Investec offshore estate planning

Welcome

OFFSHORE ESTATE PLANNING 101

STRONGER RAND

WHAT ARE MY OPTIONS?

OPTIONS • Single Discretionary Allowance up to R1

million.• Foreign Investment Allowance up to R10

million.• Special Dispensation Allowance. This is

unlimited.

OPTIONS • Acquire asset/investment directly in own

name.• Acquire asset/investment through a life

wrapper or roll-up fund.• Acquire asset/investment through an

offshore structure.

ACQUIRING ASSET DIRECTLY IN OWN NAME

• Benefit:– As a general rule, no additional costs

over and above the normal holding fee i.e. asset managers fee etc.

ACQUIRING ASSET DIRECTLY IN OWN NAME

What else should I be aware of?•Any taxable income or capital gains produced by the investment must be declared for tax in SA on the received by or accrued to basis.•Asset will still form part of my deceased estate.

ACQUIRING ASSET DIRECTLY IN OWN NAME

• If the asset still forms part of my estate what are the consequences?• Succession planning through a will.• Estate duty tax (both local and offshore).

• Share the love but not too far!• South African Reserve Bank will allow co-ownership

but only between spouses. Don’t add the children!

STOP! WHATS THIS ABOUT A WILL?

OFFSHORE WILL v LOCAL WILL

OFFSHORE WILL v LOCAL WILL

• A local trust may NOT directly own foreign investments.

• If your local will directly or indirectly bequeaths assets to a local trust the offshore assets will need to be repatriated.

• No one size fits all! Speak to your estate planner to determine if you need a foreign will to compliment your local will.

LIFE WRAPPER OR ROLL-UP FUND

• In a roll-up fund the capital gains tax is only triggered when the unit is disposed off. Taxable income such as dividends and interest don’t accrue to the taxpayer and are added to the value of the unit.

• In a life wrapper the tax is paid within the wrapper generally at lower rates than the individual’s personal rate.

• The life wrapper will fall outside the estate for executors fees i.e. no probate.

LIFE WRAPPER OR ROLL UP FUND

Anything special I should be aware of?• Even though there may be no income

tax on an annual basis in the wrapper the value of the investment will still be subject to estate duty tax.

• Probate is still required for the roll-up fund.

OFFSHORE TRUSTS

OFFSHORE TRUSTS

EVERYTHING YOU WANTED TO KNOW ABOUT OFFSHORE

TRUSTS BUT WERE TOO SHY TO ASK.

OFFSHORE TRUSTS• INCOME TAX:

– There is little to no income tax benefit in utilising an offshore trust but avoiding income tax should never be the reason for establishing a trust.

– Due to the deeming provisions in the Income Tax Act you should be in no worse off position than if you invested in your own name.

OFFSHORE TRUSTS• TECHNICAL TALK:

– Section 7(8): deeming provision for income.

– Paragraph 72: deeming provision for capital gains.

– Section 31: interest on the loan.

SO TELL US THE GOOD NEWS!

INVOLVED AND COMMITTED

OFFSHORE TRUSTS • TECHNICAL TALK continued:

– Section 25B(2A)– Paragraph 80(3)

OFFSHORE TRUSTS• TECHNICAL TALK continued– Estate duty tax: loan account pegged.– Deemed capital gains tax: no CGT on

loans.– Probate fees: calculated on the loan

value.

DAVIS TAX COMMITTEE

FOREIGN TRUSTS

FOREIGN TRUSTSRecommended that;• Attribution principles remain in place.• All distributions of foreign trusts be taxed as

income.• Inclusion of separate criminal charges in the Tax

Administration Act that can be brought against taxpayers who fail to disclose direct or indirect interests in foreign trust arrangements.

BUT WAIT! THERE IS MORE!

DTC WEBINAR DECEMBER 2015

• It was incorrect to suggest taxing all distributions from offshore trusts as revenue and the DTC is going to suggest focussing on neatening up paragraph 80 of the Eighth Schedule of the Act to deal with the double tax issues.

SOMETHING TO THINK ABOUT ON THE WAY HOME!

• Estate Duty Tax in the United Kingdom:– 40% on any amount exceeding

£325,000.• Estate Duty Tax in the USA:

– 40% on any amount exceeding $60,000.

QUESTIONSGORDON STUART

gordons@sentineltrust.co.zawww.sentineltrust.co.za

083 650 8613011 656 2722