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Investing Offshore: Do you need a foreign will?

By Stanley Broun Time of article published Jul 7, 2020

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South Africans are increasingly using their discretionary foreign investment allowances to invest offshore, both to protect against political and economic risk and to benefit from growth opportunities not accessible in this country. 

A local will may not be sufficient to cater for worldwide assets – there are several reasons why you may also need a separate offshore will. Foreign inheritance taxes and probate issues may complicate matters – expert advice is therefore essential in drawing up both a local and a foreign will.

Before deciding whether you may need to draw up an offshore will in addition to your South African will, consider the following:

  • If you’ve used your discretionary foreign investment allowance to externalise funds and you’ve invested these funds in foreign jurisdictions in your own name, you may need an offshore will.
  • In both common law and civil law jurisdictions, immovable property will typically be subject to the succession laws of the country in which it is situated, while movables will be governed by the law of the domicile of the deceased. Despite the different treatment for succession law purposes, both immoveable and moveable assets may be subject to a jurisdiction’s inheritance tax laws if such assets qualify as ‘situs’ assets in the jurisdiction, which can result in rates of up to 40% applying on such assets.
  • Legislation in different foreign jurisdictions may vary substantially with regard to succession, inheritance taxes and validity requirements for the signing of wills.
  • Having a separate offshore will can ensure that your foreign estate is administered efficiently and at the same time as your South African estate. It therefore helps to reduce delays in winding up your estate, since it won’t be subject to the administration process at the office of the Master of the High Court in South Africa.
  • Having an offshore will can expedite the process for your nominated executor to obtain a grant of probate authorising him or her to deal with your foreign estate.
  • There will generally be no need for your executor to obtain sealed copies of your will and Letters of Executorship from the Master, which may cause unnecessary delays, as will be the case if there is only one will dealing with your worldwide assets.
  • South African law is based largely on Roman Dutch law principles, with some English law influence. Some legal terms used in our wills are unknown in certain foreign jurisdictions, which may result in delays and costs to obtain legal interpretations. It may also be necessary to have your worldwide will translated and sealed before sending it to the foreign executor or agent.

OFFSHORE WILL: ADVANTAGES

Having a separate offshore will therefore have the following advantages:

  • The legal terms of the jurisdiction in which the assets are situated are used in the will.
  • The will may expedite the process of obtaining a grant of probate overseas where necessary.
  • There are typically no delays resulting from the required compliance with processes in the Master’s Office in South Africa.
  • Succession laws and validity requirements in other jurisdictions are considered when drafting the will.
  • Foreign estate tax consequences will be considered in drafting the will and in the succession planning process.
Stanley Broun is the Head of Fiduciary and Tax at Sanlam Private Wealth

PERSONAL FINANCE 

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