Whilst we at Global & Local are investment advisors and not experts in wills and estates, we have come across the scenario where assets are held outside of South Africa by the deceased and we felt that this aspect of one’s portfolio is simply not discussed often enough. We have consulted with some experts in this field and have learned the following:
The advent of globalisation and fast-paced technology has brought the world closer together, it’s now simpler to transact across the globe with a click of a button. This has resulted in the increased desire to invest across borders for diversification purposes. Not only that, but mobility has also followed suit, as people migrate for a multitude of reasons.
The increase of emigration in recent years has contributed to South Africans having assets spread across the globe. Therefore, investors need a careful and well-coordinated approach to estate planning, since there may be specific rules in the country concerned that govern how your assets will be distributed upon your death.
It is well understood that it is important to have a will in place which states how your assets would be distributed upon your death. One could also consider having a separate will in each country where assets are held. To avoid any future mishaps, it is therefore important to ensure that your draft will complies with the applicable laws of each respective country. In addition, having a separate will for your worldwide assets does not do away with the requirement to report these assets for estate duty purposes in your country of tax residency.
Even if you have appointed a knowledgeable and experienced executor for your estate in your will, they may not have the experience or legal knowledge of succession laws in the countries outside of South Africa where you have other assets. In many cases where a South Africa executor feels that they do not have the required knowledge or experience to deal with assets held by the deceased in a foreign country, they would appoint solicitors/attorneys within the jurisdiction to assist the executor in the administration of these assets.
It is imperative to consider this when you are drafting your will, and you may consider having a will that handles your South African assets and a second will that would cover assets held outside of the republic. The second will would then need to comply with the succession laws of that jurisdiction. Having two wills is perfectly legal and is common practice in many instances. If you have assets in the UK, BVI, Bahamas and Australia it is not a problem to have just one South African will that deals with your worldwide assets. When drafting a will outside the republic country you need to take into consideration the rules of the jurisdiction where the assets are located before jumping in and having two separate wills as this may not be necessary.
In many Mediterranean countries such as Portugal and Italy, there are mandatory succession laws such as where assets which are spilt automatically 50% to the spouse and then remaining 50% in equal parts to the spouse’s children, which would remove the requirement of a will. Although many wealthy people may still have a will for their assets.
If you have assets in the US, these assets or investments will be subjected to US estate tax. Estate tax treaties between the US and other countries often provide more favourable tax treatment for non-US citizens by limiting the type of assets held to properties, tangible personal properties, and equities.
As a result of different tax residences, some South Africans have been exposed to double taxation in the country of residency and in South Africa. Considering that, South Africa has entered into an estate duty agreement with the following countries:
- The US;
- The UK;
- Zimbabwe; and
- BLS countries (Botswana, Lesotho, and Swaziland).
In matters where double taxation arises with no estate duty agreement in place between South Africa and the foreign country, relief for the double taxation must be sought under domestic rules. It is important to keep in mind that if you’re a tax resident of South Africa your worldwide estate is liable for estate duty and capital gains tax in South Africa.
It may not always be required to have a second will to administer your assets outside of South Africa. Therefore, it is imperative to discuss these matters with an expert in the dissolution of deceased estate when you are considering drafting a new will.
In closing, according to Sars, “residents are, subject to certain exclusions, taxed on their worldwide income, irrespective of where their income was earned. Estate duty is charged upon the dutiable amount of the worldwide estate of every person who dies or after 1 April 1955.”