Understanding the laws of estate planning - Part III

There are a few challenges. The first is that South African law and foreign laws are different. If you have a simple asset like a bank account or unit trust overseas, you can use your South African will to wind up your foreign estate. But the minute you've got fixed property or things like share portfolios overseas, you should have a separate will in that jurisdiction because the laws and requirements are different.

For example, if you have a property in Europe, it will fall under their laws of forced heirship (where, no matter what your will says, a percentage of your assets are distributed in fixed percentages to your family) and your South African will might not be given effect to (carried out) there. So, you'd want a foreign will with a foreign expert in that jurisdiction to make sure the laws are followed properly and the will is given effect to.

It's important to use professionals for this. If the drafter of the will knows what they're doing, they can, in some circumstances, get you out of forced heirship in European countries. And if you're in the Middle East, in Dubai or another area where there's Shariah (Islamic law), there are certain ways where exemptions may apply if you're not a citizen or not Muslim, as long as the will is drafted correctly.

An original South African will must go to the Master of the High Court here. Now, the jurisdiction overseas will also want some kind of an original or certified copy, and that can result in delays. So, it's very important that people who've got assets offshore think about drawing up a foreign will - particularly if these are substantial or complex assets.

Discovery Wills and Trust Services can help. Through our partnerships, we have associate links with a number of law firms, including ENSafrica Attorneys and other law firms in the UK, for example - so we can refer clients to get wills done properly oversees.

I think it's very important to mention that in South Africa, wills are normally drafted for free if you appoint a trust company as the executor. Overseas, that's not the case - you'll have to pay for the will. You can expect to pay about £400 (or the equivalent).

What is probate law and how does it work?

Probate is just a fancy term for "winding up an offshore estate". For instance, if you've got assets in the UK, you have to have "probate" done in the UK. And again, that's easier if you've got a foreign will and a foreign executor appointed. That's what clients need to make the call to do.

South Africans are investing offshore a lot more now through their allowances - through the R1 million single discretionary allowance and the R10 million tax-clearance route. Many people are buying property offshore. It's therefore important to consider potential winding-up issues with such substantial assets. Professional assistance is important.

If your client is running their investments offshore through a Discovery global endowment policy, they can avoid probate by nominating a beneficiary on that global endowment. Payment can be made directly to the beneficiary, which means you don't need to do probate because the asset doesn't actually get wound up through that offshore jurisdiction. It just pays out as an endowment policy. So, that's a very neat planning opportunity for clients who've just got unit trusts offshore.

Harry's closing thoughts

With a will and an estate plan, formalities are very important. Once a person passes away, it's all very final. So, the will be must done properly. The trust deed must be done properly. You can't fix it up later. People need to take care to do it properly.

I've seen so many clients who've never read their will, never read their trust deed or understood their own estate plan. The formalities are very important because things can go wrong.

That's the hard legal side. On the non-legal side, if clients are going to do things they know their heirs aren't going to be happy with, they should have a conversation and clear it up, so their heirs understand why.

If, for example, they have got three kids and are leaving much more of the estate to one child than the other two, they should talk to kids to explain why. If they don't, there's likely to be strife and litigation after they pass, with the kids possibly suing each other because they feel they've been "cut out".

A will is a window to the soul of the client - when you look at a client's will, you understand that client properly, you understand what goes on inside them. It's unlike anything else. It's actually all emotion - there's a lot of law, but it's mainly emotion. So, it's a good idea to try and understand that.

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