Estate planning after this year's Budget
2011-06-15
Planning an estate can never be done in isolation, since a number of variables have to be taken into account properly, says Berrie Botha, chief executive of Sanlam Trust. “First of all, one has to use a competent planner who is familiar with the latest applicable amendments of statutes, court rulings and the latest Budget, among other things. In addition, the planner must have all relevant and important documents and information. Only then one’s estate planning can proceed.” The calculations to be made include the value of all assets, including those of a joint estate, assets payable directly to beneficiaries outside the estate, and liabilities, including administration expenses, maintenance, accrual claims and estate and other duties. It is also important to determine whether sufficient cash will be available, and if not, how this problem can be overcome. One therefore has to have one’s estate administered as if one is about to die today, without speculating about what may happen in the future. Tax calculations are an important part of the calculations and include estate duty and capital gains tax calculations, and VAT should also be calculated, if applicable. Income tax has to be paid up to the date of death. Bequests to surviving spouses are exempt from CGT, but in other cases it could play a bigger role than income tax if proper planning is not done and a correct will is not drawn up. Special attention should also be paid to CGT in testamentary and inter vivos (family) trusts. However, it is individuals such as business owners, farmers and individuals owning more than one property that are registered in their own names, as well as share trusts/unit trusts, that have to provide for CGT. It is recommended that an agreement on discount on executor’s compensation should be reached, in writing, and stipulated in the will during the lifetime of the testator. Unfortunately, people do not spend enough time on caclulating whether adequate money and other assets will be available to look after their dependants, and if not, to make thte necessary provision. The latest Budget did not contain many concessions concerning estate planning. As far as CGT is concerned, the annual rebate for individuals and special trusts was increased from R17 500 to R20 000, and the one-off additional deduction on death was increased from R120 000 to R200 000. For individuals 55 years and older disposing of their small one-man business the deduction was increased from R750 000 to R900 000. As he had done during the previous annual Budget, the Minister mentioned that estate duty was receiving attention. However, it would be reckless to speculate whether this duty is going to be lowered or abolished. Should you have any enquiries, contact Berrie Botha on 021 947 4824 or 082 440 2763 or berrie.botha@sanlam.co.za
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