Dear reader,<\/p>\n
When investing offshore \u2013 particularly in US- or UK-listed securities \u2013 it is important to understand how foreign estate and inheritance taxes may apply to non-resident investors.<\/p>\n
One key concept in this regard is situs, which refers to the legal location of an asset for tax and estate-duty purposes.<\/p>\n
For non-US persons, US-listed shares are generally considered US-situs assets. As a result, these assets may be subject to US estate tax on death, with marginal rates of up to 40%, after a relatively low exemption threshold.<\/p>\n
Read: How different offshore investments affect your tax obligations<\/p>\n
For South African tax residents, this exposure can exist in addition to local estate duty (up to 25%) and potential capital gains tax, which can materially reduce the value ultimately transferred to beneficiaries.<\/p>\n
While not all investors will be affected in practice, the risk is often underestimated and should be considered as part of a holistic offshore investment and estate-planning strategy.<\/p>\n
Why the investment structure matters<\/strong><\/p>\n When investing offshore, the legal ownership structure is just as important as the choice of underlying shares or funds.<\/p>\n Holding US-listed securities directly in an individual\u2019s own name may be simple, but it can expose the investor to:<\/p>\n For South African tax residents, one commonly used solution is investing through an offshore investment wrapper, often referred to as a sinking fund (terminology and features may vary between providers).<\/p>\n How an offshore wrapper typically works<\/strong><\/p>\n An offshore sinking fund is a regulated investment structure that allows investors to hold offshore assets \u2013 such as equities, unit trusts, exchange-traded funds (ETFs), bonds, or cash \u2013 within a single legal vehicle. In most cases, the wrapper (and not the individual investor) is the legal owner of the underlying assets.<\/p>\n Read: Offshore investments: Is your structure optimised or overlooked?<\/p>\n Because the investor does not directly own the US-listed shares, this structure can reduce or eliminate US situs estate tax exposure, subject to the specific platform, jurisdiction, and applicable tax rules.<\/p>\n Depending on the structure and underlying investments, potential benefits may include:<\/p>\n This approach is not limited to new investments. In appropriate circumstances, existing offshore portfolios can be restructured into a wrapper, although this should be carefully assessed due to potential capital gains tax and transaction costs.<\/p>\n A well-considered restructure may help:<\/p>\n Over longer investment horizons, these benefits can meaningfully improve the value ultimately received by beneficiaries.<\/p>\n The graph below has been formulated by the Ninety One advisor solutions specialist team \u2013 it illustrates the potential long-term impact of restructuring an existing offshore portfolio into a more tax-efficient structure.<\/p>\n Source (graph and scenario): Marc Lindley, head of advisor solutions and Albert Coetzee, external consultant to Ninety One.<\/p>\n<\/div>\n This type of strategy should be implemented carefully and in the context of a broader financial plan. It is generally advisable to do so with the guidance of a suitably qualified and licensed wealth advisor, together with appropriate tax and fiduciary specialists.<\/p>\n<\/p><\/div>\n\n
\n
Assets held within the wrapper are generally not treated as US-situs assets in the investor\u2019s personal estate, which may mitigate exposure to US estate tax.<\/li>\n
Where roll-up funds are used, tax on growth is typically deferred and applied at a maximum effective rate of 12% under South African tax rules, which may improve long-term outcomes compared to direct offshore investing.<\/li>\n
Investors can nominate beneficiaries directly. While the investment remains part of the investor\u2019s estate for South African estate-duty purposes, the proceeds usually do not pass through the estate administratively, which can assist with liquidity and reduce delays.<\/li>\n
Using a wrapper may help avoid complex and costly probate processes in foreign jurisdictions, such as the United States.<\/li>\n<\/ul>\n\n
![\"\"](\"https:\/\/www.moneyweb.co.za\/wp-content\/uploads\/2026\/01\/Picture-1-1-555x314.png\")
<\/p>\n