Estate Duty

Duty payable on a deceased estate

Estate Duty

Duty payable on a deceased estate

Source: Reader’s Digest’s You and Your Rights

Estate duty is an amount payable to the state if the net value of a deceased estate exceeds R3.5-million.

The burden of winding up an estate lies with the executor, who is entitled in certain circumstances to recover duty from the beneficiaries of the estate provided that provision is made for this when the liquidation account is lodged with the Master of the Supreme Court.

In terms of amendments to the Estate Duty Act, 1955, a surviving spouse need no longer pay estate duty on any bequests or amounts inherited from the first-dying spouse. On the other hand, the Act permits a reduction of duty, on a sliding scale, on inherited property where successive deaths occur over a 10-year period.

When a person dies, the proceeds of a life assurance policy are generally subject to estate duty. If a beneficiary paid any of the premiums, these can be deducted, plus the interest compounded from payment to the date of death.

In exceptional circumstances the proceeds of a life-assurance policy do not fall into the deceased estate. The main instances are:

  • A policy ceded to a spouse or child in terms of an antenuptial contract;
  • A policy covering the purchase and sale of a business interest under closely defined conditions and, in certain circumstances, a policy taken out by a company on the life of a director or an employee;
  • A policy not taken out by or at the request or suggestion of the deceased, on which the deceased paid no premium, and none of the proceeds of which are payable to the deceased’s estate, relative, anyone dependent on the deceased for maintenance, or a family company.

A relative is defined as a spouse, an ascendant up to great-grandparents, a descendant down to a great-grandchild, and a collateral to the third degree, such as a nephew of the deceased or his or her spouse (and any spouse of such a relative).

A family company is one controlled by the deceased or the deceased and a relative or relatives. An example would be a policy taken out by a company on the life of one of its executives.

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