The offshore investing guide

All interest, dividends and capital gains will be taxed in the individual policyholder fund, taxed at a marginal tax rate of 30% and an effective capital gains tax rate of 12%. Furthermore When the policy proceeds pay out to the policyholder, no further income tax is payable. This could be beneficial depending on the policyholder’s individual tax rate. Check the guide for a detailed example.

It is a type of tax equivalent to South African estate duty and is levied in many other jurisdictions depending upon the “situs” of the assets. The word situs simply refers to the source or location of that asset.

The probate process is supervised by a court to determine the validity of a will and to settle disputes over who is to inherit when an executor is distributing assets. It is an additional process to the duties of the South African executor. It also takes time and involves additional cost that can be avoided. Read the guide for more info.

An advantage of having a separate will for offshore assets is that the executors in the different jurisdictions may act independently of one another and may proceed without delay. In South Africa, there is freedom of testation, which means that an individual can specify what must happen to his assets after his death.

However, there are jurisdictions that apply forced heirship, which may override the terms of the will with regard to how certain assets are distributed. It is important to get advice from experts in the jurisdictions where the assets are situated to understand these possible unintended consequences.

Offshore trusts are more complicated and also a matter of personal preference. Essentially, the reasons for establishing an offshore trust are similar to those for establishing a local trust; namely, asset protection and wealth transfer. These benefits need to be weighed up against the costs of administering the structure and the additional complexity from a tax perspective.