For South African expats living overseas, the process of claiming death benefits from a life insurance policy, retirement annuity, or living annuity held in South Africa can be complex and requires careful attention to both administrative and legal requirements. Suppose you’re a beneficiary of a life insurance policy or retirement fund in South Africa, and you’re living abroad, as in the case of Anne in New Zealand who needs to claim her husband Ben’s living annuity benefits after his passing. Here’s an outline of the steps involved and important points to consider.

Understanding the scenario

Ben and Anne emigrated from South Africa to New Zealand in 2012. Ben maintained his retirement benefits, specifically a living annuity policy, in South Africa and drew a monthly annuity income from it. He named Anne as the beneficiary of the policy in the event of his death. Upon Ben’s passing, Anne intends to claim the remaining capital from Ben’s living annuity policy. As a non-resident for South African tax purposes, Anne faces unique requirements and processes to claim and repatriate her benefits to New Zealand.

Step 1: Notifying the insurer and providing required documentation

The first step for Anne is to inform the insurance company of Ben’s death. This involves submitting a foreign death certificate, which confirms his passing and initiates the claim process. However, most South African insurers also require a South African death certificate as part of their claim requirements, which can be obtained from the Department of Home Affairs in South Africa. This dual requirement helps insurers comply with South African regulations and ensures they have verified documentation for the claim.

Step 2: Ensuring the deceased has an active tax record with SARS

A crucial administrative step in claiming death benefits as an expat beneficiary is ensuring that the deceased has an active tax record with the South African Revenue Service (SARS). In cases where an individual has emigrated and no longer pays taxes in South Africa, the tax number may be dormant or deactivated.
Anne must confirm that Ben’s tax record is up to date and, if necessary, reactivate his SARS tax number. This step is essential for the insurer to obtain a tax clearance from SARS before releasing the benefits. Without a current tax record, the insurer cannot process the claim, potentially causing delays in the distribution of funds.

Step 3: Opening a South African bank account

Once the insurer is ready to disburse the benefits, they will do so via a South African bank account. In this scenario, Anne needs a South African bank account to receive the funds. If she no longer has an account in South Africa, she will need to open one.
Opening a South African bank account from overseas may require additional paperwork, such as proof of identity, proof of residence, and potentially SARS tax details.

Step 4: Disbursement of benefits into the South African bank account

After meeting the requirements above, the insurance company can release the proceeds from Ben’s living annuity policy to Anne’s South African bank account. This payment can include the remaining capital that Ben accumulated in his living annuity. Importantly, the timing of the disbursement may vary based on the completion of the tax clearance and verification processes.
At this point, Anne now has access to the funds in South Africa and has the option to transfer it to New Zealand.

Step 5: Transferring the proceeds of the benefits offshore

For Anne, transferring her funds from South Africa to New Zealand is the final, but often the most intricate, step in the process. South Africa has specific rules regarding the transfer of funds abroad, and Anne’s South African tax residency status determines what additional steps she must take.

If Anne is still considered a South African taxpayer or has residual ties in South Africa, she may need to obtain a tax clearance certificate from SARS, which demonstrates compliance with South African tax regulations. This clearance is required for transfers more than R1 million and ensures that the funds leaving the country have been accounted for within SARS’s regulatory framework.

Key considerations for expats claiming death benefits

The above scenario highlights several important considerations for South African expats claiming death benefits:

1. Documentation Needs: Insurers may require both foreign and South African death certificates, which can require additional time and assistance to obtain.
2. Tax Compliance: An up-to-date SARS tax record for the deceased is crucial. Without it, tax clearance may be delayed, holding up the release of funds.
3. South African bank account requirement: Funds must initially be deposited into a South African bank account, meaning expats without an account may need to open one.
4. Foreign exchange regulations: The transfer of funds offshore requires adherence to South African exchange control regulations, especially for amounts exceeding certain limits.

Conclusion

For South African expats like Anne, claiming death benefits from South African retirement funds or life policies involves a multi-step process requiring thorough documentation, tax compliance, and coordination with financial institutions.
We can assist every step of the way from obtaining South African death certificates to transferring funds abroad. With the right support, expats can navigate this complex process smoothly and ensure that the benefits are successfully transferred to their overseas accounts.

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