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Fiduciary services: the answer to complex estate planning

The world has become a smaller place. Rapid advances in tech, increased ease of communication and international movement of families and business people around the globe have opened up countless opportunities.

South Africans are now able to engage in cross border trade and can buy and invest in a multitude of different assets in other countries – all of which was almost unthinkable in previous decades.

When exchange controls were first relaxed in 1997, South Africans were permitted to invest a meagre ZAR200,000 (USD15,000) outside the country. Now, taxpayers of good standing are able to utilise an annual foreign investment allowance of ZAR10 million rand per adult.

Businesses are also increasingly expanding outside South Africa to join in the world economy and help to maintain a competitive edge against rivals.

However, the sad reality in South Africa is that many families have been fragmented with younger generations and skilled persons seeking better opportunities abroad. This in turn has created issues over inheritances, foreign wills and financial emigration status.

As people become more actively mobile and have more exposure to assets in different locations around the world, it is essential that their estate and succession planning should keep pace. Fiduciary services, where an asset owner appoints a third party to manage their assets on an integrated basis, can be an effective way to achieve this.

Generally this involves setting up a company, trust or pension scheme structure – or a combination of them – to hold overseas assets, which is then managed in a fiduciary relationship by a licensed professional fiduciary services provider. In this way, legal protection, tax efficiency and effective succession planning should be achieved.

For example, if a high net worth South African resident invests half their annual foreign investment allowance of ZAR10 million in the US and half in Europe over a five-year period, they will amass assets of ZAR50 million offshore. These investments would, for all intents and purposes, form part of the investor’s South African estate.

However, if that investor held immovable property in the UK, shares in a corporation in Australia and a yacht in the Seychelles, the multi-jurisdictional nature of the estate becomes very complex. How are these assets taxed, where and at what rate? And in the event of death, where would these assets pass and which jurisdiction would have taxing rights?

It is often recommended that separate wills should be drawn up in respect of each overseas asset to avoid any potential double taxation or conflict of laws when an estate is wound up. A more pragmatic and cost-effective solution, however, may be to use a non-resident trust, especially for those assets that did not originate from South Africa. In this way the value of the trust can grow separately from any onshore estate and may not be subject to estate duty or inheritance taxes.

Fiduciary service providers, like Sovereign, can offer effective and completely compliant solutions to the ownership and management of multi-jurisdictional assets, irrespective of where the owner actually resides.

Contact Timothy Mertens


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Sovereign Trust (Gibraltar) Limited
Tel: +350 200 76173