Foreign Estate Administration
In the financial and legal world, an Estate refers to everything of value that someone owns—such as all property owned, in and outside of South Africa (in cases where someone was ordinarily resident in the country), art collections, antique items, investments, certain insurance policies, annuities, intangible assets such as a patent or trademark and any other asset or entitlement.
Key Takeaway:
Foreign estate administration is a complex process that requires careful planning and expert guidance. Here are some tips to help you navigate the legal and tax implications of inheriting or managing assets abroad. To avoid potential pitfalls and complications, you should consider the following factors:
Jurisdiction
Taxation
Exchange Control
Expertise
What is an Estate?
A person’s ‘collection” of assets (less any debts on those assets) is also used as the primary way to refer to their net worth i.e. the value of everything a person owns. Meaning their financial and non-financial assets minus their total outstanding liabilities (your debts).
An asset is a resource with economic value that someone owns or controls with the expectation that it may provide a future benefit. Assets can be sorted into short-term (or current) assets, fixed assets, financial investments, and intangible assets.
Assets in foreign countries
It is very possible that throughout a person’s lifetime they acquire multiple assets in multiple foreign jurisdictions. Perhaps they purchased assets whilst living abroad, perhaps they used their various South African Reserve Bank allowances to make property purchases or perhaps they themselves inherited assets from non-resident family members in foreign jurisdictions. There are many reasons why someone could have assets in multiple jurisdictions.
Be the reason as it may – administering the deceased estate of a person who has assets in multiple foreign jurisdictions becomes a problem.
Technically speaking, should they be in possession of one, a South African will could govern worldwide assets. But with the complexities of international laws and conflicting jurisdictions (all having their own requirements), having only one will be precarious.
Even though it may not be legally required to have a foreign will or more than one will it may prove beneficial.
Remember - each country has its own set of laws regarding succession and the drafting of wills. Where some countries will recognise a South African will, other countries’ may not . With freedom of testation being part and parcel of our right to dispose of our assets as we deem fit, this concept will not work in a country which recognizes forced heirship - resulting in one worldwide will being impractical.
A separate will (known as an offshore will or a concurrent will) for each country dealing with the specific assets in that country, is always recommended if immovable property is owned in another country. By drafting separate wills, you can ensure that each will complies with the laws of the country in which it was drafted.
When setting up a concurrent or offshore will(s), it is essential to clarify (beyond any doubt) which assets each will is dealing with. Importantly, both Wills must be complementary.
A South African Estate being administered by a foreigner (and vice versa)
If there is a South African will which has appointed a foreign Executor, he/she will not have jurisdiction to deal with the assets in South Africa. Similarly, if there is a foreign will that has appointed a South African Executor to administer assets in foreign jurisdictions, he/she will not be able to deal with the deceased’s foreign assets.
Why? Well both conflicting laws and jurisdiction issues come into play.
Consider the following points:
Firstly, a South African appointed executor will not have jurisdiction to deal with the assets in the countries in which the foreign assets are located. This means that an agent will need to be appointed in that country by a South African executor. And vice-versa. 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 a 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 then applies for appointment to act in that country. This process is referred to as “probate”. And the same process would need to be replicated if it is a foreign executor is attempting to administer assets in South Africa.
Note: probate is a procedure whereby your South African-drafted will is approved by a foreign legal authority as valid so that your foreign assets can be administered. Obtaining probate may delay the winding up of your estate to the financial disadvantage of your heirs.
A crucial factor to consider is what in South Africa is known as “freedom of testation” (covered in our article Your Will is Yours to Make) which essentially boils down to “the right of an individual to dispose of his or her property on death as he or she pleases” (enshrined in Section 25 of the Constitution). Certain countries, instead, have what is called “forced heirship” rules. Essentially, forced heirship rules legally prescribe how the assets must be treated on death - the estate of a deceased is separated into an indefeasible portion (the forced estate passing to the deceased's next-of-kin) and a discretionary portion (or free estate, to be freely disposed of by will). Forced heirship is generally a feature of civil-law legal systems which do not recognize total freedom of testation. Each country’s forced heirship rules are unique, which means that the different laws often do not speak to one another. In fact, in the case of South Africa vs any other civil law system, the laws clash completely – forced heirship poses an important conflict between that and a South African’s rights to freely dispose of their assets as they deem fit.
Another crucial aspect is – jurisdiction. If there are multi-jurisdiction wills, their jurisdiction clauses must work in conjunction with one another. In other words, if there are conflicting clauses in the will, it could result in a massive delay and absolute logistical nightmare. Wills must also be clearly identifiable for the jurisdiction in which they are intended and not revoke one another.
