Multi-jurisdictional estate planning – Moneyweb


With more and more South Africans looking to outsource their rand and gain exposure to foreign markets, the need for multi-jurisdictional estate planning has become more prevalent. In addition to the increase in offshore investment, many families find themselves spread all over the world as children choose to study and / or live abroad. There has also been an increase in the number of South Africans purchasing property overseas, particularly in jurisdictions such as the UK, Australia and Mauritius, which can lead to new complexities in estate planning matters that require careful, holistic planning – the absence of which can lead to unintended consequences and disarray.

Here’s what to consider when developing an estate plan for your foreign assets.

Understanding the jurisdiction in which your foreign assets are held is the starting point for building a solid estate plan, followed by the type and value of the asset. Whether your assets are held in a civil law jurisdiction or a common law jurisdiction will have a significant impact on how you structure your plan. Countries that follow a civil law system include France, the Netherlands, Germany, Spain and Portugal, as well as most countries in Central and Eastern Europe and East Asia.

A civil law system is a codified legal system that has its origins in Roman law and is usually based on specific codes and laws. Some countries, like Mauritius, use a fusion of civil law and common law, their property law being governed by civil law.

Many civil law jurisdictions have what is commonly referred to as “forced inheritance” or “compulsory inheritance rights” which limit the testator’s freedom to test. This is also the case in Sharia jurisdictions where freedom of will is limited to one third of a testator’s estate while the balance of the estate must pass under the rules of forced inheritance. Under Sharia law, only Muslims are considered to be heirs with regard to forced inheritance.

Keep in mind that mandatory estate taxes vary from country to country, which can further complicate estate planning, making it essential to seek expert advice from someone with in-depth knowledge of the issues. laws of that jurisdiction. For South Africans who own or plan to buy property in Mauritius, keep in mind that Mauritius is a forced inheritance jurisdiction which reserves part of the deceased estate for the children of the deceased, and this applies to Mauritian citizens and foreigners.

Likewise, according to French rules on forced inheritance, children are protected although the spouses have few inheritance rights. These inheritance laws apply to the world heritage of French residents, while for non-residents owning property in France, only real estate is affected by these laws.

Whether or not you need a will abroad – also known as a concurrent will – depends on a number of factors, including the type of asset, the jurisdiction in which it is held, and its value. Generally, if you own real estate in a foreign jurisdiction, you must have a foreign will ready to deal with the property in the event of your death. However, there are distinct advantages and disadvantages to having a foreign will, so it is always advisable to consult a fiduciary expert.

There is no doubt that having an offshore will can ensure that your foreign assets are administered efficiently and concurrently with your South African assets, and can speed up the process of obtaining probate. Having your foreign will drawn up by an expert in the jurisdiction where your property is held also means that it will be drawn up in the language and within the legal framework of that region. For example, some foreign jurisdictions do not recognize trusts as an entity, which can lead to complications when a testator bequeaths foreign fixed property to a local testamentary trust.

One of the biggest risks of writing a foreign will is that you inadvertently revoke your South African will or other offshore wills you may have. For this reason, it’s always best to make sure that your foreign will is expertly drafted and that your planner has an overview of your entire estate. All wills should include what is called a “revocation clause” which essentially revokes all prior wills made by the testator. So, unless the revocation clause in your foreign will is worded precisely, it could inadvertently have the effect of revoking your South African will.

Assuming that you have foreign assets in France, the revocation clause in your French will should therefore only revoke all previous wills relating to your French assets. At the same time, your local will should be updated to specify that it deals with your South African assets, and the revocation clause in your local will should only revoke previous wills relating to your South African assets. Although, generally speaking, assets such as offshore unit trusts administered by a South African institution and life insurance policies held abroad may not require a foreign will, possession of shares in a foreign country – such as when you invest directly abroad in US companies – may require you to have a foreign will drawn up.

Also keep in mind that as a permanent resident in South Africa, you are taxed on your worldwide estate, which may have CGT implications and inheritance tax in the event of death, especially when your foreign assets are also subject to situs tax – which is a tax payable in a foreign jurisdiction depending on where the asset is located. If you are unaware of the double taxation agreements between South Africa and the overseas jurisdiction you are invested in, you could end up paying tax twice. The purpose of these double taxation agreements is to eliminate the potential for double taxation between two tax administrations, for example, South Africa and the United Kingdom. However, the terms of double taxation agreements vary from country to country, so don’t fall into the trap of assuming that all DTAs are the same. To know the full status of all DTAs, you can follow this link on the Sars website: Double taxation agreements.

Another factor when planning your assets abroad is to take into account the effects of the EU inheritance regulation, also known as Brussels IV, which entered into force in August 2015. The objectives of this legislation were to simplify the legalities and consequences of multi-jurisdictional succession for EU countries, but note that the UK, Ireland and Denmark have withdrawn from this legislation. Under this legislation, both EU citizens and citizens of third countries can choose which law of their country or nationality to apply to their inheritance for the purposes of inheritance. From a practical standpoint, this means that a South African resident with property in the EU can stipulate in their will that South African law should apply to these foreign assets. However, this legislation is somewhat limited in that it does not provide for a community of property, pension funds, life insurance policies and trusts, and as such it may cause additional complications for South Africans who wish to structure their foreign assets.

There is a lot to take into account when structuring your local and foreign assets, including potential tax consequences, forced inheritance rules, existence of double taxation agreements, each country’s legal framework, situs law and the effects of the EU. Settlement of succession. If you have foreign assets, it is essential to make sure that all experts involved in structuring your wealth – including local and foreign assets – have an overview of your global wealth to ensure consistency and consistency. applicability.

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