Newsletter 28 (Oct 2018)
Competition announcement for 2018/2019!
EFBOE, as a member of the Efficient family, would like to show our appreciation to the most loyal and devoted advisor who supports EFBOE and continuously makes use of our services. A cash prize is up for grabs - you have the next 12 months to strive to be the best performer. The EFBOE competition kicks off on 1 November 2018 and will end on 31 October 2019. The prize money of R10,000 will be awarded at the Efficient Wealth Gala Event in November 2019.
The criteria and weightings for this competition are as follows:
Number of existing clients with EFBOE Wills in safe custody on 31/10/2018 – 20%
Number of new signed EFBOE Wills in safe custody in the current competition period – 60%
Number of “buite boedels” referred to and administered by EFBOE in the current competition period – 20%
Points for “buite boedels” based on one base point for each R10,000 of executor fees earned during competition period.
From time to time, the front-runners will be announced in the “Let’s Talk EFBOE”-newsletter, which will be the only source of information on the competition. EFBOE appreciates your business and continued support.
IMPLICATIONS OF ESTATE DUTY, Part 2 – Deductions
IMPLICATIONS OF ESTATE DUTY: Part 1 - Property
Read more in the upcoming edition
In terms of the Estate Duty Act 45 of 1955, taxes are charged on the taxable value of an estate. If a tax payer resides in South Africa when he/she dies, the norm is that all assets (including property deemed to be property), wherever it is situated, could be included in the gross value of the estate for the calculation of the estate duty payable.
Currently it is 20% of the taxable value of estates up to R30 million and 25% of the taxable value of estates above R30 million. Foreigners/non-residents also pay estate tax on their property in South Africa.
To minimise the consequences of estate duty, an understanding of the calculation thereof is required. The following is applicable in determining liability:
Which property must be included.
Which property is deemed to be property.
Allowable deductions: possible deductions allowed in the administration of an estate.
In this edition we will discuss the definition of property and cover the first two points. In the next edition we will discuss the tax deductions allowed in an estate.
Property includes all property or rights on property, including moveable, immovable, corporeal or incorporeal property registered in the name of the deceased at the time of his/her death. It also includes types of annuities, options to buy land or shares, goodwill or intellectual property.
It also includes an accrual claim under the Law on Matrimonial Property that the estate of the deceased has against the estate of the surviving spouse.
It includes yields from foreign insurance policies on the life of the deceased (payable in South Africa in ZAR), irrespective of who the owner (beneficiary) is.
The yield of such a policy is subject to estate duty. It can be reduced with the total of the premiums, plus 6% p.a., to the extent that it was paid by a third party (the beneficiary) that is entitled to the yield of the policy. Premiums paid by the deceased are not deductible.
If the yield on the policy is payable to the surviving spouse or to a descendant of the deceased in terms of a properly registered prenuptial agreement (i.e. registered at the Deeds Office), it will be entirely exempt from estate duty.
If business partners took out a policy on each other’s lives with adherence to certain criteria, the yield will be exempt from estate duty.
Benefits payable by pension- and other funds by or because of the death of the deceased
Payments by these entities (pension-, retirement annuity-, provident funds) normally consists of two components – a lump sum at time of death and an annuity thereafter. The lump sum component was previously subject to estate tax, but since 1 January 2009, any lump sum payments received from such a fund, is excluded for estate duty purposes, with certain exceptions.
Donations at the time of death
Donations where the beneficiary will not benefit up to and including the death of the donor and where the donation only realises when the donor dies, is not subject to donations tax. It must be included as an asset in the estate and is subject to estate duty.
Property which the deceased was able to alienate immediately before death (Article 3(3)(d) of the Law on Estate Taxes), for example to donate an asset to a trust, can be considered as deemed property.
In the next edition read about the allowable deductions in an estate.
This is a general information article and not legal or professional advice. Always consult a qualified financial advisor for specific and relevant advice.
Source: Moore Stephens “Estate Planning Guide”.
MILLIONAIRE LEAVES LEGACY TO CHAUFFEUR AND DOORMAN
Alan Meltzer died on 31 October 2011 at the age of 67, a year after he had divorced his wife, Diana, whom he had been with for 13 years.
He was the founder and former owner of Wind-Up Records and built it up into an indie-label powerhouse. In his recent years, he became a celebrity high stakes poker player. He lived in a luxury apartment building on New York’s exclusive Park Avenue.
The contents of his Will have since been disclosed and it became public knowledge that he left $1 million to his chauffeur, Jean Laborde, a father of five, and $500,000 to his doorman, Chamil Demiraj. Apparently, both of his former employees supported him through his messy divorce from Diana. The former Mrs Meltzer had no ill feelings about his beneficiaries, even though she would have inherited a third of the estate of about $8 million had they not divorced. On the contrary, she said it was no business of hers if her ex left his fortune to “bums”.
His benefactors described him as a very nice man. Mr Laborde said: "I don't know what to do exactly with the money, but one thing I know for sure – each year I'm going to bring the guy some flowers for his grave.”
Until next time!
The “Let’s Talk EFBOE” Team