How offshore life wrappers can reduce foreign inheritance tax
27 Jul, 2022

If you own assets outside of South Africa, your estate may have foreign tax liability upon your death. These foreign estate taxes, also known as inheritance tax, can be avoided by holding certain investible assets (e.g. ETFs and shares) in an offshore life wrapper or policy. The potential reduction in costs and taxes is significant, says Colin Archibald, Regional Manager at Glacier International. He unpacks foreign inheritance tax and the advantages of offshore life wrappers in mitigating these costs.

About situs assets and how they are taxed

‘Situs’ is Latin for ‘position’ or ‘site’ and generally the place where an asset (such as fixed property, collective investments, shares and ETFs, among others) is located. For the purpose of this article, the focus is on owning investment assets in the US or the UK. The situs rules for inheritance/estate tax purposes vary from country to country and can be, for example, the physical location of immovable property or the place where, for example, a share register is kept and maintained. Under US and UK situs laws, as a non-resident, your foreign assets (those worth over $60 000 in the US and £325 000 in the UK), could result in inheritance tax in the UK or federal estate tax in the US as high as 40% when you die. Moreover, the assets will still be included in your South African estate for estate duty purposes. Estate duty in South Africa is currently 20% for dutiable estates under R30 million and 25% for estates over R30 million.

Important to note that South Africa has double estate duty agreements with very few countries, namely the US, UK, Botswana, Lesotho, Swaziland and Zimbabwe which means that, in the case of the UK and the US, inheritance tax payable in South Africa can typically be reduced by the estate duty due in those countries. Depending on the value of the assets in the US and UK, the rates can be as high as 40%, which is much higher than the SA estate duty rate, even after a credit has been provided in SA against the SA estate duty liability.

What you should know about investing in an offshore life wrapper

You can nominate beneficiaries in an offshore wrapper issued by a South African insurer. As a result, the wrapper will not be subject to the normal administration processes of the deceased estate. This means you don’t need an offshore will or testament, nor are you required to obtain foreign probate, to deal with the offshore wrapper, as is normally the case with assets you hold personally. In most instances, these processes are both costly and time-consuming. Holding the investments inside the offshore wrapper also avoids any potential foreign inheritance tax being levied on those assets.

Furthermore, the investments in the wrapper can continue in those beneficiaries’ names or, they can elect to receive the investment proceeds from the wrapper on your death.

Why does an offshore life wrapper make sense?

1. It mitigates probate and foreign inheritance tax. Broadly speaking, probate is the legal process when a will is “proved” in a court of law and accepted as a valid Will in order for the estate assets to be administered in that particular jurisdiction. As mentioned previously, the situs of an asset refers to where the asset is located for inheritance/estate tax purposes. This may be important when determining which laws apply to the asset. Investing in a wrapper therefore avoids both the probate process and the associated costs, as well as foreign inheritance/estate taxes.

2. No executor’s fees. Although the wrapper forms part of your South African estate for estate duty purposes, when nominating a beneficiary, the wrapper will not be subject to executor’s fees.

3. It offers tax efficiency. The income tax rate in the wrapper (for individuals) is 30% and capital gains tax (CGT) is currently at 12%, which represents a considerable tax saving for individuals with high marginal tax rates. All tax inside the wrapper is calculated and settled annually with SARS as part of the insurer’s tax liability.

4. Access to the investment or proceeds is immediate. Offshore estates can take months or years to be wound up. In the case of an offshore life wrapper, your beneficiary will have immediate access to the investment upon your death.

5. It offers protection from creditors. If the life wrapper is an endowment policy, such as the Glacier International Global Life Plan, and has been in force for at least three years, benefits (or received returns) of the Plan may not be attached, or be subject to execution under a judgement of court, or form part of the owner’s insolvent estate. Upon the death of the owner, if the owner is survived by a spouse, child, stepchild or parent, the benefits of the Plan cannot be made available for the payment of the owner’s debts. The protection continues for a period of five years from the date that the benefits are provided. Wrappers issued as sinking fund policies, however, do not qualify for insolvency protection.

6. Access to global investment opportunities. A comprehensive range of collective investment schemes, managed by leading global asset managers, provides exposure to various asset classes, regions and sectors globally.

Investors can also hold global securities directly through a number of stockbroking service providers inside the Glacier International Global Life Plan.

Before you decide to invest in an offshore life wrapper, start by determining the appropriate offshore portfolio to meet your investment objectives. It’s a good idea to choose an investment administration platform where access to research and a range of offshore investment solutions are available. Your financial adviser is well-placed to determine the best solutions based on your tax and estate planning requirements.


Glacier Financial Solutions (Pty) Ltd and Sanlam Life Insurance Ltd are licensed financial services providers.

Glacier International is a division of Sanlam Life Insurance Ltd.

The Glacier International Global Life Plan is an offshore endowment policy issued via Sanlam Life Insurance Bermuda branch.


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