With the 1998 budget less than two months away, the rumour mills have already started up again, and one of the issues anticipated is a further relaxation of foreign exchange controls.
There is even talk about scrapping of controls altogether, considering the sound state of the foreign exchange reserves and the stability of the rand.
I don't think this will happen as the issue of exchange controls cannot be confronted before the revamped tax system is up and running.
Once exchange controls have been phased out, however, as an investor, you will be able to seek the best possible vehicle to house your investments. A popular choice is a trust, but many people do not fully understand the workings and ramifications of such an entity.
A trust is merely a vehicle by which legal ownership of assets can be transferred from one person to another, for the benefit of third parties or beneficiaries. Therefore, ownership of the assets no longer rests with the individual.
In addition to anonymity of ownership, holding assets in a trust can ensure swift distribution of assets after death in accordance with your wishes.
Usually when you die your assets are frozen until the Grant of Letters of Executorship have been obtained in each country where your assets are held. The assets would then be handed over to the Executor in your country of residence, to be administered in accordance with the terms of your will.
Problems that arise at this stage include:
* Time delays it can take months to finalise the estate.
* High costs the charges can amount to as much as 10 percent of the value of the estate. As the will is a public document, full details of your estate will be available to authorities in your country of residence and your estate could become liable for estate duty, and under exchange controls it could be forced to repatriate the funds.
* Location of assets often only one member of the family knows where the offshore assets are, and if this person dies remaining family members may not even be aware of the investments. Holding assets in a trust can overcome this problem and ensures that your assets are distributed swiftly in accordance with your wishes, without disclosure to a third party such as the authorities. There would also be no estate duty or repatriation of funds.
Remember assets that are located all over the world can be consolidated into a single trust. The trust could then be registered in any one of the current tax havens.
This is a just a brief outline of the workings of international trusts. Anyone considering setting up a trust should consult an expert.