I have been doing some estate planning and am looking at how I can make it easier for my children to inherit from me and not pay any unnecessary tax. I have a substantial dollar-based share portfolio that is held offshore. I have heard that this can be costly and cause delays when it comes to wrapping up an estate.
Is this true?
Answer There are two things you need to look out for when it comes to offshore investments
This is the tax that is payable in the country in which your asset is housed. Each country has its own rules and a lot of the time, these rules are often a lot more punitive than they are in South Africa.
For example, if your shares are held in the USA, you will be liable for a situs tax of 40% of the value of the asset instead of the 20% estate duty that would have been levied had the asset been held in South Africa.
A grant of probate will allow your executor to execute your will in another country. Getting a grant of probate is expensive and slows down the finalization of your estate.
To give you a feel for the type of work needed to get a grant of probate, here are some of the requirements
Getting these can take a long time. I have come across estates with offshore assets that have taken a number of years to be finalised.
In addition, your executor must either present themselves personally in the country where the asset is housed or hire an attorney in that country. These attorneys are expensive - I recently saw a probate quote where the attorney charged R8 500 an hour. Add in court fees and stamp duty and you can see how much of your investment will disappear in costs.
A solution is to put your shares into an offshore sinking fund or endowment structure where your offshore shares will be deemed to be an asset in your South African estate
There are downsides: to this:
There are several advantages though:
As always, chat to a skilled financial adviser before making any decisions.