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Offshore investments vs offshore endowments



When investing directly offshore in foreign currency instead of rands, there are generally two options to consider on an offshore investment platform: a pure offshore investment or an offshore endowment.

This is very similar to the options for rand-based investments, but there are additional reasons for you to choose an offshore endowment for some clients over and above an offshore investment. For rand-based investments, when an adviser is discussing the choice between an investment and an endowment, the potential tax benefit of an endowment is often weighed against the withdrawal restrictions. This is especially true for high-income earners who could benefit from a tax perspective.

When investing on an offshore investment platform, one of the first differences is that access to a client’s money is improved on certain international endowments as they consist of multiple underlying policies. This could already make the offshore endowment’s potential tax benefit a deciding factor, but there are even more compelling reasons for using offshore endowments. These reasons relate specifically to situs tax and probate, which may come into play on the death of the investment owner or the last insured life.

In short, situs tax is a type of tax equivalent to South African estate duty and could be up to 40%.

Probate is a procedure where a legal authority approves a will as the valid and last will of a deceased testator. The probate process can be expensive, complex and time-consuming, which means that the winding up of a South African deceased estate could be delayed.

Situs tax and probate can be avoided by using an optimally structured offshore endowment. This structuring has a direct implication on how the proceeds are treated in the event of death.

Advisers can structure their client’s offshore endowment by adding certain role players, such as the investment owner (policyholder), the insured life (or lives), and the beneficiaries (beneficiary for proceeds and/or a beneficiary for ownership).

The most effective way to invest in an offshore endowment is to use the services of a reputable and established offshore investment platform. Our offshore investment platform, Momentum Wealth International, was established in Guernsey in 1999 as it offers an efficient regulatory and fiscal framework together with investor protection policies. The Momentum International Endowment Option (offshore endowment) is available as the Life insurance bond or the Capital redemption bond, a sinking fund without insured lives. This offers various structuring options for financial advisers to make sure that on death, the transfer of ownership or payment of the proceeds can be handled according to the client’s wishes.

Our comprehensive range of products, investment funds and other investment components, places us at the forefront of international investment solutions to cater for every client’s offshore investing needs. Your client’s offshore investment isn’t just another investment. It’s personal to them. And with us, investing is personal. We can help you with the offshore investment solutions your clients need to help them achieve their goals.

Momentum Wealth International Limited is an authorised financial services provider in terms of the Financial Advisory and Intermediary Services Act No 37 of 2002 in South Africa. Any information in this editorial is not intended nor does it constitute financial, tax, legal, investment, or other advice. Nothing contained in this editorial constitutes a solicitation, recommendation, endorsement or offer by Momentum Wealth International Limited.