Estate planning is crucial for any family (just ask anyone who's tried to wrap up a poorly managed estate), but it's even more so for high and ultra-high-net-worth individuals (HNWIs and UHNWIs) and their families. In addition to ensuring that assets are passed on to the correct beneficiaries, their estate planning should allow them to protect their assets, optimise tax efficiency, manage complex financial structures, plan for business succession, fulfil philanthropic goals, address family dynamics, ensure privacy, and preserve wealth across generations.
This multifaceted planning also has to take place and be functional in increasingly complex local and global environments, characterised by political and economic uncertainty, and shifting regulatory regimes. In South Africa, it is further complicated by the increasing prevalence of international families, the holding of assets in multiple jurisdictions, and the divergence in local and global financial planning tools. For example, a trust in South Africa enables the settlor to be fully involved in the day to day running and direction of the trust, and they are relatively simple and cost effective to set up. An offshore trust on the other hand requires independent trustees (not at a small cost), and a strict adherence to the independence or separation of the settlor from the trust which can come as a real shock to many South Africans.
Navigating such complex environments requires thorough estate planning, which includes putting the right building blocks in place.
Start planning early
When it comes to estate planning, it's essential to start as early as possible. That's especially true for emigration and investing offshore for example.
Over the past decade or so, we have seen more South Africans looking to invest abroad, often in real estate or to grow a business internationally. Re-location to other jurisdictions is also increasing. The UK, Australia, US and the UAE are popular destinations, while others have chosen to pursue citizenship by investment programmes in select European or Caribbean countries. These can pave the way to gaining permanent residency and can facilitate easier international travel to a wider range of places.
Anyone planning on the latter route will have a much more complicated time than they would have had a few years ago, with a growing number of countries clamping down on so called "citizenship-for-sale" schemes. Another key consideration for any family prepared to spend increasing amounts of time abroad is the extent to which funds can be externalised which is an ever evolving landscape.
Ultimately, the earlier you start with estate planning, the better positioned you'll be to deal with any potential shifts to the financial environment.
Work with the right team
In addition to starting early, it's important that you have the right team around you. Proper estate planning requires expertise in everything from tax and regulatory compliance, to business succession planning and wealth preservation. Always remember to explore your options for a private banking partner. Stability, independence and integrity are the three values that most resonate with our clients, and many when looking overseas want an institution separate from their local provider that has the expertise and product proposition to support their journey. Estate planning can be further complicated by factors such as geography: grandparents in Plett, one child in Johannesburg, the other in London with grandchildren scattered all over the world.
A quality private banking team will be well-positioned to assist you with all of these things and more. It's critical, however, that this team come from a reputable institution with a strong track record in multiple aspects of the estate planning process. Its members should also be open to pointing you in the right direction if there are any processes they can't deal with directly.
Barclays does not provide legal or tax advice but our Wealth Advisory team discusses the various issues families face and the options they have. While each family is of course unique, most importantly Barclays can provide real insight into how other families in similar positions both in South Africa and globally are managing their affairs.
Conduct regular reviews
Once you've laid the foundations for your estate planning and have put together a solid team, it's important that you don't let things lie and assume it will all work out. Indeed, failing to regularly review your estate is one of the biggest mistakes you can make.
Your estate needs to evolve to be compliant with changing regulatory regimes, to keep up with any moves made by estate beneficiaries (a grandchild moving from the UK to the UAE, for example), and to ensure that it's using the best available investment products.
As countries move to make taxation more transparent and financial regulators continue to tighten up their regimes, these regular reviews will only become more important.
Setting up for multi-generational success
While there are a number of other factors that go into successful estate planning, when it comes to putting those building blocks in place, working with reputable experts who understand your estate's needs and how to achieve them is crucial. This should ensure that an estate is equipped to navigate increasingly complex local and international financial landscapes and is set up to deliver success across multiple generations.