Investors wanting offshore exposure have various routes they can take – including rand-denominated funds and asset swap investments. However, if opting to use discretionary savings to obtain direct foreign exposure, from a financial planning point of view there are a number of considerations that need to be taken into account.
Danie van Niekerk Executive Head from Indwe BlueStar says that Glacier International offers an offshore life wrapper – or endowment structure – which provides a number of benefits, some of which are discussed below.
Estate planning advantages
According to Glacier International, when investing via a wrapper issued by a South African life company, investors don’t create an offshore estate. This means they don’t need an offshore will, nor do they need to appoint international representatives to help wind up their offshore estate (which, in most instances, is both costly and time consuming). The wrapper also ensures that an investor’s estate is not subject to foreign inheritance tax, which can be as high as 40%.
Investors in life wrappers can simply nominate a beneficiary or beneficiaries – either for the plan to continue being invested in the beneficiary’s name, or for the investment to be paid out, in which case the proceeds will be paid directly to the beneficiary or beneficiaries and not be dependent on the estate being finalised. In addition, the proceeds will not attract any executor’s fees.
Tax efficiency and simplicity
Investing via a local wrapper means the South African life company is responsible for the calculation, collection and administration of any tax due, and the investor therefore has no personal tax administration to take care of. The tax paid by the life company can be less than what an investor would pay in their personal capacity depending on their personal tax rate.
Tax liabilities are also calculated in US dollars, which means that any rand depreciation is not taken into account. This benefit can extend to local trust companies that invest via a wrapper using asset swap facilities, which provides an interesting financial planning aspect to consider.
Protection from creditors
After a period of three years from the inception date, the life wrapper will not form part of an investor’s insolvent estate and cannot be attached by creditors.
In the event of the death of the investor, the proceeds of the life wrapper may not be used to pay any of the estate’s debts. This protection continues for a period of five years from the date that the benefits are provided.
Danie concludes that using an offshore life wrapper could make estate planning a lot easier and save beneficiaries time and unnecessary expenses.
To help you set financial goals and make more informed decisions about you financial future, speak to our expert planners at Indwe BlueStar on 011 831 8000.
Indwe BlueStar is an authorised Financial Services Provider. FSP 2759