For many South Africans who have invested offshore, the way investments are structured can have a significant impact on how efficiently wealth is transferred to loved ones.
As South African investors diversify globally, offshore policy wrappers and endowment-style investment products have become increasingly popular. While these structures can offer tax benefits and estate-planning advantages, the finer details can have major consequences for beneficiaries when the investor passes away. The key take away is that no two beneficiaries are the same and the investment owner must consider the individual circumstances of each intended beneficiary when doing their planning.
There are a number of different Offshore Investment Structures.
The word “endowment” is often used to describe different products that may have very different outcomes on death. Some products include a life assured, while others do not, and this distinction can determine how and to whom the investment is ultimately paid. If your beneficiaries are South African tax residents, an Endowment or Sinking Fund might be appropriate, but if one or more beneficiaries is foreign tax resident, the way you structure the beneficiary instruction could have significant tax implications.
Every Investor Should Consider these questions when setting up their offshore investments.
1. Who is the Life Assured, who is the owner and who are the beneficiaries?
The identity of the life assured can influence whether an investment continues or is paid out on death. Understanding this structure is critical to ensuring your intentions align with the eventual distribution of your assets.
2. Is Joint Ownership the Best Option?
While joint ownership may appear convenient, it can create complications. Decisions often require all owners to agree, and inheritance outcomes may not always reflect the wishes of the deceased owner. Careful consideration should be given before selecting a joint ownership arrangement.
3. Will Beneficiaries Have Flexibility?
Some offshore investment structures force a payout on death, potentially requiring assets to be sold during unfavourable market conditions. Others allow beneficiaries to remain invested, receive funds offshore, or transfer ownership without disrupting the investment strategy. This flexibility can be invaluable during times of uncertainty. In financial planning, generally, greater flexibility is always preferable which means the “beneficiary for ownership” would likely be the preferred option.
4. Have You Named Alternative Beneficiaries?
One of the simplest yet most overlooked estate planning steps is nominating contingent (backup) beneficiaries. If a nominated beneficiary passes away before the investor and no alternative beneficiary has been recorded, the proceeds may fall into the deceased estate. This could result in delays, executor fees, unintended Capital Gains due to disposal and additional administrative complexity.
A Valuable Estate Planning Opportunity
For couples, separate policies are often worth considering, as they may help avoid administrative complications, reduce potential disputes among heirs, and simplify the transfer of wealth between spouses and children.
The broader lesson is clear: investment performance is only one part of successful financial planning. Equally important is ensuring that your wealth is structured correctly so that your loved ones can benefit from it efficiently and according to your wishes.
As part of your Wills Month review, now may be the ideal time to revisit your beneficiary nominations, offshore investment structures, and overall estate plan. A few simple checks today could save your family significant cost, delays, and stress in the future.
Wealth & Asset Insight
A will remains the cornerstone of any estate plan, but it should work hand-in-hand with your beneficiary nominations and investment structures. Regular reviews ensure that your wealth passes smoothly to the people you intend to protect.
Source: Adapted from “Ruan Breed, Offshore Investment and Beneficiaries”, published by Moneyweb, 3 September 2026. [moneyweb.co.za]
