being unable to work due to serious illness. If you are eligible for SSDI, it doesn't kick in right away and there's (at least) a five-month gap where you're on your own.

My excellent insurance went a long way during a scary time.
posted by mochapickle at 9:01 AM on December 14, 2017

This question doesn't make any sense to me. I guess if you were to get into a terrible life-threatening accident and you were without health insurance, you could get emergency treatment at a hospital and not be successfully sued for payment if your assets were inaccessible. But the vast majority of scenarios that result in huge medical bills are chronic or otherwise require ongoing treatment, the kind that you're just not going to get if you don't have health insurance (or able to self-pay). And I mean, nobody's going to force you to pay for treatment - you might as well just decline the cancer drugs, no need to mess about with hiding your money offshore. But not having assets doesn't mean you're going to get anything besides the most urgent of stabilizing treatment for free.

Maybe you're under the impression that you can just hop onto medicaid if you're broke and need medical care, but even assuming the current medicaid expansion stands and you're in a state where it's taken effect, if you're under 65 and not disabled, then your eligibility is based on income, not assets (the ACA prohibits means tests for most groups covered under the expansion). This whole idea is both ethically/legally dubious and poorly thought out.
posted by exutima at 9:08 AM on December 14, 2017 [8 favorites]

I'm not sure any form of trust is going to accomplish what you are hoping for here. An irrevocable trust could be used to shield some assets for your partner and vice versa in the event that one of you incurs significant medical expenses and subsequently dies, thus releasing the assets to the beneficiary. But the assets would be released from the trust only in the event that you die, and can't be taken out of the trust and used for anything else until that happens. That's certainly not a good place to put money you may want to use for retirement while you're both alive. Decent life insurance policies will accomplish the same goal.

A revocable trust can be...revoked, obviously...while the grantor is alive but the assets would be considered part of the grantor's estate in the event of bankruptcy, for Medicaid spend-down purposes, doesn't shield them.

I understand that you've worked hard for your savings, but you're basically saying "I want these savings to go toward covering retirement; if I incur massive medical debt I want my creditors and/or other taxpayers to foot the bill."

With those thoughts in mind, long-term care insurance is one important piece of the insurance puzzle that a lot of people are missing.
posted by drlith at 9:12 AM on December 14, 2017 [4 favorites]

Are you aware that (in most cases, I’m not a lawyer or CFP or anything) retirement accounts are shielded from bankruptcy? Sounds like you need to slow down a little and figure out a strategy for reducing risk, which is what most people try to do if they’re able to save at all.
posted by chesty_a_arthur at 9:18 AM on December 14, 2017 [5 favorites]

I would suggest talking to a lawyer about wills and trusts and how medical debt works and what is protected from bankruptcy in your state. And to a fee-paid financial planner. This stuff varies so much by state that advice from the Internet will have limited use.

I have wondered if a bitcoin account might be shielded out of sheer difficulty in finding it, but I don't know. I just like to speculate for the novel I write in my head.
posted by theora55 at 9:25 AM on December 14, 2017

I can’t see paying hundreds of dollars a month for some kind of insurance, that would probably end up not providing that much, er, well… insurance against being bankrupted.

You can't get generic bankruptcy insurance but you can get:

a) health insurance so that if a catastrophic illness hits your medical bills will be paid
b) disability insurance so that if you become unable to work you'll have income
c) life insurance so that if you die your dependents (spouse, kids) will have money
d) Umbrella insurance on top of your home or auto insurance to cover losses for certain types of lawsuits
e) home and auto insurance which many people have and are sometimes legally required

Yes, most people pay money into these things and never get a dime back. That's how insurance works. If you want to save a lot of money and sock it away in a bank account you can sort-of self-insure but most people just aren't able to save that much. Can you save enough money to completely replace your house? Do you have a million dollars for a long medical treatment? Probably not. But sure, if you saved enough, you could do that.

As with many things in life you need to do a threat assessment - what are you protecting yourself against? If medical issues are your #1 concern get a medical policy with no total limits on how much will be paid (this was a major ACA reform). Or move to Canada or the UK where people don't go bankrupt from medical issues. Do you think you're going to get sued? Have you put all you personal worth into antique oil paintings that you store next to a well-used fireplace? Are you Tina Turner? Concerned about losing millions in a maritime disaster? You can get insurance for nearly anything as long as you know what you need it for.

As for saving money, it's a great idea, but generally there's no need to hide it offshore unless you have enormous amounts of it.
posted by GuyZero at 9:37 AM on December 14, 2017 [11 favorites]

You could just keep cash in a safe.
posted by Waiting for Pierce Inverarity at 10:12 AM on December 14, 2017

You could just keep cash in a safe.

So I know we're not supposed to back-and-forth here but I wanted to expand on this.

