FINANCIAL WELLNESS COACH: US asset may not be the best bet when it comes to estate planning

A South African resident with US-based investments could face significant financial challenges when planning their estate. The offshore investments may lead to US estate tax, cash flow issues, and lengthy delays in finalizing the estate. These issues stem from the fact that the investments are legally situated in the United States, which can trigger tax obligations and legal processes in the US, even if the money is held overseas.

One potential solution to avoid these complications is to place the offshore investment within a properly structured offshore life policy. This wrapper allows the money to remain offshore while the investor owns a policy issued by an insurer. The insurer would then own the underlying US investments, thereby eliminating the US estate tax and probate problems associated with personally owning the assets.

Another advantage of this approach is that the policy can be nominated to a beneficiary, potentially allowing for quicker access to the investment after the investor's death—within a month instead of years. Additionally, the beneficiary may not need to transfer the funds back to South Africa. However, selling the current investment might trigger capital gains tax, which should be considered before making any changes.

Overall, this structured approach could save considerable time, money, and legal hassle compared to dealing with offshore estates.