A separate will for your offshore assets

While a clear, well-written will is always essential to avoid potential family disputes, South Africans with offshore assets in particular should seek professional assistance to determine if they are exposed to a foreign tax and if it may be necessary to draft a second or offshore will.

To determine whether an offshore will is required, practitioners will usually consider the type of offshore assets the testator owns and where these assets are located. If the testator’s only offshore asset is a bank or investment account, generally, one will that deals with all worldwide assets will suffice. In such cases, the offshore bank or financial institution would normally recognise the South African will, provided it covers all worldwide assets.

“One will promotes simplicity and certainty in a client’s estate planning. One worldwide will can also reduce the risk of accidental revocation, which can occasionally happen when a client has more than one will,” says Oliver Phipps, partner at Lester Aldridge in the UK and member of the Fiduciary Institute of Southern Africa (FISA).

Accidental revocation often occurs when an individual who only has South African assets drafts a will applicable to all worldwide assets and only acquires an offshore bank account at a later stage, for example in the UK. If an UK advisor drafts a will for these assets without knowing that the individual also has South African assets, the advisor could unintentionally revoke the South African will by not explicitly stating that the new will only relates to UK assets. Since the beneficiaries of the wills may not be the same, accidental revocation could have far-reaching consequences.

If an individual is domiciled in South Africa and has a bank account registered in England as his only offshore asset, the person drafting the will should consider what the formalities would be to administer the bank account in England should the testator pass away, Phipps says.

“Each bank in England has their own threshold in which they will release the funds without wishing to see an English court authority and, on average, this is approximately £15 000. If the funds exceed the bank’s threshold, an English court authority will be required. In these circumstances, there is a fast track procedure called ‘resealing’ whereby the English court could formally recognise and give effect to the South African letters of executorship,” Phipps says.

While preparing one worldwide will will likely be appropriate in this instance, there are potential disadvantages.

The South African and English administration cannot be conducted at the same time and before letters of executorship can be resealed, court sealed and certified copies of the letters of executorship will have to be obtained, which may delay the process considerably, he adds.

But where a South African jointly owns an offshore bank or investment account, care should be taken when drafting the will. If a husband jointly owns a bank account in England with his wife, he should not bequeath his share of the account to someone other than his wife, as it could result in a dispute, Phipps cautions.