With reference to the article Holy Grail of direct offshore investment – the international endowment option. We hold shares on the Nasdaq and New York Stock Exchange. Is it possible to switch to an international endowment without incurring costs?
Thank you for your question.
It is important to ensure that you understand the process of switching to an international endowment. In order to do this, a personal share portfolio (PSP) will have to be opened within the endowment and a share transfer will be done into the PSP. A share transfer is the transferring of shares from one entity to another.
An endowment would need to be established, with a PSP as the underlying asset of the endowment. A PSP is defined as a portfolio of directly owned securities that are managed and structured by stockbrokers according to an investment mandate.
It is not possible to transfer your shares into an international endowment without incurring costs. Once you transfer the shares to the PSP within the endowment this may cause a capital gains tax (CGT) event. This is because you will be doing a transfer of ownership. Once the shares are transferred, they will be owned by the endowment.
Thereafter there might be other costs such as upfront fees, also known as initial fees. Fees can be charged by your financial planner for the rendering of advice, or by the selected stockbroker for the managing of your funds. There are also admin fees that will be charged for the administration of your investment.
Depending on where your shares are currently being held, there could be a fee payable to transfer the shares to a new custodian. From our experience, most providers do charge this fee.
Some product providers do not charge an upfront fee for the administration of your investment and placement of that within a PSP. Typically, the potential upfront fee that may be charged will be from the specific financial advisor chosen as well as the stockbroker selected.
The typical ongoing fees that will be charged are the investment management fees, the admin fees as well as the stockbroker fees.
One can invest in a portfolio of listed global shares and will be given access to stocks on the world’s biggest stock exchanges, all through one platform.
There are many benefits that come with investing in an international PSP, including the following:
- These types of endowments are tax-efficient investment vehicles;
- They offer estate panning benefits, such as you being able to nominate beneficiaries as well as enjoying joint ownership of the investment;
- They provide continuity by allowing you to select as many lives assured as you please; and
- They provide a lot more liquidity than a local endowment provides.
Since international endowments provide many benefits to investors, switching to one is considered a wise decision. Even though there are fees that will be charged, investors get to benefit from tax efficiency.
Always be sure to enquire about the fees that will be charged before transferring your shares so that you are able to make an informed decision.