Do you see the problems that could arise?
Can I appoint someone who is outside of South Africa to be the executor of my Will?
It is important to keep in mind the following - no person may deal with South African assets in a deceased estate unless authorised to do so by a Master of the High Court in South Africa (section 13(1) of the Administration of Estates Act).
Therefore, an executor is appointed either by means of the issuing of Letters of Executorship issued by the Master in South Africa or, in the case where a letter of appointment has been issued by another country, that Letter of appointment from the foreign country can be signed and sealed by any of the South African Master’s offices authorising the executor to deal with the assets in South Africa.
For intricacies involving foreign executors administering assets in a foreign jurisdiction, it is always best to confirm details with legal advisors in that specific jurisdiction. There may be various requirements that need to be met, so hearing from a local expert would be advisable.
What if someone passes away outside of South Africa leaving South African assets?
Jurisdiction is not automatically granted to the Master in the country where the largest portion of the estate is located. In terms of the provisions of the Administration of Estates Act, any office of the Master of the High Court to which an application is made to grant letters of executorship or to sign and seal any such letters already granted in another country, has jurisdiction in a foreign estate. To ensure that no duplication is caused, the applicant must sign a declaration stating that no letter of appointment has been issued in any foreign jurisdiction.
There are countries which have been proclaimed (“Proclaimed States”) which means that it is not necessary for letters of executorship to be issued by the Master of the High Court in South Africa. If letters of appointment have already been issued in that Proclaimed State, that appointment letter can simply be signed and sealed by the Master of the High Court in South Africa.
These Proclaimed States include Botswana, Canada, Channel Islands, Kenya, Namibia, Australia, New Zealand, Swaziland, Tanzania, the UK, Ireland, Zambia and Zimbabwe. All documents issued in such foreign country are required to be authenticated before they may be of official use in South Africa.
Can a Master decline to grant authorisation to an executor?
Section 22 of the Administration of Estates Act sets out that the Master of the High Court may refuse to grant, endorse or sign and seal Letters of Executorship in certain cases. This will include circumstance where Individuals are not resident in South Africa (and therefore do not have an address within South Africa), which makes it difficult for estates to be efficiently administered.
However, Section 22 (2) on the other hand does not prohibit an individual from applying to the Master of the High Court to be appointed as an executor. The proviso? They will be required to choose a domicilium citandi et executandi (physical address) in South Africa to ensure service of all correspondence and documentation between the parties concerned. And this often involves appointing local attorneys.
A foreign executor may need to provide security
In addition to Section 22 above relating to refusal by the Master of the High Court to sign and seal Letters of Executorship, the provision of security may be another hitch preventing the appointment of a foreign executor.
In certain instances, an executor may have to lodge security for the full value of the estate unless he/she is exempted from doing so. In terms of the Administration of Estates Act, only certain executors are exempt from providing security to the Master - those exempted from providing security are either in terms of the will or if the executor is a parent, spouse or child of the deceased.
If a nominated executor does not qualify for the exemption, the Master will insist that the executor provide the necessary security for the value of the estate before the executor’s appointment is confirmed. Such security must be in the form of a Bond of Security, issued by a short-term insurance company.
Known as a surety bond by insurers, it is a guarantee by a surety (the Insurer) to pay one party (the Master) a certain amount if a second party (the executor) if any default is made by the executor in the proper performance of his/her functions. The Master may enforce the security and recover from such executor or his/her sureties the loss to the estate.
Simply put – the surety guarantees the proper administration of funds and property by the executor.
Insurance premiums on surety bonds are charged at a percentage of the estate asset value to be paid out of the estate, which for executor bonds is 0.5% plus vat.
Why should you trust Benaters with the complexities of foreign assets and/or foreign wills and assets?
There is so much to take in with so many complexities and other issues that can arise when dealing with foreign assets, foreign wills and foreign executors.
The information set out above are just some of the issues which could arise (it is not an exhaustive list). We therefore implore (and encourage) you to contact attorneys who have experience in this area of deceased estates (like the attorneys at Benaters).
We have assisted many individuals and families with their estates, from the planning thereof to the administration of same (even if it is in a foreign jurisdiction) and have been able to successfully support and guide them through the entire process.
We are here to help you. In any way we can!
So please, get in touch today and let us see how we can assist you as you go through the concept that is foreign wills, foreign assets and foreign executors. We will undertake your matter, as always, with professionalism and the utmost due care.