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By Rozanne Heystek-Potgieter*
With more South Africans investing offshore than ever before, investors need to consider the impact offshore investing has on their overall estate planning layout and objectives.
The most commonly asked question in terms of cross border investing and estate planning is whether a foreign will is necessary? In order to answer that, one needs to unbundle information such as the type of asset, the laws of the jurisdiction that governs the assets, possible tax implications locally and abroad, as well as who will inherit from your estate and where they are based. The following factors can impact whether one worldwide will be sufficient or if it is advised to draft a foreign will:
- Type of asset
The type of asset in question will impact whether you require a separate foreign will or whether it can be dealt with in one will that encompasses your worldwide assets. The process involved in handling an immovable property in an estate such as a house or empty stand in a foreign country, will differ significantly from movables such as offshore bank accounts or discretionary investments. Immovables in most cases require a separate foreign will that matches the laws, taxation and estate administration procedures of the jurisdiction in which the asset is held. If you are a SA tax resident and hold property in the UK, for instance, then a separate will is advised.
The jurisdiction in which an asset is held is a major factor in how you would structure your will or wills, as legal concepts that do not exist in South African law might apply to an offshore investment. As an example, Guernsey is a preferred jurisdiction from an investment perspective due to its favourable laws and taxation structure. Mags Heystek finds it a favourable jurisdiction to invest in as “there are no repatriation laws between Guernsey and South Africa at this time. Guernsey is also not part of the EU or United Kingdom, mitigating Brexit fears. Investing in this jurisdiction also allows for seamless cross border inheriting, without funds ever having to be paid out to the SA estate. This is also advantageous if your heirs have emigrated.” Further, a co-owned investment in Guernsey, through a platform such as Momentum Wealth International, allows for the selection of the joint-tenancy rights applying to that investment. Simply put, on the death of one of the owners, the surviving owner inherits their half share automatically, and not in terms of a will. This is a great estate planning tool for spouses who want to avoid the cost implication of a foreign grant of probate process or having to draft a separate Guernsey will.
- Forced heirship laws
Certain civil law countries still follow a strict code of forced heirship laws. In Mauritius for example, Mauritian laws govern the devolvement of immovable property owned by a foreigner, yet on a limited basis. A distinction is made between a reserved and unreserved portion – the reserved portion is allocated to children, if the deceased had any, depending on the number of children (1 child = 50% reserved, 2 children = 66%, 3+, 75% reserved). Most importantly, the reserved portion cannot be infringed upon by testamentary disposition. The unreserved portion can be bequeathed in a will.
The process of estate planning, especially with the inclusion of foreign assets it not always a straight forward topic, with simple solutions for all investors. Mags Heystek, Certified Financial Planner® professional, advises that “discussing estate planning from an offshore point of view, ensures that the investor and even the potential heirs or beneficiaries are aware of the ultimate goal of capital preservation and asset protection from future unforeseen circumstances, for example, the government limiting exchange controls”. If you decide to draft a foreign will, ensure that it is not done in isolation of your SA executor. Multiple wills must be carefully drafted in order to not revoke each other, to avoid obvious disastrous effects. It is best to consult a Fiduciary services specialist who can provide guidance on estate planning, drafting wills and ensure synergy between offshore investment strategy and estate planning goals,” Heystek says.
Every individual’s situation is different. It is recommended to consult an experienced, qualified advisor to suit personal circumstances. Read more: Fiduciary Services
- Rozanne Heystek-Potgieter is responsible for the drafting of wills, administration of deceased estates, estate planning, and all matters that relate to trusts, offshore trusts and offshore wills, with special focus on jurisdictions such as Guernsey and Mauritius. She is an admitted attorney, holds a BA Psychology & International Studies degree from Monash University, a LLB degree (UNISA), and a certificate in International Trust Management from STEP (Society of Trust and Estate Planners). She first joined Brenthurst in 2010 and rejoined in 2014 after completion of articles of clerkship.