Relaxation of exchange control regulations has made it possible for wealthy South Africans to build substantial foreign holdings. Offshore trusts, when established for the correct reasons, remain a popular choice, especially for estate planning. Sanlam Private Wealth has for the past seven years offered offshore trust services and to make this option accessible to more of our clients, we’re now offering a new, cost-efficient offshore trust solution.
Offshore trusts hold significant benefits for South African investors with foreign assets:
Exchange control regulations restrict local trusts from investing directly in foreign assets, except by way of asset swap. Offshore trusts are therefore often the most suitable mechanism to align offshore asset holdings with an estate plan
They facilitate global diversification of assets in a way that allows for succession upon death, so complex issues relating to offshore inheritance tax and probate requirements can be largely avoided
If correctly structured, and located and effectively managed in a well-regulated financial services centre, they can protect assets from sovereign risk and political or economic turmoil at home. Assets held in such trusts won’t be considered part of an estate in South Africa on death for purposes of the administration process, executors’ fees or estate duty and capital gains tax (CGT)*
For potential emigrants, the act of leaving South Africa will likely trigger a deemed CGT charge on the market value of assets. However, if the assets are held in trust, funded by a correctly structured loan, there will be no CGT on the value of the outstanding loan account.
Until now Sanlam Private Wealth (SPW) has offered our clients offshore trusts, along with a range of other services, via Summit Trust Mauritius, recently rebranded as Sanlam Trustees International. Our fiduciary and tax team in South Africa provides advisory services.
Increased regulatory and reporting requirements have increased the costs of setting up and administering an offshore trust over the past few years, making it largely unfeasible to consider this option for foreign investment holdings of less than US$1 million. In response to client requests, we’ve now developed a cost-efficient offshore trust solution for individuals or families with investable foreign assets of between US$500 000 and US$2 million – an option with slightly less functionality, but priced at a reduced annual fee.
Our new offshore trust solution – offered via Sanlam Trustees International in Mauritius – is subject to an agreed scope of services and suite of investments. It may, for example, hold a maximum of five unit trust investments selected from the SPW approved offshore fund list, and won’t hold direct (segregated) equity or bond portfolios. The cost-efficient trust will not have a separate bank account and cash will be held in a money market fund.
This offshore trust option will ensure that more of our clients will be able to enjoy the benefits of expanding their estate-planning process to include their foreign assets. It’s important to remember that offshore trusts are subject to stringent regulatory requirements that ensure peace of mind for clients.
At Sanlam Private Wealth, we can facilitate the seamless integration of your local and offshore estate planning. For further information, please contact your wealth or portfolio manager or our fiduciary and tax team at firstname.lastname@example.org. For more information on Sanlam Trustees International, email Rod Phillips in Mauritius at email@example.com.
* Please note: The scope of this article is limited to the broader benefits offered by offshore trust structures. Various other issues such as the funding mechanism and related income tax, donations tax and estate duty consequences should be given careful consideration. You are also strongly advised to obtain professional tax advice on these and related matters before establishing trust structures and transferring assets to an offshore trust.
we can assist you with
The formation and registration of trusts, and the provision of independent trusteeships – both local and oﬀshore.
The creation of BEE, charitable, special and Shariah trusts compliant with regulatory and legislative requirements.
The administration of deceased estates in South Africa and abroad.
Advice on complex structures, asset restructuring and bequests in foreign jurisdictions.
Advice on emigration and immigration, foreign earnings and the application of any double taxation agreements.
Updating trust deeds to ensure they’re in line with the latest changes in the trust environment.
Updating and/or drafting of wills dealing with South African and/or foreign assets.
Advice on the establishment and management of charitable organisations, their tax status and tax deductible donations.
Advice on the potential tax consequences and reporting obligations if you hold a US passport or green card, or if you have children living in the US.
Guidance on the financial implications of life-changing events, such as getting married, divorce or the birth of a child.
Sanlam Private Wealth (Pty) Ltd, registration number 2000/023234/07, is a licensed Financial Services Provider (FSP 37473), a registered Credit Provider (NCRCP1867) and a member of the Johannesburg Stock Exchange (‘SPW’).
All reasonable steps have been taken to ensure that the information on this website is accurate. The information does not constitute financial advice as contemplated in terms of FAIS. Professional financial advice should always be sought before making an investment decision.
Participation in Sanlam Private Wealth Portfolios is a medium to long-term investment. The value of portfolios is subject to fluctuation and past performance is not a guide to future performance. Calculations are based on a lump sum investment with gross income reinvested on the ex-dividend date. The net of fee calculation assumes a 1.15% annual management charge and total trading costs of 1% (both inclusive of VAT) on the actual portfolio turnover. Actual investment performance will differ based on the fees applicable, the actual investment date and the date of reinvestment of income. A schedule of fees and maximum commissions is available upon request.
COLLECTIVE INVESTMENT SCHEMES
The Sanlam Group is a full member of the Association for Savings and Investment SA. Collective investment schemes are generally medium to long-term investments. Past performance is not a guide to future performance, and the value of investments / units / unit trusts may go down as well as up. A schedule of fees and charges and maximum commissions is available on request from the manager, Sanlam Collective Investments (RF) Pty Ltd, a registered and approved manager in collective investment schemes in securities (‘Manager’).
Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. The manager does not provide any guarantee either with respect to the capital or the return of a portfolio. Collective investments are calculated on a net asset value basis, which is the total market value of all assets in a portfolio including any income accruals and less any deductible expenses such as audit fees, brokerage and service fees. Actual investment performance of a portfolio and an investor will differ depending on the initial fees applicable, the actual investment date, date of reinvestment of income and dividend withholding tax. Forward pricing is used.
The performance of portfolios depend on the underlying assets and variable market factors. Performance is based on NAV to NAV calculations with income reinvestments done on the ex-dividend date. Portfolios may invest in other unit trusts which levy their own fees and may result is a higher fee structure for Sanlam Private Wealth’s portfolios.
All portfolio options presented are approved collective investment schemes in terms of Collective Investment Schemes Control Act, No. 45 of 2002. Funds may from time to time invest in foreign countries and may have risks regarding liquidity, the repatriation of funds, political and macroeconomic situations, foreign exchange, tax, settlement, and the availability of information. The manager may close any portfolio to new investors in order to ensure efficient management according to applicable mandates.
The management of portfolios may be outsourced to financial services providers authorised in terms of FAIS.
TREATING CUSTOMERS FAIRLY (TCF)
As a business, Sanlam Private Wealth is committed to the principles of TCF, practicing a specific business philosophy that is based on client-centricity and treating customers fairly. Clients can be confident that TCF is central to what Sanlam Private Wealth does and can be reassured that Sanlam Private Wealth has a holistic wealth management product offering that is tailored to clients’ needs, and service that is of a professional standard.