Offshore trusts have long been regarded as the sole preserve of ultra-high net worth individuals. File Image: IOL

Offshore trusts have long been regarded as the sole preserve of ultra-high net worth individuals, but the reality is that they compare favourably to local service providers in terms of investment and retirement trust options, says independent trust service provider Sovereign Trust SA.

Coreen van der Merwe, the Managing Director of Sovereign Trust SA, says South African consumers have significant misconceptions around the term ‘offshore’, which prevents them from fully exploring their retirement and financial planning options.

“Investing in retirement trusts is no longer a luxury, or something reserved for the high net worth market: it’s a necessary consideration for all South Africans,” said Ms. van der Merwe. “Offshore trusts are a real option for those who don't have an ultra-high net-worth but want to ensure they have sufficient retirement income that is growing in a strong currency and in a politically stable jurisdiction.”

The benefits of an offshore trust include flexibility, effective tax and succession planning, saving on executor’s fees and asset protection. While assets in your personal estate are frozen during the finalisation of the deceased estate, trust assets are accessible at all times. To add to this, tax-efficient trusts offer the opportunity to reduce, or even avoid taxes - including estate duty, income tax, capital gains tax, donations tax and transfer duty.

Properly-structured trusts allow families to protect their assets from creditors and can provide for joint ownership of typically inseparable assets such as holiday homes and farms. They also provide controlled distributions for beneficiaries who are not in a position to manage assets themselves, ensuring that the weak are protected.

Ms. van der Merwe says trust companies are well aware of the challenges facing South Africans and are providing a range of increasingly innovative solutions. “The important thing is to work with a professional and licenced trustee to set up a valid trust and help navigate the administrative work and complexity around the settlor and beneficiaries’ affairs. If a trust is not set up and administered properly, you run the risk of losing the benefits available,” she said.

“Guernsey retirement trusts like the Conservo are a great starting point. They’re not just affordable, they offer a way for estate planners to protect their assets long after they pass on.”

Personal Finance