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Albert Coetzee | The problem with probate

Albert Coetzee | The problem with probate
24-04-24 / Albert Coetzee

Albert Coetzee | The problem with probate

Many investors seek offshore exposure but may not know how their foreign investments may impact their estate on death. From a financial planning perspective, Albert Coetzee, Head of the Ninety One Global Investment Platform explores whether probate will be required when invested in offshore-domiciled products.

What is offshore probate?

Offshore probate refers to the process of applying for the right to deal with a deceased person's foreign assets and proving their will as a valid legal document in the foreign jurisdiction. The process may vary from one jurisdiction to another because of legislative differences, adding complexity.  A Grant of Probate can be seen as the equivalent of a letter of executorship in South Africa and serves as the formal acknowledgement by the foreign court that a will is enforceable. It also confirms that the persons named as executors under the will have the authority to manage the estate.

Why can it be problematic?

If an individual holds assets in South Africa and in a foreign jurisdiction where probate applies, the process of winding up their estate can become complicated. While the South African executor process is managed separately, it is directly impacted by the probate process. In other words, until such time as the grant of probate is received from the foreign jurisdiction, the South African estate cannot be finalised. Typically, the process of probate can take 12 months, or even longer depending on the jurisdiction. This can leave the deceased's loved ones vulnerable and without access to funds.

Investing via multiple jurisdictions may compound the problem. If an investor holds offshore assets in various jurisdictions where probate applies, grants of probate may be required in each of these jurisdictions, further delaying the finalisation of the estate.

Probate may also result in additional costs for the South African estate, which becomes particularly pertinent when one considers that not all countries place a cap on agency fees like we do in South Africa, where executor fees are limited to 3.5% plus VAT.

Are there offshore investment products where offshore probate isn't required?

There are. Investments held on the Ninety One Global Investment Portfolio, for example, should not require offshore probate because a local nominee company (Grayston Nominees) is the registered holder of the foreign assets.

The Ninety One Global Life Portfolio is domiciled in Guernsey, which is a jurisdiction where probate would normally apply. However, provided the investor nominated a beneficiary on the policy wrapper who is able to receive the benefit, no offshore probate will be required. And to reduce the circumstances under which a person could die without a nominated beneficiary, we allow for the nomination of an alternative beneficiary. This feature provides a 'plan B' in case the primary beneficiary should pre-decease the original owner.

Previously, if the owner of a Ninety One Global Life Portfolio passed away without a nominated beneficiary or where they nominated the estate as their beneficiary, probate would have applied. However, product providers have the right to determine whether probate is applicable to their products or not, and we are pleased to confirm that the Guernsey probate process does not need to be followed in respect of our Global Life Portfolio product, subject to certain conditions.

This should provide more flexibility from a financial planning perspective. There are family circumstances where it would make more sense to nominate the estate, for example. However,  investors are often deterred from doing so because they do not want to bring the cost and complication of probate into the equation. This change means policyholders are free to make their beneficiary nominations based on the most suitable options for their family without any other processes clouding their judgement. Ninety One Investment Platform's new rule will apply regardless of the value of the investment, on condition that at the time of the investor's death, there is a financial advisor in place who was appointed in respect of the Global Life Portfolio. A further requirement is that this advisor should be able to introduce Ninety One to the appointed executor of the estate. 

Our recently launched Ninety One International Investment Portfolio is a flexible investment designed for investors who have ceased to be South African tax residents and/or their adult children who may be living abroad. It makes use of a Guernsey nominee company and, as such, would normally be subject to probate. However, as with our Global Life Portfolio, we will not be requiring the Guernsey probate process to be followed, subject to certain conditions. At the time of the investor's death, there must be a financial advisor in place who was appointed in respect of the International Investment Portfolio. A further requirement is that this advisor should be able to introduce Ninety One to the appointed executor of the estate.

*Albert Coetzee is Head of the Ninety One Global Investment Platform.

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