When planning your estate it is important to know the ramifications of any bequests one may make. Below we table issues relating to fixed property
- If the testator bequeathed their immovable property to their surviving spouse (either by way of Last Will and Testament or by intestate succession), the following taxation consequences are applicable:
- Estate duty – There is no estate duty payable on all property accruing to a surviving spouse [Section 4q of the Estate Duty Act (no. 45 of 1955)].
- Transfer duty: There is no transfer duty payable.
- Capital Gains Tax (CGT) consequences: fixed property bequeathed to a surviving spouse do not incur capital gains tax, as this will be subject to roll-over relief.
- If an estate planner bequeaths fixed property to an heir or legatee in his Will, no transfer duty will be payable. In fact, any immovable property left to an heir or beneficiary is exempt from transfer duty as per Section 9(1)(e)(i) of the Transfer Duty Act (no. 40 of 1949). This exemption extends to any heir or beneficiary regardless of their relationship to the deceased testator.
- If the value of his estate is more than R3,5 million, estate duty will become payable on the balance in excess of R3,5 million. Sufficient cash should be made available to pay this duty in order to avoid selling any fixed property.
- If the property is subject to a mortgage bond, and the property is left as a specific bequest, the estate planner may wish to secure the bond by life insurance, the proceeds of which would clear the debt on his death, or could make the bequest subject to a carefully worded bequest price.
- A fixed property bequeathed to a number of heirs in equal shares, may give rise to impracticalities due to the indivisibility of the bequest. This may result in a redistribution agreement being drawn up between the heirs.
- There may be specific provisions in an estate planner’s antenuptial contract in regard to fixed property, which may override the estate planner’s wishes in terms of the Will.
- here is a portable R3.5 million estate duty deduction between spouses.
- Where agricultural property is bequeathed, the testator needs to be aware of Section 3 of the Subdivision of Agricultural Land Act (no.70 of 1970), which prevents the subdivision of agricultural land, and such land being registered in undivided shares in more than one person’s name. This is especially relevant when the testator is considering bequeathing agricultural land to more than one beneficiary.
Should you wish to discuss issue raised please do not hesitate to contact us for professional assistance in this regard.