Rory McFarlane, of Durban attorneys Shepstone and Wylie, looks at what is deemed to be part of your estate for the purposes of duties, in this the sixth part of his series on Estate Planning.
Do not think that estate duty only applies to the wealthy with assets of more than R1 million. Many people are unaware that the value of their estate for estate duty purposes may be far more than the value they might usually associate with their assets.
The Estate Duty Act No 45 of 1955 regulates what property is to be taken into account when determining a person's estate. The Act states that a person's estate consists of all property at the date of death and of all property which is deemed to be that person's property at that date.
The first component of "property" involves that with which the executor deals as estate assets and which is sometimes referred to as the deceased's "personal estate'. For example, your house, motor car and the proceeds of your bank accounts are included here.
It also includes any limited interests in property which you enjoy immediately before your death. If you enjoyed the usufruct over a property during your lifetime, that right of enjoyment will be given a value. Certain annuity payments which you were receiving immediately before you died will also be valued.
The second component of "property" is "deemed property". Property which you may never have considered to be part of your assets but which the Act regards as yours for estate duty purposes includes:
* Life assurance policies: The general rule is that the proceeds of life policies form part of the policyholder's dutiable estate, irrespective of whether the proceeds are paid into his estate, to a beneficiary or a person who is entitled to the proceeds of the policy;
* Lump sum payments from a fund: Any lump sum payments made to your dependants by a fund (including a pension fund or retirement annuity).
Usually your pension or RA fund will pay out a lump sum, which may not exceed one-third of the value of the fund, and the balance will be regularly paid in the form of an annuity. Provided the annuity portion, or part of it, is not commuted to a lump sum, it will be exempt from estate duty under current legislation; and
* Claims for accrual under the Matrimonial Property Act 88 of 1984: If you are married out of community of property under antenuptial contract, incorporating the accrual system, then when you die your estate might have a claim against your spouse's estate for accrual.
Although various rebates and deductions are applied to achieve a net dutiable estate, it is worth considering the methods available to reduce the value of the "property" and "deemed property" which might be in your name when you die.