It’s a global village. Technological advances allow us to live, do business and invest offshore with relative ease. Against the backdrop of local uncertainty, South Africans are increasingly looking at offshore investment options; our political climate makes investing in second residency schemes attractive. How, then, do these offshore investments impact our estate planning? Kerryn Franck, Director of Chartered Legacy & Trust, underscores the importance of having an international Estate Plan.
Investing offshore exposes your personal estate to foreign laws and jurisdictions. So, understanding the different rules that may apply to your worldwide assets is imperative as part of your estate planning.
Different countries have different succession and inheritance tax laws. Which law applies to your assets may depend on your nationality, domicile, residence and location of your property.
You can, of course, deal with all your assets in a worldwide Will. It is important, though, to consider whether it may be more practical and/or efficient to deal with offshore assets in a separate Will. I would urge you to discuss the many factors to be considered when making this decision with your planner; for example, property may be situated in a jurisdiction that has forced heirship rules and you may not be able freely to dispose of the property as you wish in your Will.
Even though you have a worldwide Will, you may still be required to report your estate in the foreign jurisdiction where the asset is located and apply for a grant of probate. This requires the services of a lawyer overseas – this can be costly and is an extra expense for your estate. A jurisdiction where a foreign language is spoken can further complicate matters.
Should you opt to have more than one Will, you need to ensure that your Wills are read together. A Will dealing with your offshore assets must not revoke all your previous Wills but only those dealing with your offshore assets. Revoking all Wills may result in your local assets being distributed in accordance with the laws of intestacy. When drafting separate Wills, you must also ensure there is enough liquidity in each of the various jurisdictions to cover the costs of administering that portion of your estate and the transfer of the assets.
Often a testator will have sent money offshore with the intention of it remaining offshore for the benefit of the nominated beneficiary. In this case, a detailed Estate Plan should be created to investigate whether all estate expenses and taxes can be paid locally. This is so that the offshore funds are not repatriated and the testator’s wishes are upheld.
When you do your financial planning, remember that a South African trust cannot hold or inherit offshore assets – note this when drafting your Will. A testator wanting to leave their assets to a local trust in their Will must investigate an alternative option for any offshore assets.
In short, if you have offshore assets, you must have an international Estate Plan in place.
Chartered Wealth Solutions is an authorised financial services provider
(FSP no. 13909)