A few weeks ago, I wrote about a relative of mine who recently passed away. He was a smart guy and followed many of the wealth protection practices I recommend in The Bauman Letter.
One such practice involved keeping a liquid store of value outside the financial system. In ascending order of liquidity, he kept rare collectibles, gemstones, precious metals and cash.
But there is one critical recommendation he didn’t follow. He kept these things in an unsecured location in his home office even though they were subject to theft and destruction. (In fact, I well remember one time when his office, which was in a converted granny flat, almost burned down.)
With economic and political temperatures rising fast, and investors shifting assets into cash and other stores of value, I thought it would be a good time to review the commonsense alternatives to that risky approach.
It’s There Until It Isn’t
My relative’s risk from theft was low, but it wasn’t nonexistent. As a retiree, he spent much of his time in his home office, where he could keep an eye on his wealth. But still, he should have invested in a decent safe.
What’s a decent safe? Well, it depends on the risks you face.
If your risk of theft is low, the small safe that you find at big-box and home renovation stores will do the job. They may be small, but they’re heavy, and their locks do work. If they are appropriately concealed, they are a good basic frontline defense mechanism for your home-kept wealth.
But these small, convenient safes come in different varieties. It’s essential that if you get one, it is both fireproof and waterproof. Gold and silver have low melting points, and as much as we may like it, cash is just paper. And if you do have a fire, or if you live in a hurricane-prone floatplane like my relative, a waterproof lockbox is essential.
The next step up from a low-budget home safe is a bigger and heavier model that can be bolted down. If you have guns or other larger objects of value at home, it’s worth contacting a safe contractor to see about your options in this respect.
Security Away From Home: Diversified Wealth Preservation Strategy
Keeping liquid wealth at home certainly feels safer. But that’s not always the case, nor is it always practical. In fact, a prudently diversified wealth preservation strategy should involve secure storage outside your home as well.
Here are several options I’ve written about in The Bauman Letter over the years:
- A safe-deposit box at a U.S. bank. This has the advantage of being easily available and readily accessible. But it does have disadvantages. The contents of a bank safe-deposit box are not subject to Federal Deposit Insurance Corp. (FDIC) coverage. Typically, you have to insure the contents yourself. And although it’s hard to imagine it happening here, it’s not unknown for governments to order banks to hand over the contents of personal safe-deposit boxes, as happened in Greece during its recent financial crisis.
- A safe-deposit box at a foreign bank. If you manage to obtain one, a bank account in a secure jurisdiction like Switzerland gives you access to a safe-deposit box as well. In addition to protecting against government confiscation, a foreign safe-deposit box also protects you against court-ordered confiscation. Privacy-protecting jurisdictions typically do not enforce foreign court orders. A litigant after your wealth would have to start a new court proceeding from scratch before a foreign judge to get your goodies.
- A vault at a nonfinancial institution. Keeping assets in a vault rather than a bank gives you an extra level of security. Governments and courts have a lot of leverage over banks because they are heavily regulated. U.S. banks routinely surrender information about their clients to the federal government. But vault companies face no such pressure, and they usually require a formal court order to provide information about the identity of a client and their holdings.
- A foreign vault. The gold standard in the protection of physical assets is a secure vault in a privacy-respecting foreign jurisdiction. As nonfinancial institutions, vaults are not subject to banking regulations or to the onerous reporting requirements that the IRS imposes on foreign banks. Physical cash, precious metals and similar assets are not considered reportable under the Foreign Account Tax Compliance Act (FATCA).
A Vault Designed for You
Countries like Switzerland, Austria and Singapore have specialized asset-storage industries. But they tend to be expensive and require your physical presence to create an account.
That’s why my favorite offshore secure storage option is New Zealand. A company called New Zealand Vault has created a unique system that allows Americans and other foreigners to open an account and deposit assets into a vault without having to set foot in that fair country. What’s more, New Zealand Vault also acts as a metals broker, so you can buy the metal at competitive prices and have it put straight into a vault at one of its facilities.
New Zealand Vault’s rates are remarkably competitive — so much so that its services make sense even for regular folks like us.
So as the world becomes more uncertain, consider contacting them. Oh, and tell them I sent you!
Editor, The Bauman Letter
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