I recently received $50,000 USD, which my parents worked hard to save. To secure these funds, they brought them to me here in CH, as keeping them in our home country seemed risky. My parents are nearing retirement, and although they don’t need the money right away, there’s a chance they might require it in USD in the short term. Our primary goal is to protect the funds from losing value due to inflation, and secondary to that, explore opportunities for growth.
What would you say is the best option to do with that money and why? here below some of the alternatives I am considering but I’d love to hear your feedback:
Exchange USD to the stronger CHF and simply keep the cash - if so, any advice on a safe place to exchange?
Exchange to CHF and put that in Neon Spaces at 0.9% - anyone with experience here?
Put those USD into IB and get that ~4.85% yield - what’s the fastest way to get from cash to IB balance? any minimum timeframe to be considered?
Buy US T-Bills at ~5% yield
Any feedback on the options above? any other alternative you’d consider?
Besides wealth tax, any other impact you’d consider?
Basically you have to decide if you want to keep them as USD or exchange to CHF. I am not aware if banks in Switzerland would accept USD for a deposit to your account, but you can ask Postfinance, which seems to me a good chance. Another question is what are USD withdrawal options.
If you have to give back USD notes, another option is to just rent a safe in a bank and put them there.
If your parents would be satisfied to get EUR cash, that gives you more options including EUR withdrawal from a common Swiss ATM.
How short is the short term when they might need money?
Furthermore, you should think about setting it up as a loan from your parents to you that you are going to repay. For at least 2 reasons.
An appearance of excessive 50k in your wealth most probably won’t go unnoticed in your tax declaration. There will be questions.
When you have opened an account at IB or any other account, there is a question about the beneficiary of the assets that you are depositing. 99.99% chance that you have answered that you are the sole beneficiary. To deposit your parents’ money on your account is a tricky move.
Is the inflation you are trying to ward against linked to the USA or to another country? (Some types of assets, like short term TIPS, will not protect equally against both and no be equally available to US citizens (if your parents are) and other people).
Moving money around in actual banknotes may be a sign of other kinds of distrusts from your parents (or a lack of access to banks). Would they be ok with it being invested at a broker or deposited at a bank? Would there be limitations as to wich ones you could use?
Great point, any idea where to look guidance on how to set up such a loan?
It’s Argentina, where the USD is the reserve currency people have to ward against +100% inflation of the local currency. I am trying to help them ward against the USD inflation too.
Would opening a new sub IB account, under my main one, and with their name be an option? Or just a new one under their name? They are not residents here and I guess this will pose other implications too
Given that it’s apparently prohibited I assume that’s not an option.
I don’t know what a swiss bank typically requires when they have concern regarding cash deposits, maybe try and see what happens (though worst case can make your account flagged for increased money laundering risk I assume ).
Assuming the money is legitimately in the banking system I would keep any cash in USD to match spending.
A large cash holding is not a good long term solution in whichever currency but as a short term solution US inflation is on a downwards trend and IB interest rate is > Fed target inflation rate (if not the current inflation rate)
If set up like this it would be necessary to demonstrate to the tax authorities it is not just a ruse to reduce you taxable wealth. I assume interest would need to be paid to your parents at a market rate, and your parents would need to pay tax on the interest … not sure how that would work in practise