posted: Feb. 9, 2009 @ 6:05p
Lets discuss isolation of financial accounts. This topic could potentially span several individual subtopics and several of these ideas fall under Asset Protection
Several concepts may potentially fall under the category of FRAUD if misused. Some ideas are presented for academic purposes only. Some ideas may be fully lawful but be unethical.
EDIT: I didnt mean to steal SIS ideas - just compiling ideas I have read over the last year and too lazy to find actual sources. I editted the ideas with some links that SIS provided to his posts on the subject. Enjoy!
Reasons for Isolating Financial Accounts
1) Hide assets from potential frivelous lawsuits - if you have no money its less likely a potential lawsuit will even begin against you
2) Hide assets from potential gold-digging relationship = if you appear to have no money its less likely someone will lie to get you to marry them for your money
3) Hide assets from potential divorce - if you are able to hide assets during the marriage, its less likely your partner will divorce you for half
4) Qualify for better assistance programs - FAFSA, Foodstamps, subsidized graduate school loans, etc
5) Minimize losses in potential identity theft
6) Minimize damage from aggressive institutions - i.e. paypal doing a chargeback and bouncing your mortgage
Techniques for Isolating Financial Accounts
1) Do not Link all your accounts. Keep paypal attached to one checking account that you only use for paypal. You dont want someone doing a reversal on you 3 months after you sell something to them on eBay and bouncing your mortgage check. Preferably attach a checking account with "free" overdraft protection such as Penfed or USAA where you wont get hit with a $39 overdraft fee for one day of interest.
2) Do not keep credit and savings accounts at the same institution. If you have Chase credit cards that you use, dont keep your savings there.
3) Keep some assets under trusts/LLCs/Corps. Pay your taxes! But keep them separate. This is a separate thread of its own.
4) Do not keep a large portion of assets in one institution. It would be terrible if Bank of America went under and 90% of your savings accounts were there. Sure the FDIC should kick in a few days but what if it takes a week or more? And you have AOR/BT money due that was sitting in the account that went under. Personally I dont want more than 30% of my overall assets at any single institution.
5) Isolate through FOREX/Precious Metals. It would be unreasonable and paranoid to go 90% gold coins but it would be reasonable to keep 5% to 10% of assets in gold coins as both an inflation hedge isolating you from the USD as well as counterparty risk isolation by physically controlling the coins. Not that you are going to be buying groceries with 1 ounce krugerrands but you would still have money set aside. If your plans include going to Europe or Mexico during a local crisis, it would be reasonable to keep 5 to 10% of your savings in a FOREX like Euros.
6) Isolate through overseas accounts. PAY YOUR TAXES! Any accounts over $10k that are overseas need to be reported even if theres no income. However if a massive US banking financial system occured, it would be reasonable to keep 5% to 10% of your money in a Swiss/Panama/Other bank. You need greater than $200k in assets to reasonable keep 5% overseas. Interest rates overseas are lower than the US and do not have FDIC protection so keeping more than 10% overseas might be unwise.
7) Isolate through different addresses. Keep one checking account/savings account/debit card under an address that isnt on your credit report. A PO Box - after you open the account you can change it to this - or a mail rental box, or a relatives house. The idea is that if your main address gets compromised, they wont get everything. This might occur if you go on vacation and someone steals 2 weeks worth of your mail. An offshoot of this is to add a different email address that you dont normally use. Create a new free gmail or yahoo account that you dont keep saved on your computer in case that is compromised. Keep one month worth of expenses at this isolated account.
8) Isolate locations of your banks used. This is likely overly paranoid but I once read a suggestion to ensure that if you carry 2 credit cards, try to have one based in a bank on the east coast and another based on the west coast. There was several hours where the internet infrastructure in the midwest went down and certain banks were unable to process CC transactions. Its theoretically possible that this might be helpful, perhaps if theres a natural disaster or maybe the hamsters running one banks servers die unexpectantly.