Foreign investing: how do I navigate wills and tax?
A Moneyweb reader asks:
I have an account with Saxo through which I’ve traded shares in New York. I’ve heard about problems with foreign investments and your estate when you pass, e.g. separate foreign wills, 40% estate duty, investing through insurance wrappers etc. How do I navigate this?
Brenthurst Wealth’s Suzean Haumann answers:
Whether to have a foreign will or not depends on your individual circumstances. If you only have an offshore investment portfolio and no other immovable assets, like property, a local will would be enough to wind up your estate. It’s also easier for the family to deal with only the local executor. When there are immovable assets one would need to look at drawing up a global will too.
For investments in common law jurisdictions, e.g. Guernsey, it’s possible to execute a single worldwide will in SA, and for a Guernsey executor to act on resealed letters of executorship, issued by our master of the high court. The SA executor then instructs an agent in the other jurisdiction to attend to the assets’ administration.
If you opened a foreign trading account with the local branch, Saxo will work with your local will and executor. Offshore assets are held in Saxo’s name in omnibus with Citibank; they’re held off register in the client’s name.
If you opened a joint account, account ownership passes 100% to the surviving owner, on receipt of the death certificate. With a single owner, your local will must stipulate that it covers your worldwide estate/assets.
International estate taxes
The US and the UK have situs (position/site) taxes. The authorities have legal authority to tax them, e.g. in terms of inheritance taxes (UK) and estate taxes (US).
Although the asset owner is a nonresident, these taxes apply to all share portfolios and property owned there (excluding unit trust investments). Estate taxes can be as high as 40% of the assets’ market value.
In SA, estate duty’s levied on your worldwide assets. The amount payable will be calculated after applying the R3.5 million Section 4A abatement, and any other deductions/exemptions, eg. Section 4(q) afforded to surviving spouses. The net total after deductions is taxed at a 20% rate.