ESTATE PLANNING: DEATH & TAXES

It is by no means an easy subject talking about and planning for death, it can be very intimidating and unsettling. But it is something you should prioritise for you and your loved one’s sake. Death is inevitable and its consequences do not just affect you, so it is best to plan for those around you. After all you want to be in control of who benefits from your life’s work.

Estate planning or rather deceased estate planning is one of the most neglected types of events. Should you die without a last will and testament, your estate will be distributed in terms of the law of intestate succession. This means that beneficiaries you may never have wished to inherit might benefit, while those that you genuinely care for and would want to benefit might be left with no legal entitlement to your estate or assets.

The word estate means all the money or property owned by a particular person hence we all have estates. A deceased estate comes into existence when a person dies and all its assets and liabilities form part of such estate. The deceased estate comes to an end when all assets are distributed, and liabilities paid.

From a tax perspective a South African tax resident is seen as one taxpayer and that taxpayer terminates upon his/her death and a new taxpayer with a different tax number comes into existence namely the deceased estate.

The next step in deceased estate administration requires a distribution to be made between the legal aspect and tax aspect. These two steps are governed by two pieces of legislation.

The legal aspect requires:

  1. reporting of death to the master of the high court
  2. appointment of executor

Inventory of assets

  1. liquidation and distribution account
  2. payment of creditors and distribution or sale of assets

The tax aspect requires:

  1. reporting of tax aspect to south African revenue services
  2. preparation and submission of final tax return of taxpayer

Preparation and submission of tax return for the deceased estate

  1. preparation and submission of estate duty return
  2. payment of all taxes

The process of finalising estates may take quite some time if the deceased died without a will. The master may appointment an interim curator who will have limit authority to collect debt, sell movable property, carry on business or undertaking of the deceased or release money out of the estate for the sole subsistence of deceased family or household.

Do I need a will if I am single? – one of the biggest misconceptions amongst singles is that it is not worth having a will unless they get married and own property worth millions. The truth is, if you earn a salary, have savings in the bank, own a few personal belongings, furniture, possibly a car, you should consider having a will drawn up, whether the total value of your property is R10,000 or R100,000. More and more people are involved in serious relationships and live with their partners without getting married for some time, or at all. After years of planning for the future and making financial decisions together, these couples often realise the importance of a will when it is too late. With no will, one often sees the surviving partner left in a disadvantage position.

Estate planning is important to ensure that the financial legacy is bestowed upon your loved ones and preserved as far as possible through careful consideration of all tax aspects, succession planning and preparation of wills.

As the saying goes “where there is a Will, there is a way forward”. The importance of an updated, expertly drafted Will cannot be stressed enough. Contact us at info@capitalwealthcounsel.co.za and let us help you protect your loved one’s legacy and help them move on a little more easily in the event of your untimely death.

 

Article prepared by

Edward Banda, Certified Financial Planner at Capital Wealth Counsel