Multi-jurisdictional estate planning crucial if you have assets offshore

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Mandy Dix-Peek | Head | Fiduciary Services | Old Mutual Wealth | mail me


According to the University of South Africa (UNISA), South African households’ real net worth increased by over R1 trillion from the second to the last quarter of 2020, despite the economic contraction due to the pandemic.

Consequently, more people are inclined to make offshore property investments in popular destinations such as Portugal and Mauritius.

In fact, property sales of more than R500 million, involving South African and international property buyers, have been concluded in Mont Choisy La Réserve, a luxurious estate in the Indian ocean island nation of Mauritius.

Setting up a will in the jurisdiction of the assets

As the trend is expected to continue where more South Africans snap up offshore assets across the globe, it is critical that where one holds assets offshore, often the best way to protect those assets is to set up a will in the jurisdiction of those assets because a South African will might not be recognised there.

Where a South African will is not recognised, those assets abroad may be subject to succession law in those jurisdictions.

Because there is no one-size-fits-all approach to all countries, the most prudent approach is engaging in multi-jurisdictional estate planning. This would go a long way in mitigating nasty surprises further down the road.

Currently, by law, South Africans don’t need more than one will if they have assets locally and elsewhere in the world. However, a South African executor is only permitted to manage matters and assets that are held domestically.

An offshore will would, therefore, have to be handled by an executor in that jurisdiction or permission would have to be sought for the South African executor to administer the estate. This process can take time and can draw out the process further.

Generally, if someone dies without a will and has assets in a country that recognises South African wills, their assets will devolve according to the SA law of intestate succession.

However, some territories that are popular with South African investors, such as Portugal and other European countries, have forced succession in their inheritance laws. If someone dies without a will in countries with forced succession, their foreign assets may devolve according to the laws of the country in which those assets are situated.

Not all assets and countries are equal though

There are different permutations depending on the asset type and country. For example, in Mauritius, while immovable property is governed by Mauritian law, when it comes to movable assets, the inheritance thereof is governed by the laws of the last jurisdiction of domicile of the deceased or his/her country of permanent residence. This applies to Mauritian and foreign nationals.

Beyond that, South Africans who own or plan to purchase property in Mauritius need to be cognisant that Mauritius is a forced heirship jurisdiction that reserves a portion of the deceased estate for the children of the deceased, and this applies to both Mauritian citizens and foreigners.

Another example is that of Portugal’s inheritance law, which is derived from the Portuguese Civil Code and dictates that the inheritance process should be governed by the laws of the home country of the deceased, if he/she is a foreigner. Furthermore, Portuguese inheritance law follows forced heirship, meaning that certain relatives will be entitled to a portion of an estate, despite what is stipulated in the will.

Another factor for South Africans to consider when planning their estates is double taxation that occurs when winding up an estate. To avoid this, investors should eye jurisdictions with whom South Africa has double taxation agreements (DTAs).

In conclusion

Currently, South Africa has DTAs with Botswana, Lesotho, Swaziland, UK (including Northern Ireland), US and Zimbabwe. There are a few things all South Africans should consider when planning multi-jurisdictional estates.

The first port of call is engaging with specialists and getting advice on the best course of action. Broadly, this will involve the jurisdiction of choice, the nature of the assets and DTAs.

Depending on how these three circumstances stack up a decision needs to be made about whether a will in the foreign jurisdiction is necessary.


 



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