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Investec offshore estate planning

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This document provides an overview of offshore estate planning options in South Africa. It discusses acquiring assets directly, through life wrappers or roll-up funds, and through offshore trusts. Acquiring assets directly has no additional costs but any income/gains will be taxed in SA. Life wrappers and roll-up funds defer tax until disposal but the investment will still be subject to estate duty. Offshore trusts provide estate planning benefits like removing assets from an estate and loan accounts can reduce duty, but there are also tax implications to consider under South African law. The document notes recent recommendations from the Davis Tax Committee on taxing foreign trusts.

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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. Dont 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 dont 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 individuals 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 TRUSTS Recommended 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 贈325,000. Estate Duty Tax in the USA: 40% on any amount exceeding $60,000.
QUESTIONS GORDON STUART gordons@sentineltrust.co.za www.sentineltrust.co.za 083 650 8613 011 656 2722

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Investec offshore estate planning

  • 4. WHAT ARE MY OPTIONS?
  • 5. OPTIONS Single Discretionary Allowance up to R1 million. Foreign Investment Allowance up to R10 million. Special Dispensation Allowance. This is unlimited.
  • 6. 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.
  • 7. 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.
  • 8. 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.
  • 9. 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. Dont add the children!
  • 10. STOP! WHATS THIS ABOUT A WILL?
  • 11. OFFSHORE WILL v LOCAL WILL
  • 12. 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.
  • 13. 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 dont 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 individuals personal rate. The life wrapper will fall outside the estate for executors fees i.e. no probate.
  • 14. 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.
  • 16. OFFSHORE TRUSTS EVERYTHING YOU WANTED TO KNOW ABOUT OFFSHORE TRUSTS BUT WERE TOO SHY TO ASK.
  • 17. 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.
  • 18. OFFSHORE TRUSTS TECHNICAL TALK: Section 7(8): deeming provision for income. Paragraph 72: deeming provision for capital gains. Section 31: interest on the loan.
  • 19. SO TELL US THE GOOD NEWS!
  • 21. OFFSHORE TRUSTS TECHNICAL TALK continued: Section 25B(2A) Paragraph 80(3)
  • 22. 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.
  • 25. FOREIGN TRUSTS Recommended 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.
  • 26. BUT WAIT! THERE IS MORE!
  • 27. 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.
  • 28. SOMETHING TO THINK ABOUT ON THE WAY HOME! Estate Duty Tax in the United Kingdom: 40% on any amount exceeding 贈325,000. Estate Duty Tax in the USA: 40% on any amount exceeding $60,000.