Yes, you can do this. The advantage is extreme liquidity - you can access the money in 60 seconds. The disadvantage is that not only does the money not grow, it actually loses value to inflation over time. Inflation is currently 2.2% so after 10 years $1000 will only have the buying power of $800 today. As opposed to putting it in your 401k or IRA or whatever and getting, say, a 6% return and having $1790 after 10 years ($1430 inflation-adjusted). And that's tax-deferred in a retirement account. And, while IANAL, from a legal perspective there's no difference between a wad of bill sunder your mattress and a bank savings account. If you're sued, they're all liquid assets.

The actual top risk for people in retirement is simply not having enough savings and living too long. I know that living too long doesn't sound like a bad thing, but if your retirement financial plan ends at age 85 and you live to 90, it's going to be a tough 5 years as you're probably not in any shape to pick up a few hours as a WalMart greeter at 88. (if you can, hey, good for you).

You don't need a Swiss bank account. You need to max out your 401k every year and have solid medical insurance. Everything beyond that is based on what you feel is your personal risk profile.
posted by GuyZero at 10:52 AM on December 14, 2017 [2 favorites]

As a Swiss / American dual citizen, I can tell you that, as others have said, it doesn't really make sense to have a Swiss account unless you are already wealthy. The Swiss government recently caved to the American government and imposed a recurring fee for American account holders.
posted by switcheroo at 12:36 PM on December 14, 2017

You want Panama or the British Virgin Islands, actually, not Switzerland. That being said, offshoring on that scale is more complicated than a domestic LLC and requires lawyers who have contacts with registered agent companies in those kinds of countries. They don't take new clients without an introduction/referral; quite a few of the individuals in this part of financial services are involved with large scale corruption or some kind of money laundering/embezzlement. You cannot just google "registered agent Panama" and start calling people and expect them to be ready to set up what you need.

I used to work at a law firm that specialized in this, I was doing regulatory compliance (that's how I know about all the money laundering LOL) and our clients were spending a few grand a year just maintaining the existence of a company in those jurisdictions. They'd have their money in a bank account in that company's name, and have someone like a large multinational bank doing wealth management (investing). Between legal fees, annual registration fees, registered agent services, securities brokerage commissions, and accounting services, that method gets quite expensive. It's a tool that really only makes sense for people with millions in securities or cash, or high value assets. We had many clients whose condos, luxury homes, boats or planes were owned by offshore companies.

You can use a revocable trust or a corporate vehicle owning real property (like a domestic LLC) to help protect your assets. Consult an estate planning attorney to find out if that would help mitigate your risk. Many people use revocable trusts to avoid losing their whole estates due to long term care expenses even with Medicaid or Medicare coverage.

I think you should focus on saving as much as possible in a protected retirement account, paying off all your debt, and obtaining a medical insurance policy that has no lifetime cap. Or, as another user said above, "move to Canada or the UK where people don't go bankrupt from medical issues" if that is your number one fear. This is something in my long term plans at this point, for the affordable medical care & for other reasons as well.

Umbrella insurance is not that expensive and is totally worth getting; most insurance agents won't tell you about it because they don't make much profit or sales commission from it. Disability insurance (either AFLAC or longer term) is also a good idea if you can afford it. If you have children depending on you for money, or someone else in your family whose bills/welfare you are concerned with, get a life insurance policy for yourself and name them as beneficiaries.
posted by zdravo at 12:53 PM on December 14, 2017 [4 favorites]

Do you hear yourself? You are literally asking if you can arrange to illegally hide assets from creditors. Talk to an accountant and a lawyer by all means, but switch your common and moral sense on first.

"How can I ensure an unforeeable catastophic medical event to me does not condemn my partner to poverty for the rest of his/her life?"

I don't think there's any problem with OP's common or moral sense. Certainly not moral.
posted by migrantology at 4:09 PM on December 14, 2017 [3 favorites]

I don't see anything untoward about proactively seeking answers to a really common issue of insuring that one partner does not leave the other partner destitute in case of a major illness. I've read and re-read your question and saw nothing to suggest that you are wanting to hide assets from creditors, as some claimed upthread. I think you are wise to be thinking about this early on.

Lucky for you, asset split/protection for couples in the event of major illness or disability is a largely solved problem (my company helps families find assisted living for their loved ones and this is priority #1 for elderly couples where women outlive men by a decade or more because they both live longer, and are the younger spouse). If you google your state + asset protection + elder law, you will most likely find satisfactory answers. There is typically no need for a trust or moving the money overseas and there is definitely no need for long-term care health insurance - those policies stopped being an insurance product years ago and now they are just overpriced investment vehicles that cost way more than the maximum cares they could ever pay out.
posted by rada at 5:03 PM on December 14, 2017 [3 favorites]

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