Have you ever given thought to the tax consequences for your children who have moved from SA and are heirs to your Estate?
According to an article by Anthea Stevens of Maitland Family Office, which appeared in the Personal Finance Section of the Independent on Saturday 15 June 2019, there are 2 categories of these children.
1. Those who studied abroad and then were able to find employment there and stayed long enough to obtain residency or citizenship by naturalisation.
2. Those who left, with their families, in the 1970s and 1980s and have settled into full lives there. Many have their own grandchildren.
In each of these 2 categories your children have not formally emigrated even if they have no intention of returning to SA. According to the SA Reserve Bank (SARB) they are, “South African citizens temporarily abroad”. This is the case until and unless they formally emigrate by completing a MP336(b) and submitting it to the SARB. They will retain their SA citizenship.
If they do not formally emigrate there will be exchange control requirements before a child of yours, regardless of age, can inherit from your Estate. The Executor of your Estate can only transfer any inheritance until either an emigration reference number from an authorised dealer or a tax clearance certificate from SARS.
Those older children who left 30 or more years ago are unlikely to have tax numbers and IDs and a clearance certificate can only be issued to a person with an ID number. It would be best for children to formalise their emigration status and so have a valid emigration reference number.
The tax implications for heirs depends on the country where they are resident. SA citizens are taxed on world-wide assets, even after death. Currently this is 20% on the first R30million and 25% on any excess thereof.
If you decide to bequeath your assets to your grandchildren who were born in another country and are, therefore, not SA tax payers, there are no tax implications.
A final point is that SA citizens who have not formally emigrated may not deposit money back into SA through a foreign trust or company.
Should there be any question that there may be complications, Anthea advises that one should get expert advice.