Protecting your wealth
across borders

You can watch the full interview here, or read the edited highlights below.

Why is global estate planning important, and when should it begin? There’s often an assumption that it’s something you deal with later in life.

Let me start by saying that global estate planning is extremely important for our clients – and you should start planning as early as possible. If you leave it too late, there is often very little that can be done from a planning perspective.

Typically, clients who require global estate planning hold assets in different jurisdictions and need to navigate foreign laws and regulations. The aim is to ensure a seamless transfer of assets from one generation to the next, while also protecting those assets throughout the process. In a nutshell, this is what we mean when we talk about global estate planning – helping clients navigate these complexities and putting the right arrangements in place to achieve their long-term objectives.

What are the main elements to consider when drawing up a global estate plan?

There are a number of important elements to consider. Typically, we approach estate planning through the lens of customisation, tailoring each plan to the client’s specific circumstances.

You need to consider how to navigate foreign laws and how your wills should be structured to support that. It’s also important to avoid delays by ensuring that wills are set up correctly and that you understand the probate requirements in the different jurisdictions involved.

The way wills are structured is particularly important because there is the potential for conflict between them. Clients often move their wills from one institution to another. One institution may have drafted multiple wills, while the next institution may not be aware of those existing wills. A newly drafted will can inadvertently cancel or conflict with the others.

Another key consideration is the minimisation of taxation, which is something many clients are understandably focused on.

One element that people don’t often talk about, however, is avoiding family conflict. When we talk about the main elements of estate planning, we should also be thinking about how to reduce or eliminate any potential conflict that could arise when an estate devolves to the next generation.

I imagine structure becomes quite critical here. What are some of the repercussions of not housing assets in the correct structure?

I think the first thing to understand is that your structure needs to evolve. The structure we put in place today may not necessarily be appropriate 10 or 15 years from now as your circumstances, and those of your family, change.

A trust is one of the structures most commonly used, not only in South Africa but in other jurisdictions as well. However, a trust is not a silver bullet for every family, which is why we always approach planning through the lens of customisation and tailor a solution to each client.

While a trust can be a very effective estate planning tool in South Africa, it may not be the best solution where beneficiaries are based abroad and need to inherit from, or receive distributions from, the trust. In those situations, the tax implications can become more punitive for certain individuals.

Our clients often make use of life wrappers because of the efficiencies they can offer. But again, while a life wrapper may make sense in South Africa, the position can change if the beneficiary you’ve nominated is based in Australia, the UK or the US. You need to ask whether that beneficiary will truly receive the maximum benefit you intended when the structure was put in place.

So the correct structure is critically important. Clients can use trusts locally and offshore, life wrappers or endowments. But whatever structure you choose must be appropriate not only for where you are today, but also for where you are going.

You’ve highlighted some of the key structures to consider. How do you decide what’s appropriate for whom, and in which circumstance?

It’s a journey we go on with each client. Before we can talk about structures, we first need to understand the client and their family. We need to understand their circumstances, where their assets are located and, importantly, what they are trying to achieve.

When we start talking about structures, we need to align them with the client’s objectives and intentions. The structure must also be dynamic. As you grow older, as your estate expands and as your children settle in different jurisdictions, the plan needs to evolve alongside those changes.

Trusts can be very effective estate planning tools, but I always encourage clients to think more broadly. A trust can do much more than simply support estate planning. For example, it can help protect family members who may not be capable of managing their own affairs. It can also be used as a testamentary trust, established on death, where assets are protected for the benefit of a surviving spouse.

So it’s about much more than tax savings. These structures can serve a range of purposes, and that’s why we always customise the solution according to each client’s specific needs and circumstances.

Let’s cast the spotlight onto entrepreneurs. If you’re planning to sell a business and convert the proceeds into personal wealth, what should you be thinking about before the transaction takes place?

Selling a business is a milestone for an entrepreneur, but a lack of proper planning can erode much of the significance and value that has been built up over the years. The key consideration is having a strategy, and then timing – as an entrepreneur, you want to start planning well before the sale takes place. The objective is to ensure that the proceeds are transferred to the appropriate structure when the transaction eventually happens.

My advice is that as you build your business, and even as you start thinking about the possibility of a future sale, planning should be a priority. That means reviewing the structure regularly and making sure that, when value is ultimately realised, you can extract it in the most effective way possible.

Good planning helps ensure that you maximise the value you receive from the sale, while also implementing appropriate tax planning within the parameters of the law. Without that preparation, entrepreneurs can end up eroding a portion of the proceeds through taxes that may have been mitigated with earlier planning.

Does having offshore assets mean you also need an offshore will, in addition to a South African one?

In my view, yes, although it is not a legal requirement. The important thing is to look at where the assets are located. If we take an example of a client with assets in South Africa, France and Spain, the question becomes whether it would be beneficial to have a South African will covering the South African assets, a Spanish will covering the Spanish assets, and a French will covering the French assets.

Part of the planning process is deciding whether separate wills should be established in those jurisdictions, drafted in the relevant language. What you are ultimately trying to determine is whether offshore wills make sense considering the assets involved, and whether they will make it easier to obtain probate, administer the estate and reduce unnecessary costs.

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.