Why do the rich store their money in the Cayman Islands? And should you follow their example? Brett Arends at Smart Money examined some of the issues involved:

• Contrary to popular perception, moving your money offshore does not allow you to avoid taxes. Income earned from abroad is taxed in the same way as income earned at home.
• The real reason people move their money abroad is litigation risk – US courts have no jurisdiction over money stashed overseas and you can protect yourself to some extent by stashing your cash abroad.
• Another reason is political risk – with the financial crisis some have lost faith in the American government and have stored their money abroad. If need be they can go renounce their citizenship and go into exile.

To read more about both these risks and ways that you could avoid paying taxes in the United States, click here.

Source: Smart Money

Via: Newmark’s Door