November 29, 2022
SA’s growing export: Generational Wealth
In the years preceding 2022, the trend for inheritance flows (categorised by the South African Reserve Bank by BOP category 409) reflect a consistently dominant inward flow of these funds into South Africa, versus a recent trend where the outward flow of inheritance payments, has overtaken the inward.
In addition to some of the usual gripes related to a South African exodus, with Residents taking with them specialised skills, academia, valuable taxpayer contributions, we are seeing an increasing trend of generational wealth being exported in the form of these inheritance payments to offshore beneficiaries.
Inheritance where beneficiaries are living abroad, poses two interesting questions worth considering:
1. How beneficiaries invest these funds once the funds have been distributed?
2. And how does Residency status affect the distribution of inheritance (when beneficiaries are living abroad)?
In the first instance, it is useful for Wealth Managers to initiate conversations with their clients and families earlier, to ensure that the Family’s succession planning is in in order, and successfully preserve and manage generational wealth for years to come, even after beneficiaries have received their inheritance.
Secondly, South African Residents living abroad, who become entitled to an inheritance from a South African Estate, cannot receive these funds paid directly into an account held offshore. Instead, these funds will need to be distributed to an account held in their name with a local South African Bank.
Once the funds are received into their local bank account beneficiaries may send these funds offshore making use of their Single Discretionary Allowance (up to R1m without the need for a foreign tax clearance PIN) or their Foreign Capital Allowance (up to R10m with a foreign tax clearance PIN), depending on the size of the inheritance. These allowances are applicable per calendar year.
Often beneficiaries are no longer in possession of, or have never applied for, a barcoded South African ID. In this case they can complete a Tax Migration (formerly known as Financial Emigration), to open a South African bank account as a nonresident or emigrant using their passport as proof of identity. Once a Tax Migration has been completed, the beneficiary may remit the funds, regardless of the amount of the inheritance, if they can provide confirmation of the Tax Migration (or Financial Emigration) as well as the relevant supporting Deceased Estate Documentation. Thereafter funds can be remitted to the beneficiary’s offshore bank account.
How can we help?
Currency Partners is proud that some of the biggest names in Financial Services and Property have chosen us as their preferred specialist provider of foreign exchange services for their clients and can handle such applications, along with any related exchange control matters, as a benefit of our foreign exchange services.
Furthermore, by giving you access to the best pricing and service available in the market, we add value to your individual requirements and make your money go further. Keeping an eye on the markets, so you don’t have to, we make sure that you never miss out on a favourable exchange rate. And with our ‘better price promise’ you can always be assured of saving with Currency Partners.
To speak to an expert in our specialist Private Clients team, email email@example.com or call us on +27 21 203 0081.
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