With South Africa representing less than 1% of the global investment universe, many South Africans are diversifying their investments portfolios to include substantial offshore assets, ranging from global equities to immovable property. 

Yet, when I sit down with clients I often find that their estate planning has lagged behind this trend and does not take account of these offshore assets or integrate such into existing estate planning. This is understandable as integrating offshore assets is not as straightforward as dealing with local assets, and deserve special attention when planning to bring such into your holistic estate plan.

In this blog I will touch on a few important factors to keep in mind when planning for the transfer of offshore assets to your beneficiaries on your death.

Foreign assets subject to foreign laws

Assets in other countries are subject to the laws of that country. This may include laws that dictate how the assets can be dealt with on death of the owner. Some countries have what is commonly referred to as “forced heirship rules” which often dictate how and to whom ownership of the asset may be transferred from the deceased estate of the owner. These rules will take precedence over the provisions of your will.

Probate

In most offshore jurisdictions the letters of executorship issued by the Master of the High Court of South Africa will not be recognized by the authorities and administrators of your offshore assets. In practice a lawyer in that jurisdiction will have to be appointed to deal with the transfer of those assets from your deceased estate to your beneficiaries. This may be a costly and burdensome process that can cause a delay in the winding up of your estate.

Situs tax

Although offshore assets are included in the deceased estate of a South African resident and are subject to estate duty in South Africa, ownership of assets situated in some foreign countries may result in a death duty liability in that country for the deceased estate on death of the owner. Primary examples include the US and UK where death duty is levied at 40% above certain thresholds. This potential liability should be carefully considered as it may have a dire impact on the liquidity of the estate.

Exchange Control

Although South African residents may invest offshore and hold offshore assets, the ownership of such assets are still subject to our local exchange control regulations. As a consequence hereof there are some limitations on how you can deal with your offshore assets in your will. One significant limitation is that offshore assets cannot be bequeathed to a South African inter vivos trust. It is possible to request permission from the South African Reserve Bank to transfer offshore assets bequeathed to a testamentary trust in the will of the testator to such testamentary trust but in practice this can be a tricky and a lengthy process that could result in a substantial delay in winding up the deceased estate.

Offshore will

South Africans owning offshore assets should strongly consider drafting an offshore will to deal with those assets. One should keep in mind that there may be laws applicable to the transfer of assets situated in that particular jurisdiction as alluded to above, and there may also be unique requirements for a testamentary writing to constitute a valid will in that jurisdiction. It is advisable to get advice from a qualified professional in such jurisdiction before venturing into the drafting of an offshore will dealing with the assets held in that particular jurisdiction. 

Although not a finite list, the above are definitely some of the key areas that should be considered as part of your estate planning. It is here where a specialist estate planner can really assist to integrate all the elements, including looking at alternative ownership structures to deal with high value or complex estates.

At Phatshoane Henney Consult this is what we love doing – helping clients to integrate and plan their estates in the most effective and efficient manner and to do so in a way that is cost-effective and protects their families across generations. If this is your need, make contact with us and let’s set up a meeting to see how we can help.



Disclaimer: This blog is the personal opinion/view of the author(s) and is not necessarily that of the firm. The content is provided for information only and should not be seen as an exact or complete exposition of the law. Accordingly, no reliance should be placed on the content for any reason whatsoever and no action should be taken on the basis thereof unless its application and accuracy has been confirmed by a legal advisor. The firm and author(s) cannot be held liable for any prejudice or damage resulting from action taken on the basis of this content without further written confirmation by the author(s).