How to deal with the complications of offshore assets while an es…

To respond: Estates currently take a long time to settle when they consist of only South African assets. When you add the complication of offshore assets, you have to be prepared for a long process. You need to make sure you have contingency plans in place to ensure the surviving spouse has access to cash while the estate is being settled, as this could take a few years.

A standard part of my financial advice includes finding ways in which assets can be transferred to the surviving spouse or family members without having to go through an executor. By providing for this, you can certainly speed up the transfer of wealth and allow everyone to continue their life.

You don’t want to be in a situation where you can’t access any of your investments for an extended period of time.

Deadline for disposal of offshore assets

You should have around half of your assets offshore to reduce the risk of having too much exposure to South Africa. The challenge arises when a person dies and those assets need to be transferred to a beneficiary. Your estate can only be finalized once the South African and offshore elements of your investments have been processed.

In order for your executor to be recognized in the country where your assets are held, your estate must apply for a grant of probate in that country.

This will involve the use of offshore lawyers and can be both time consuming and expensive. One of the offshore investment companies recently had a special offer where they would grant you probate for R50,000.

With a little planning, you can restructure your assets to make the inheritance process much faster, cheaper, and easier.

Your banking investment

The easiest investment to sort will be your bank investment.

As it stands, probate fees will significantly reduce the value of your investment. When you add the extra time and effort required to finalize your or your husband’s estate, it makes perfect sense to transfer that investment into an offshore endowment. It’s a quick process.

The offshore endowment is deemed to be part of your South African estate, so no probate is needed. You will also only pay South African inheritance tax and will not be liable for any overseas inheritance tax.

You can attach a beneficiary of the property to the investment. This means that in the event of death, your spouse or children automatically take over the investment without having to go through the will and the executor.

The money never needs to be brought back to South Africa and the returns should be better than what you got in the bank.

You can also access this money whenever you want (up to 100 times in the first five years).

Property at sea

When it comes to owning assets in offshore countries, you need to understand the inheritance laws in those countries.

This is a potential minefield and I highly recommend that you speak to someone who knows property law in Portugal as they practice forced inheritance.

Many countries practice forced inheritance. This means that certain percentages of your assets must be bequeathed to certain family members, regardless of what your will might say. It is therefore important that you understand what the inheritance laws are in the country in which your property is held.

Many people buy offshore properties in order to obtain a foreign passport.

However, they are not always aware of the implications forced inheritance can have on the settlement of their estate upon their death.

Generally, if a British flag has been flown over this country at any time, chances are the inheritance laws will be similar to ours, where we have the freedom to test.

This means that we can bequeath what we want to whoever we want. We can disinherit adult family members and donate everything to a charitable cause if we wish. This is not the case in all countries.

If you have no sentimental attachment to your property, it may make sense to sell it and transfer the proceeds to an offshore endowment plan. This will allow you to pass the inheritance on to whoever you want, with the least amount of hassle and delay. DM168

This story first appeared in our weekly newspaper Daily Maverick 168 which is available for R25 from Pick n Pay, Exclusive Books and airport bookstores. To find your nearest retailer, please click on here.

Michael J. Birnbaum