Thousands of elderly South Africans have children who are living overseas, which can become an administrative nightmare when the parents pass away and their expat children inherit the estate. Inevitably, they run into issues with the payout of the estate and taking the money out of the country.
Tim Powell, director of forex at Sable International says the problem is arising more frequently: “Many South Africans who have emigrated, have been living overseas for a long time and often have lost their South African ID documents and have no local bank accounts, which makes it difficult for administrators to pay out an estate.
“We are working extensively with law firms and administrators liaising with estate beneficiaries, to establish what their status is in terms of exchange control and what their options are.”
According to Powell, the most common scenario is where the beneficiary has been living overseas for a long time, their parents pass away and they inherit in SA, but they’ve lost their ID book or didn’t obtain the green barcoded ID book, and the only way they can access their money is to financially emigrate.
“Remember, when applying for a tax clearance at SARS, one of the things you have to do is submit a copy of your green barcoded ID, you cannot use a passport. If you cannot produce your green barcoded ID, you’re going to be stumped.”
“If they do have an ID book, then we can use the allowances – we can use the R1 million allowance or we can register you for tax if it’s more than a million (up to R10 million). You would apply for tax clearance and then get permission to send the money overseas, which is quite a straight forward process,” says Powell
“If you have a green ID book but no South African bank account, you would need to open an account to receive the money in a FICA compliant manner,” says Powell.
“If you don’t have a South African ID you either have to financially emigrate or go through the schlepp of getting an ID. If you have the ID, but no longer have a South African bank account, you need to work with an entity like Sable or go through the mission yourself of opening a South African bank account so funds can be transferred in and then transferred out,” says Powell.
According to Powell, if you are the beneficiary of a trust in a deceased estate there are sometimes further complications. “The problems often arise when the founder of the trust dies. Often in a family trust, one of the conditions of the trust is the trust will be terminated on the death of the founder and spouse, and this needs to be finalised,” says Powell.
Isn’t it easer just to financial emigrate?
“Taking the decision to move overseas permanently, is a complicated financial decision and emigrating South Africans have to consider whether or not they want to close all their bank accounts, leave certain assets and investments behind, and if they need to financially emigrate,” explains Powell.
“Financial emigration, also known as formal emigration, is the process whereby a South African resident changes their status with the Reserve bank to that of a non-resident. It would require you to complete a form called an MP336 and to go to your bank and place your emigration on record with the South African Reserve Bank. You would receive a reference and a confirmation from SARB that your emigration is on record.
“The decision to financially emigrate can be taken at the outset, at a later stage or not at all. The death of a parent and the complications in winding up the estate, could be the impetus, but there are many other reasons to evaluate whether or not to financially emigrate.”
Why do it?
Powell suggest that emigres look at the context and their wealth, before considering financial emigration: “South Africans and South Africans living abroad can move R10 million a year out of the country with a tax clearance certificate and another R1 million without tax clearance. If you’re married, you can move R22 million, and if you have children over 18, you can extrapolate the R11 million per person per year for your children as well in some instances.
“The reason you financially emigrate is because it allows you take everything out in one go so if you want to take out more than the annual allowance at once you would need to financially emigrate. About several years ago, there used to be a levy on financial emigration – If you financially emigrated you would pay a 10% levy, but this is gone now.
“If you’re living overseas and your only remaining asset is a retirement annuity policy, you may want to financially emigrate as the rules around retirement annuity policies require that the only way you can encash them, is to financially emigrate. A pension or provident fund, you can cash, pay the tax and take overseas, but cashing in a retirement annuity, requires financial emigration.
“Lastly, as I have mentioned, if you are already living overseas and inherit from an estate in South Africa, and you don’t have a South African ID you probably need to financially emigrate.”
“If you have trusts and property in South Africa, you might want to consider not financial emigrating. Banks will often say you need to financially emigrate, because they want to close your account, but it is not always the right solution for the client. They might be creating a headache for themselves. With the current laws, as long as you have your ID book, there’s a lot you can do without financially emigrating,” concludes Powell.