Offshore investing: One Will or two?
South African fiduciary practitioners regularly find that their clients or estates have an international element, says Oliver Phipps of Lester Aldridge Solicitors in the United Kingdom. He was speaking at the 7th Annual FISA Conference in Sandton today.
Phipps says that if a South African client owns foreign assets, a practitioner must consider whether a separate Will should be prepared to deal with them.
The starting point for this analysis is to consider what the estate administration formalities will be to deal with the asset and then decide whether a separate Will would be best to deal with these formalities.
To conduct this analysis , Phipps says, the practitioner will need to know the following:
- In which jurisdiction(s) the assets are located. The requirements of the foreign jurisdiction – for example, civil law or common law;
- The type of asset and value.
Some practitioners, Phipps adds, prefer one worldwide Will when the only foreign asset is a bank account. “The reason being that a worldwide Will would, depending on the foreign country, be recognised as valid where the assets are located and that 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.
“For example, let us take the example of an individual domiciled in South Africa where the only offshore asset is a bank account registered in England. In this example, the person drafting the Will should consider what the formalities will be to administer the bank account in England – if the testator passes away.
“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.
So 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. So in this example, the person preparing the Will may consider that one worldwide Will is appropriate.”
Phipps says one drawback is that the South African administration and English administration cannot be conducted simultaneously. Before the letters of executorship can be resealed, court sealed and certified copies of the letters of executorship will first have to be obtained, which can occasionally take many months.
If a South African citizen has a bank account in Switzerland, Luxembourg or the USA , it is usual for the bank to ask for, “a court sealed copy of the court authority and Will from the country of domicile together with the apostille of the Hague Convention”.
“If an offshore Will has been prepared, this can then lead to difficult conversations with the bank’s compliance team when you advise that you can provide these documents, but there is also an offshore Will,” notes Phipps.
Occasionally, the bank’s compliance team will then have to refer the case to their legal team and the requirements can become quite complex.
“So where you have a South African domiciled client with bank accounts in Switzerland, Luxembourg or the USA, I would generally recommend one worldwide Will – unless there are compelling reasons for a second Will to be prepared.”