When should South Africans consider moving their wealth offshore?

UNDERSTANDING “offshore” starts with one simple certainty: nothing in the South African Income Tax or Reserve Bank regulations prohibits South Africans from opening a bank or investment account, or setting up an offshore trust.

- COREEN VAN DER MERWE

Placing money offshore is often a prudent financial strategy. Exposure to international assets offers three vital benefits. It hedges against rand depreciation, enables portfolio diversification, and opens up access to a broader range of investment opportunities.

In most cases, opening an offshore bank account is advisable early on, especially for individuals who earn income abroad or operate a business with international exposure. Banking offshore is a relatively straightforward way to begin building financial resilience and global diversification.

Setting up an offshore trust, on the other hand, is typically a more advanced step. It becomes appropriate when your wealth reaches a certain scale, or when estate planning, intergenerational wealth transfer, or asset protection become key priorities.

Key considerations

Wealth accumulation: Opening an offshore bank account can, and often should, happen early in your wealth journey. However, the establishment of an offshore trust is typically reserved for those with substantial assets. The benefits of asset protection, estate planning, and structured wealth transition can justify the setup costs of trusts.

Circumstances: Having a high tax burden, exposure to litigation risk, or the need to ensure generational wealth may prompt earlier trust structuring. In these cases, an offshore trust offers preemptive protection of assets.