Estate planning is more than just writing a will
Procrastination is the biggest enemy of estate planning. While nobody likes thinking about dying, if you don’t plan for it you may leave family feuding, assets going to the wrong people, drawn-out litigation, and more money paid in estate taxes than what’s necessary.
Your estate planning goes beyond just writing a will or opening a trust. It’s about accounting for all your assets and wishes so that when you die, your assets transfer smoothly to your heirs.
What is estate planning?
Estate planning is the process of deciding what happens to your money, belongings, property and other assets after you die. It also includes who will make critical health care and financial decisions on your behalf if you’re incapacitated.
While creating a will is the most important part of estate planning, other things also need to be considered. These include:
- Working with an accountant and/or financial planner to limit your estate taxes.
- Naming your beneficiaries (who will inherit your assets).
- Assigning guardians for minor children.
- Naming your executor to oversee the terms of your will and guide it through probate.
- Naming or updating your beneficiaries on your life insurance and retirement policies.
- Setting up your funeral arrangements.
- Appointing someone as your power of attorney to manage your affairs if you become incapacitated.
- Detailing your end-of-life health care wishes (living will).
What is estate duty?
Estate duty is the tax that is due on the assets of a deceased’s estate to the estate’s beneficiaries or heirs.
With effect from March 1, 2018, this duty is levied at 20% on an estate that doesn’t exceed R30 million, and at 25% on estates exceeding this value.
To work this out, the deceased estate is calculated by adding the value of the deceased’s property, deducting allowable expenses, and then deducting the Section 4A rebate. This applies to everyone who’s ordinarily a South African resident and includes assets situated both in and outside of South Africa. Where the deceased is not a resident for South African tax purposes, foreign assets are excluded from the dutiable estate.
An executor is responsible for paying the estate duty from the estate. Once they determine the estate duty payable, they are required to submit an estate duty return and the Liquidation and Distribution account to both SARS and the Master. However, if the deceased’s policy accrues directly to a
beneficiary, then that person becomes responsible for paying over any applicable proportional share of the estate duty to SARS.
An executor needs to be tenacious, business-minded and able to focus on taking the steps necessary to get the job done. The person you choose will be in charge of making sure everything the decedent owned ends up where it’s supposed to be, and that taxes are correctly filed and debts are paid.