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The Expat’s Guide: to Extracting Your Inheritance Money From South Africa

By June 23, 2020April 9th, 2021South African inheritance

The Expat’s Guide: to Extracting Your Inheritance Money From South Africa

June 23, 2020

south-african-inheritance-overseas

If you’re a South African living abroad, chances are you’re going to need to deal with your Will at some point – it’s inevitable. You’re going to have to think about how your estate and assets will be dealt with on your passing. In addition to your own estate, there’s also a chance that you might inherit money or assets from South Africa if you have any relatives back home. With this in mind, let’s take a look at what you need to know about South African inheritance law and tax and how it affects South Africans living overseas.

How do I wind up an estate in South Africa from overseas?

Even if you die while living overseas, the assets that you left back in South Africa will need to be handled according to the Administration of Estates Act.

This means that if you are considered a South African resident, your estate must be registered and wound up in South Africa. Where your estate value exceeds R250 000, an estate executor will need to be appointed.

The process that the executor undertakes in winding up an estate in South Africa is as follows: 

  1. Apply for letters of executorship to be issued by the Master of the High Court.
  2. With this in hand, the executor must:
    • Take control of all of the deceased’s assets.
    • Close the deceased’s bank accounts.
    • Call for debtors and creditors.
    • Pay debtors who are owed money.
  3. Set up a liquidation and distribution (L&D) account.
    • Distribute assets according to the will and the L&D account schedule.

What do you need to know about how your estate will be wound up in South Africa?

  • Once your estate has been registered, your assets in South Africa will be dealt with according to the wishes left in your Will.
  • If you have assets in South Africa in addition to assets abroad, it is common to have a Will drafted in each jurisdiction that your assets lie in order to provide for a smoother administration process, but it is possible to deal with all your assets under a single Will.
  • Your South African estate will be charged estate duty in terms of the Estate Duty Act – this is a form of inheritance tax in South Africa that is levied at a rate of 20% on the dutiable estate up to R30 million and 25% on the dutiable estate value in excess of R30 million. Your estate pays this tax so that your beneficiaries are not taxed on their inheritance from you. What other costs are involved in death? Take a look at just how high death’s price tag can be – an important reminder to ensure that your estate planning makes provision for these costs.

How long will it take to wind up my deceased estate in South Africa?

Time seems to move differently when it comes to wrapping up deceased estates. It can take anything from six months (with miracles involved) to several years to finalise. The time it takes depends on the size and structure of the deceased individual’s assets and liabilities.

How can I claim my inheritance money in South Africa?

Chances are that if you have relatives back in South Africa, you might play a starring role in someone else’s last will and testament. If this is the case, think carefully about the potential impact of exchange control regulations. Failure to plan for such an event means that payments due to you from either an inheritance or trust source will not be actionable without retrospective application to the South African Reserve Bank for which there is no guaranteed approval. In such an event, failure to plan means you risk missing out on a significant windfall.

If you are a South African living overseas and you receive an inheritance from a South African estate,  you will fall into one of three inheritance allowance classifications:

1. South African Resident Temporarily abroad –

Most people fall into this classification. Here are your options: 

  • Use your Foreign Investment Allowance to transfer up to R10 million abroad, this will require your South African ID book/card along with tax clearance from SARS.
  • Formalise your emigration with the South African Reserve Bank (in other words, complete the process of financial emigration) in order to make it easier to get your money out.

2. South African Non-Resident –

If you have already emigrated from an exchange control perspective and you are considered a non-resident by the Reserve Bank, your funds can be transferred to you abroad if you can: 

  • Provide proof of your emigration, which involves furnishing the South African Reserve Bank reference number or approval received when you originally emigrated.

3. Non-resident – 

You were never a South African citizen, so all you need to do is provide evidence of your non-resident status in order to have the funds transferred to you abroad.

Do South African residents pay tax on inheritances?

The Income Tax Act is only concerned with ensuring that SARS gets their cut of your income. Since an inheritance doesn’t count as an income, you won’t be taxed on it, nor will you be required to pay Capital Gains Tax on your inheritance. SARS gets their due from Estate Duty that is charged on the deceased estate.

How do I transfer an inheritance overseas from South Africa?

Your inheritance funds can be paid to you locally in a South African bank account if you left South Africa without formalising your emigration for exchange control purposes. If you have completed financial emigration, your funds can be paid into your blocked Rand account.

Your foreign investment allowance is your opportunity to shift your inheritance abroad without personal tax consequences. However, if you can’t utilise this allowance for some reason (perhaps you’ve already exhausted it for the calendar period) you can apply for financial emigration in order to  transfer your money out of South Africa, once the Reserve Bank has approved your financial emigration application. 

FinGlobal: cross border financial specialists

Need assistance with claiming your inheritance back in South Africa? We’re here to help!

We offer a full suite of financial services for South Africans around the world. We’ve already helped more than 60 000 clients in over 105 countries and we’re waiting to offer you the same expertise in financial emigration, retirement annuity withdrawal, South African inheritances, foreign exchange, tax clearance and so much more.

Interested in discussing your options when it comes to financial emigration? Leave your contact details and we’ll be in touch to start your free, no-obligation consultation.

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