TRICKS & TRAPS - ESTATE DUTY

This is a tax on capital which is payable on the net value [gross assets less total liabilities] of a person's deceased estate. Under current legislation, if the net value of your estate is likely to exceed R3,5 million [don't forget to include your life policies] you should seek specialist advice. Through proper planning you will be able to minimise the impact of estate duty on your heirs. Solutions include the proper drafting of your will, the use of trusts and/or the application of specially designed life assurance products.

Before you seek advice, compile an accurate schedule of your assets and your liabilities. If you are married in community of property [i.e. you do not have an ante nuptial contract] you will need to include both your and your spouse's details to assess the net value of your joint estate. The net value of your joint estate must exceed R7 million before any estate duty will be payable [because only the deceased's half attracts estate duty - not the surviving spouse's share].

Estate duty, where an estate is dutiable, is calculated at a flat rate of 20% on the capital value that exceeds allowable deductions and rebates. Any amount left by one spouse to another will be free of estate duty when the first spouse dies - but may be more heavily taxed on the death of the second dying … unless you plan properly.

Exemptions are also provided for bequests to certain qualifying charities, educational and religious institutions.