By FIDUCIARY & TAX: KEN NEWPORT, FIDUCIARY AND TAX ASSISTANT
May 2013 Newsletter
Ken Newport says, “A well-structured Will can save stress, taxes and confusion.”
When you die, the administration and distribution of your estate is governed by the Administration of Estates Act of 1965. If there is no Will, the Intestate Succession Act applies, and the administration process can be significantly longer and more cumbersome.
Steps in the administration process
Briefly, in the administering process of an estate:
- The estate of the deceased person must be reported to the Master of the High Court within 14 days of the death.
- The Master will issue Letters of Executorship appointing the executor.
- The Executor’s role in the deceased estate, in terms of the deceased’s Will or the Intestate Succession Act, is to:
- collect the deceased’s assets
- settle all liabilities
- pay legacie
- distribute the balance of the estate.
- The Executor will also have to furnish various documents to the Master, and Publish a notice in the Government Gazette and in one or more newspapers in the district in which the deceased was ordinarily resident.
- These notices give all persons with claims against the estate an opportunity to lodge their claims with the Executor.
- After this period the Executor must submit an account of liquidation and distribution to the Master for examination.
- If all is in order, the Master will authorise the Executor to advertise the account to lie for inspection for no less than 21 days.
- Once the period for inspection has passed, the Master will notify the Executor that the account is free from objection.
- The Executor can then pay creditors and distribute the estate.
In the absence of complications and with no foreign assets in the estate, this process should not take more than six months to finalise.
Taxes and death
When a person dies, the Income Tax Act deems the deceased to have disposed of all their assets for an amount equal to the market value of those assets and the deceased estate is deemed to have acquired the assets at the market value. Therefore, Capital Gains Tax will be applicable, with the exception of assets accruing to a surviving spouse, for which roll-over relief is granted. Therefore, in respect of certain assets, double taxation will be levied on death, i.e. Capital Gains Tax and Estate Duty payable on the same assets.
Estate Duty is payable on the dutiable amount of the estate at a flat rate of 20%, which is calculated after deducting the primary abatement of R3.5m and liabilities from the gross value of estate assets at market value at the date of death. Assets that accrue to a surviving spouse will in effect not be subject to Estate Duty or Capital Gains Tax in the estate.
Consult with your Fiduciary Specialist to ensure that your estate is efficiently administrated, that your Will complies with your wishes and that you have made provision for taxes and Executors’ fees.
This article was taken from Mastermind, the official monthly newsletter of Sanlam Private Investments, a division of Sanlam Ltd. May 2013. Visit the SPI Website
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