How to make inheritances for overseas heirs simple, fast and tax smart

When a South African resident dies and their children live abroad, the emotional load is heavy. The administration of the deceased estate should not add chaos. It is worth knowing how money gets transferred overseas, what usually slows it down and what you and your heirs can do now to ease the process.

1. How the money is transferred overseas

Most inheritances move overseas through a South African Authorised Dealer (usually a bank) that applies exchange control rules to release funds offshore. The rules sit in the Reserve Bank’s exchange control framework and the Currency and Exchanges Manual used by Authorised Dealers. Knowing these rules can help you avoid the things that get in the way of a transfer.

Typical compliance and status check

Before performing a transfer, the bank wants to see proof of the following:

• Who the beneficiary is;
  
  
• The amount due and where it comes from (estate distribution or policy benefit);
  
  
• The beneficiary’s “exchange control status” (more on that below).

The type of asset that is paying out

• Life policies / living annuities / endowments / certain investment policies can often be paid to a non‑resident beneficiary’s foreign bank account once the exchange control requirements and documents are satisfied.
  
  
• Discretionary investments (like unit trusts) typically fall into the deceased estate and must be administered by the executor, then paid out through the estate process.
  
  
• Retirement fund death benefits are a special case: they are allocated by the fund’s trustees under pension fund rules, not simply “as per the will”. That can change the timing and the paperwork.
  
  

2. What SA residents can do to make it easy

A. Plan for liquidity (this is the real make-or-break)

Even if the estate is solvent on paper, it can be cash‑poor. And cash is what pays the executor’s costs, taxes due, settles the bond settlement, pays the rates and other practical costs of winding up the estate.

Scenario 1: Spouse inherits half, children get the residue

When a spouse inherits half the estate and the children get the residue, it is worth knowing that:

• Amounts left to a surviving spouse can generally be deducted before estate duty is determined, which often reduces tax pressure in the estate of the spouse who dies first.
  
  
• The unused portion of the R3.5 million estate duty abatement can roll over to the surviving spouse, potentially helping the family across both estates.
  
  
• Liquidity risk still exists: if the estate’s cash is tied up in property and investments, the executor may need to sell assets (or delay distributions) to settle costs before the children living overseas are paid anything.

Scenario 2: No spouse, children inherit everything

When the second spouse dies and leaves their estate to children living overseas, you should be aware that:

• There is no deduction for an amount left to a spouse acting as cushion, so the estate may have more immediate tax and cost pressures before the children can be paid.
   
• If the estate has poor liquidity (cash in the estate), the children may wait longer for their inheritance, the estate may be forced to sell assets, or the inheritances may be reduced simply because the estate must first “find cash”.
  
  

Practical move: Build a simple liquidity plan. Consider what could get sold first. What must not be sold? This is often the difference between a smooth transfer and a drawn-out family fight.

B. Use the 2026 Budget changes to reduce friction where you can

The latest Budget left the capital gains tax (CGT) inclusion rates (the percentage of the taxable gain that is added to taxable income) the same, but key exclusions were increased:

• The annual CGT exclusion is now R50 000, and
  
  
• The year‑of‑death exclusion is now R440 000, and
  
  
• The primary residence exclusion now R3 000 000.

Why this matters: Death triggers a CGT event, and these exclusions can reduce the tax drag that otherwise eats liquidity.

C. Align assets to outcomes (make “easy assets” do the heavy lifting)

If you know heirs are overseas, consider structuring your estate so that at least some value pays out cleanly:

• Up‑to‑date beneficiary nominations on qualifying policies/investments (where appropriate) can speed up an offshore payout because it does not rely entirely on selling estate assets first.
   
• Keep a clear record of contracts, policy schedules and provider contact details. Missing paperwork is a silent delay multiplier.

3. What heirs need to know 

In order to make inheriting easy, heirs need to know that their tax residency status recorded with the South African Revenue Service (SARS) affects everything.

South Africa taxes residents on worldwide income, and non‑residents on South African‑sourced income.

If the child has truly moved and settled abroad, it is often worth ensuring their status is properly reflected and their SARS affairs are compliant, because exchange control processes commonly rely on clean, provable status.

Rent is a cross-border tax issue

If the heirs retain property in South Africa and rent it out, South Africa will generally treat the rent as South African‑sourced income, so it sits on SARS’s radar even if the heirs are non‑resident. The rent becomes a cross-border tax issue.

Then the heir’s new country may also tax them on that rental income (often with foreign tax credits).

Action plan (practical next step)

If your children live abroad, do not wait for a family death to discover the bottlenecks. Ask your fiduciary/tax team for planning that includes:

A liquidity map (what assets will pay the costs, what gets sold, what must be kept).

A list of which assets can pay directly to beneficiaries and which must flow through the estate.

A simple status checklist for each child: their country of residence, their SARS residency position and what documents the bank will need to make the offshore payment.