Estate duty on foreign assets

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For this blog I am referring to an article by Harry Joffe entitled “Overseas assets? Plan properly to avoid SA estate duty shock.” It appeared in the Sunday Times Business Times section of 19 September 2019 pg 6 headed Money.

For South Africans who have assets overseas, Mr Joffe’s opening question is, “...what are the estate duty consequences in SA when they die?” He gives an example of a person who has assets up to the equivalent of R5.5m in the UK and only R2m in SA.

1. SA taxes its citizens on worldwide assets, including estate duty.
2. The assets in the UK, in the example above, will raise SA estate duty.
3. They may also attract estate duty in the UK as well which will be credited to any duty required in SA.
4. In this particular example there will be no duty in the UK as that is only raised on amounts in excess of R5.8m.
5. As a result the full amount will be taxed in SA along with the SA assets i.e. R7.5m but, in SA there is an abatement of R3.5m leaving a total of R4m on which to pay estate duty.

This can raise a further complication as, excluding such fees as Executor’s fees, debts and funeral expenses the estate duty at 20% would be R800 000. No small change at all. You need to plan and make provision for this expense. (If a spouse is the heir the assets will be deductible from the dutiable estate).

It is important to have liquidity for this duty and the best way to do so is through an insurance policy but, to add to your woes, this policy will also have to pay estate duty. This too will need to be factored into the overall plan. Then, if the policy pays directly into the estate, the executor will charge fees on the policy as well. It is recommended that this is negotiated with the executor and any agreement must be written into one’s will.

Another consideration is to take out a policy in the other country in which you have assets and so match the growth of those assets in a foreign currency.
To end his article, Mr Joffe, reminds about the necessity to have either 2 will, one in each country, or one w

ill which clearly covers all assets. If you have 2 wills ensure that they run in unison and each states that the other does not supercede it due to different dates. A couple of years ago I wrote on this in a short blog which you will find on the following page under the heading: Assets in more than one country


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