More and more of clients seek our advice whether they need a Last Will for their foreign assets. In a recent case we had a look at some important points for a client who moved to Canada.
Essentially, the main reason for creating a foreign will is to avoid delays in winding up your estate.
We considered factors such as having a Worldwide will and Tax residency.
A legally drafted Last Will and Testament in South Africa will, unless otherwise specified, cover your world-wide assets.
If you hold assets in a country where a foreign language is spoken, consider the fact that language barriers and translation costs would result in delays and additional expenses.
- Probate procedure: Delays
The procedure whereby your South African-drafted will is approved by the foreign legal authority as valid, is called “Probate”. It admits your foreign assets to be administered in that jurisdiction. It involves obtaining the necessary court authority in the foreign country to ensure that your estate can be wound up accordingly.
Since your South African appointed executor will not have jurisdiction to deal with the assets in the countries in which your foreign assets are located. An agent will need to be appointed in that country by your South African executor. The appointment of this agent can be time-consuming given that an application needs to be made to the Master of The High Court for court certified copies of your Will (which is lodged with the Master of The High Court) and various other affidavits. The original documents are then forwarded to the agent who in turn applies for appointment to act in that country.
- Freedom of testation
Many countries, such as South Africa, the UK and Canada enjoy the freedom of testation which is essentially the right of the testator to bequeath their assets to whoever they wish. In South Africa, there are very few restrictions to a testator’s freedom, one of them being that the first-dying spouse must make financial provision for their surviving spouse and children to the extent that they are financially dependent on them.
However, not all countries enjoy the freedom of testation. Many countries, especially those in civil law jurisdictions and those operating under Shariah law, have mandatory succession rights – otherwise known as ‘forced heirship’. These countries include Mauritius, Switzerland, Spain, France, Japan and Portugal.
- Tax residency
We, in South Africa have a residency tax-based system and not source based only. Therefore, if the South African Revenue Services consider you as a tax resident, your worldwide estate is subject to the tax system, as such, capital gains tax and estate duty apply.
Regardless of whether you have a separate will for your foreign assets, you are still required to report them to SARS. Further, it is important to understand whether the jurisdiction in which you own assets has a double taxation agreement with South Africa.
This is also pivotal to consider whether you should formally “emigrate” and cease to be a tax resident (the onus of proving your intention).
- Be sure to avoid inadvertently revoking a will
The revocation clause is standard which effectively revokes all previous wills that you have drafted. However, accidental revocation can occur when the person drafting your foreign will in Canada, for instances, includes a revocation clause referring to all previous wills rather than all previous wills dealing with your Canadian assets.
On a high-level understanding, if there are multi-jurisdiction Wills, their jurisdiction clauses must work in conjunction with one another. Meaning, if there are conflicting clauses in the Will, it could result in a massive delay.
Do I need a foreign will
Having a separate will for your foreign assets, even if you don’t legally require one, means that your South African estate can be wound up at the same time as your overseas assets, thus avoiding unnecessary delays for your loved ones.
Generally speaking, a foreign will is required if you own immovable property or shares in an overseas company. Assets such as life insurance policies and some bank accounts generally don’t require a foreign will, although there may be practical reasons to draft a foreign will.
A worldwide Will works very well if you live in South Africa but have assets in a country with similar heirship laws to our own, such as Canada.
*We assume in this case our client did not emigrate through SARS and may be a tax resident in both countries.
By Godfried JJ Kotze (MCom Taxation (UP).