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Professional advice matters

18 September 2017Jonathan Faurie

Different people have different mindsets when it comes to diversifying their investments. The beauty of this is that no single approach is correct or favoured ahead of the other. In the current South African political and economic climate, those who can afford to diversify their assets – particularly establishing an international investment portfolio – are paying serious attention to this. However, each approach to investment diversification comes with rules, regulations and due process that needs to be followed.

Tropical playground

When investing in international property type assets, South Africans prefer locations that are close to home. Mauritius is one such destination; however, the rules governing using Mauritian property as part of a deceased estate is complex.

Speaking at the recently held 7th Annual Fiduciary Institute of Southern Africa (FISA) Conference, Gordon Stuart – MD of Accuro Mauritius – pointed out that professional advice is needed when approaching these investments. 

“If there is more than one will, care must be exercised that these wills do not override each other. In terms of the South African Reserve Bank (SARB) Regulations, a local trust may not directly own foreign investments. An application to the SARB can be made, but the success of this is not guaranteed,” said Stuart.

Succession worries

Subject to certain exclusions, South Africa practises freedom of succession where they are, in essence, they are free to bequeath their assets to whoever they please.

“It is important to note that a number of countries do not have this freedom of succession and these countries apply forced succession. Mauritius is one such destination,” said Stuart.

He added that Mauritius is a forced heirship jurisdiction and a portion of the estate is reserved for the children of the deceased. This may be a problem for the deceased if children from more than one marriage/relationship are involved.

“The Code attaches an unchallengeable right to a reserved portion of the deceased’s estate for the direct line of heirs and such heirs are entitled to a reserved part of the estate of the deceased,” said Stuart.

Understanding the law

It is important to understand what the law dictates when it comes to international asset diversification as multiple challenges could arise if the owner of the asset dies and the rest of the family is unclear as to the letter of the law.

“When dealing with a deceased estate in Mauritius, no testamentary provision may encroach upon the reserved portion, which consists of one half (50%) of the estate if the deceased leaves one child, two thirds (66%) of the estate if the deceased leaves two children and three quarters (75%) of the estate if the deceased leaves three or more children,” said Stuart.

He added that the reserved portion is divided equally amongst the surviving children and the descendants of any pre-deceased children (children who die before their parent). “The descendants of a pre-deceased child are jointly entitled to the pre-deceased child’s share of the reserved portion,” said Stuart.

The unreserved or available portion of the estate may be freely willed to any other person, including an heir under forced heirship provisions, or any entity, charitable or religious body, whether Mauritian or foreign.

Professional advice matters

The above challenges are a lot to take in and are prime examples of how professional advice does matter when it comes to planning international investment diversification.

“Preparing a Mauritian will is more complicated than drafting a South African will. To start with, Mauritian law does not recognise oral, joint or mutual wills. Furthermore, unlike in South Africa where the surviving spouse or child can be nominated as the executor, no heir can be appointed as an executor in the will,” said Stuart.

In relation to wills drafted outside of Mauritius the Code does recognise wills prepared under the laws of another country, however foreign wills are unenforceable in respect of movable and immovable property situated in Mauritius unless they have been duly registered at the office where the immovable property is situated. For information purposes ‘office’ refers to the body responsible for the registration of wills.

Editor’s Thoughts:
This is yet another example of how a processional adviser is worth their weight in gold. Though scarce, there are those who can assist advisers with the intricate task of cross border estate planning. What are we doing to encourage skills development in this area? At the end of the day, professional advice matters. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.

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