Global estate planning:
secure your legacy

Why is proper and timeous estate planning so important?

Estate planning is a crucial part of ensuring the smooth intergenerational transfer of your wealth. It’s important to remember that each person’s estate plan is unique – there’s no one-size-fits-all solution, and it involves far more than just pushing around some numbers on an Excel spreadsheet.

We often find that clients become fixated on wanting to save on tax and estate duty, but estate planning is much more than that. Estate duty is, of course, key, especially if you’ve accumulated wealth over your lifetime, but it’s paramount to obtain expert advice to ensure that all the elements of proper estate planning are taken into consideration, to ensure that there are no nasty surprises for your beneficiaries when your estate gets wound up.

There are many factors to be taken into account – especially if you have both local and offshore investment structures – including your marital regime, and whether your children have ceased their tax residency or intend to do so and settle abroad.

You can read more about what to consider when drawing up an estate plan here.

What are the main elements you look at when drawing up an estate plan?

We would normally ask you to share more than just the elements that will form part of your estate duty calculations. We like to know all the details of your assets and liabilities, both local and offshore, but also information about life policies, pension and provident funds, business interests, company shares and loan accounts, where beneficiaries are resident, and much more.

Your marital status and the marital regime applicable – in community of property, out of community of property, with or without accrual – will have an effect on the division of assets at death and is therefore also an important factor to be considered in estate planning.

Having the full picture enables us to draw up a proper estate plan and determine if there are ways to better structure your financial affairs – both in South Africa and offshore – to reduce your overall tax burden.

If you have both local and offshore assets, how important is it to have an offshore will as well as a South African will? And does it matter if your will is in Afrikaans?

If you have assets located in an offshore jurisdiction, even if it’s just money in a foreign bank account, we normally advise that you have both a local and a foreign will. Although it’s not a legal requirement to have an offshore will, based on our experience, it really helps with the administration of the offshore assets. If you don’t have one, it can become very time-consuming and complicated to wind up your estate.

It complicates matters if your will is not in English. Your executor will first have to get it translated to English by a legal professional, leading to unnecessary delays. Then the will must be submitted to the Master of the High Court, and only once we’ve received sealed copies from the Master, which could take months, can we start the process of obtaining a Grant of Probate in the UK, for instance. All these elements can delay the administration of the estate and result in additional costs.

Another advantage of having an offshore will relates to terminology. In South Africa, we may use different legal terms to those common in other jurisdictions. In the UK, for instance, they might have different terms for concepts such as ‘bare dominium’ and ‘usufruct’ – so they’ll have to send your local will containing these terms back for legal clarification before a Grant of Probate can be issued, resulting in further delays. When we draft an offshore will, we work with solicitors in the jurisdiction in question to make sure it’s drafted in line with legislation in that jurisdiction and that there is no confusion when it comes to interpretation.

You can also read Kajal Chowthee’s views on the importance of drawing up an offshore will here.

How can estate planning help you to structure your assets more efficiently?

Taking into account all the elements of your financial assets and liabilities, proper estate planning can provide an excellent opportunity to restructure your wealth. For example, what planning opportunities are there to better manage inheritance tax issues in the UK, or US estate taxes? Would an offshore trust or a dry trust be a good option to house your offshore assets? Are there ‘wrappers’ such as the Glacier Global Life Plan that may be beneficial?

While there may be an immediate capital gains tax impact should you decide to transfer your assets into a more suitable vehicle, the future growth of your assets will be outside your estate for estate duty purposes, which will definitely be more advantageous for your beneficiaries at your date of death.

The most important question to ask when thinking about estate planning is, ‘What are my objectives, and what do I want to achieve?’ Just because one product or vehicle may prevent someone from having to pay estate duty and taxes, it doesn’t mean it will be suitable for your particular purposes. Your estate plan, whether it’s for your local or your offshore assets or both, must be in line with your overall objectives.

You should never allow tax to be the driving force in your decision-making, because if the tax laws change, you may have to change your vehicle or structure again. While certain events may well result in you having to pay some taxes, your plan should at least be aligned with your objectives, so that when you pass away, your beneficiaries will inherit the way you intended them to.

At Sanlam Private Wealth, we have all the necessary skills and expertise to assist you in drawing up your estate plan. If you’d like further information, please contact Stanley Broun on +27 (0)11 778 6648 or stanleyb@privatewealth.sanlam.co.za.