Have you considered the cost of estate duty?

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Estate Duty is a tax which is levied on deceased estates with a net estate value in excess of R3.5 million. The current prescribed rate is 20% and it must be paid within one year of the date of your death. The tax is payable to SARS and it is the responsibility of your executor to ensure that it is paid.

If you are married and your spouse inherits your assets, then there is no estate dutiable payable on your death. On your surviving spouse’s death, an estate duty free limit of R7 million will apply. Any amount over and above this will attract estate duty at 20%. In the event of death where no spouse inherits, then full estate duty will be payable.

These scenarios highlight the importance of estate planning to ensure that you make adequate provision by means of an estate plan.

An estate plan should ensure that there is sufficient liquidity available to cater for estate duty. If there is no liquidity available, then your executor may be forced to sell assets or your heirs’ inheritance may be compromised in order to cover the cost.

An interesting fact is that estate duty or inheritance tax is not unique to South Africa. It is applicable at varying rates in France, Belgium, Germany, Ireland, USA, Italy and most other counties.

We would recommend an analysis of your estate to determine if you have made provision for estate duty. After an analysis has been carried out, we could offer various solutions to ensure your executor won’t be faced with liquidity problems when administering your estate.

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted. (E&OE)

Gemma De Luca
FPM Risk and Wealth Management
011 778 9300