Ralph Wichtmann, Managing Director of Sovereign South Africa

For many high net-worth South Africans living and working abroad, the call of home is growing stronger. Whether prompted by family ties, lifestyle choices, or a renewed focus on local business opportunities, the decision to return is often as emotional as it is practical. But, for these high-net-worth individuals (HNWIs), coming back to South Africa carries significant financial consequences, particularly when it comes to the preservation of their offshore wealth.

To start with, South Africa’s residency-based tax regime means that, once you are re-classified as a resident, the South African Revenue Service (SARS) can tax you on your worldwide income and capital gains. Without careful planning, this shift can result in significant erosion of wealth. However, Ralph Wichtmann, Managing Director of Sovereign South Africa, says that there is a tax risk mitigation tool at hand: “Offshore trusts, when set up and administered correctly, can streamline tax efficiencies, and also secure succession and estate planning.”

In fact, when properly structured and funded before residency is re-acquired, trusts are one of the most strategic tools available to high net-worth families. They can create a framework that ensures global assets remain protected and secures wealth across generations.

Wichtmann stresses that offshore trusts must be set up before setting foot back in South Africa. “If you wait until you have already regained tax residency, many of the strategies that shield assets in offshore jurisdictions will no longer be available.”

By establishing and funding an offshore discretionary trust while still non-resident, HNWIs can remove assets from their personal estates. This achieves two critical goals: protecting against South African estate duty, and shielding future capital gains from being taxed locally. Just as important, a trust ensures that wealth is separated from personal ownership, providing protection against creditor claims and simplifying succession planning.

It is important to know that the advantages of a trust only hold if its independence is beyond question. After reacquiring residency, SARS will scrutinise an HNWI’s offshore structures to ensure they are legitimate, compliant, and independently administered: “If a returnee is seen to be exercising control (by serving as a trustee or holding veto powers, for example) SARS can disregard a trust altogether. And, while a trust can shield assets, distributions to beneficiaries who become resident in South Africa may still be taxable locally, underscoring the need for ongoing professional oversight,” says Wichtmann. “South Africa’s exchange control rules have become more flexible in recent years, but compliance remains essential.”

While offshore trusts can hold assets in stable jurisdictions outside the reach of local estate duty, which can be up to 25% of the inheritance, they can also give families tools to formalise their long-term vision and provide a framework for lasting family governance.

By keeping wealth ring-fenced from the risks of individual ownership, offshore trusts allow for continuity, ensuring smoother transfer of assets to the next generation. This is because trusts allow families to design more than just succession. They can set up family councils, philanthropic arms, or investment committees within the trust deed, ensuring that wealth is both preserved and aligned with the family’s values and legacy wishes.

“Too often, wealthy South Africans who have been living in foreign jurisdictions return home before addressing their offshore structures. By then, the most effective opportunities are lost. With the right advice, offshore trusts can protect wealth, streamline succession, and provide the certainty families need to return with confidence – but the key is to start planning early,” ends Wichtmann.