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Estate Duty Tax

While saving Estate Duty Tax is important, do not make the mistake of making your will too complex so as to avoid estate duties and as a result there is confusion over what you intended. This will only result in expensive lawyer’s fees, probably higher than what you would have paid in estate duties. Here are some ideas to save Estate Duty Tax. It is a complicated area, which is why you should really Contact Us to ensure that your estate duty planning is done properly as part of your broader financial plan.


  1. Donate It
    You can give away up to R150 000 a year without any donations tax (R300 000 for married couples). The lucky recipients could be family members, charities or whoever you wish. A rich grandparent can take out an education policy on the life of a grandchild and cede the policy to that grandchild. The grandparent, (the premium payer) can pay up to R150 000 a year under the policy – reducing his eventual liability. Donations and bequests in your will to certain charitable, educational and religious institutions are also exempt from donations tax and estate duty.
  2. Make the most of your marriage!
    All assets that you leave to your spouse (including insurance proceeds) are free of estate duty. However, when your spouse dies, estate duty must then be paid on both her estate as well as the estate she inherited from you:
    1. Before you get married, cede a life policy to your spouse in a registered ante-nuptial contract.
    2.  Each married partner can leave the first million rand of their respective estates to beneficiaries other than the spouse, such as your children. That way, both parents will get an exemption of R6 million on the combined assets.
    3. You can leave your estate to your children subject to a usufruct for your surviving spouse. In other words, she enjoys the use of the income generated by assets in your estate.
  3. Contribute a Lump Sum to a Retirement Annuity
    The annuity portion of a Retirement Annuity is free of estate duty. Therefore, if you buy a single premium retirement annuity and then die, the income generated will be estate duty free for your dependants.
  4. Have A Third Party Pay The Premiums On Your Life Policy
    If a third party (such as a child or spouse) takes out a policy on your life and pays the premiums, your estate will be able to deduct all the premiums paid plus 6% compound interest from the life policy proceeds.
  5. Peg Your Estate
    These plans involve transferring your growth assets to a third party, most commonly an inter vivos trust. This is done by way of donation or more often by sale against a loan account. By setting up a trust, you can divest yourself of ownership of your assets while still retaining some decision making control during your lifetime. The trust can be structured to ensure that your beneficiaries have no vested rights to the trust assets. This means that when you die, there is a very effective tax shelter in place for future generations. You are not simply transferring your estate duty problem to somebody else. What’s more, by selling growth assets to the trust in return for an interest-free loan (repayable on demand), you can avoid the donations tax that you would have had to pay had you donated the assets to the trust.


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