Deal separately with offshore investments in your will
18 October 2013 | Investments | General | Clive Hill, Sanlam
With the rand continually under pressure, it makes sense to invest some of your money offshore. Investing in more than one economy provides you with an effective hedge against the devaluation of our currency. However, when drafting your will – which will determine what happens to your offshore assets, policies and investments after you die – there are some important considerations you need to be aware of.
According to Clive Hill at Sanlam Trust, it may be necessary to have more than one will. When planning your estate and drafting your wills, it is advisable to distinguish between the different types of offshore investments:
• Rand-denominated investments: If investments are made in rands, daily prices are quoted in rands and repayments are made in rands, they are not really offshore investments in the true sense of the word. For these investments, no Reserve Bank permission or income tax clearance forms are required. They simply provide you with offshore exposure in that the funds concerned, for example, invest in a diversified portfolio of international equities. As far as your will is concerned, such investments are not dealt with any differently than any other South African asset.
• Investments denominated in foreign currency: If investments are made overseas using your foreign investment allowance and are denominated in, for example, dollars, euros or pound sterling, then for the purposes of estate planning and drafting your will, they are seen as pure offshore investments.
"If your investments are denominated in foreign currency, it is wise to not only have a South African will but also a foreign will that takes the laws of the relevant overseas jurisdiction into account. It is possible that a South African will would not be accepted as valid in the country where your investment is held, which could result in you dying intestate (without a will) and your foreign assets being dealt with according to that country’s laws,” says Hill.
He says the South African will needs to refer to domestic assets only, while the foreign will must refer only to offshore assets in a specific country. "When drafting your South African will, take care not to revoke it with the words ‘I hereby revoke all wills, codicils and other testamentary documents effected by me’, as is usually done. This will result in the foreign will also being revoked, leaving the newly drafted South African will as the only valid one.”
Hill recommends that an offshore executor be appointed to finalise the overseas estate. "A South African executor cannot deal with your offshore assets. A trust company or attorney in the foreign jurisdiction should therefore be nominated as the executor in that country.”
To arrange drafting your foreign will, contact Sanlam Trust at www.sanlam.co.za
