As unbelievable as it may seem, the summer holidays are barely a few weeks away! As we see the beautiful awakening in nature all around us, it sparks a renewed energy within, knowing that a time to relax is in the not-too-distant future. Let us thus press on to achieve as much as we can in the remaining stretch of this year. Time has a way of moving quickly, so endure, persist, and strive to accomplish those goals that you have yet to achieve for 2023!
 
ONLINE WILLS DRAFTING SERVICE
Legatus Trust is pleased to announce that an online Wills drafting service is now available for the drafting of standard Wills, should you wish to make use of this service to draft a simple Will yourself. The process for the drafting of more complicated or complex Wills has not changed and must be submitted to your Wills drafter as usual. Should you prefer that your Wills drafter continue to draft all your Wills, that option remains available to you.
The online Wills drafting service can be accessed via our website, www.legatus.co.za. Please contact your consultant, should you need any additional information regarding this service.
 
LEGTUS TRUST CARES
The Legatus Trust Team proudly supported the effort to raise awareness about breast cancer in October. We stand together again in November to raise awareness about men’s health issues through “Movember”.
 

“Movember” is an annual event where men grow their moustaches during the entire month to raise awareness about men’s health issues, such as prostate and testicular cancer, mental health, and suicide prevention.
 
Thank you joining us in supporting these initiatives. Together we can make a difference!

CELEBRATING THE FESTIVE SEASON
In the next edition

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ESTATE DUTY

Many people find it difficult to navigate the complexities of estate obligation legislation. With the recent announcement of revisions to the estate duty legislation in South Africa, it is more critical than ever to understand the consequences of these changes and how they may affect estate planning.

 
What is estate duty?
Estate duty is the duty levied on the dutiable amount of an estate of a deceased person under the Estate Duty Act 45 of 1955. In Newsletter 65 of August 2022, we explained what the dutiable part of an estate is but will include a practical example in this article again.
 
Estate duty is taxation imposed on the assets and property of a deceased person upon their passing. It is levied on worldwide property and deemed property of the deceased who was a South African resident at the time of their passing. If the deceased was a non-South African resident, estate duty will be levied on their South African property only.
 
How is estate duty calculated?
The calculation of estate duty begins with determining the gross value of the estate. This is done by identifying what the estate property (assets) and deemed property are. Deemed property is any benefit received because of the death of a deceased. An example is the proceeds of a life policy, which would then form part of the estate. Many executors find it difficult to determine whether property that the deceased owned fits the Act's definition of property. Thus, the definition of property should be carefully considered. Property, as defined in the Estate Duty Act, includes any right in or to movable or immovable property, both corporeal and incorporeal.
 
To determine the net value of an estate, various deductions are allowed under Section 4 of the Estate Duty Act. A significant deduction is the exemption threshold, which determines the value of an estate below which no tax is levied. Estates falling below this threshold, typically, do not incur any estate duty liability, whereas those exceeding it may be subject to taxation on the portion that exceeds the threshold. The current value of the Section 4A abatement is R3.5 million. It should be noted that there are no exemptions from estate duty, just exclusions of specific property (assets) from an estate.
 
Some other deductions allowed to reduce the gross value of an estate include funeral expenses, debts owed in South Africa, administration and liquidation charges, and bequests to certain organisations.
 
Another significant consideration that affects the calculation of estate duty is the matrimonial property regime of the deceased. In terms of Section 4A of the Estate Duty Act, the first spouse to pass away can leave assets to any other person up to the value of R3.5 million without incurring estate duty. Upon the death of the second spouse, they can make use of any unused portion of the estate duty exemption to offset any estate duty that their estate may attract. This abatement can thus add up to a total of R7 million (if the second spouse who passed away was the only beneficiary in the estate of the first spouse who passed away). Alternatively, they can make use of any unused portion of the estate duty exemption to offset estate duty that their estate may attract. 
 
Section 4(q) of the Estate Duty Act stipulates that the value of all property bequeathed to the surviving spouse, either in respect of a Will or by intestate succession, is deductible from the gross estate of the deceased.
 
If partners are not married, they may not fall within the definition of ‘spouse’ and this could impact the intended inheritance. The term ‘spouse’, however, came under scrutiny and testate law would probably be expanded to include life partners in a relationship intended to be permanent (based on the court case of Bwanya v. Master of the High Court in 2020).
 
Failure to understand the impact of the marital property regime on a person’s estate can result in financial problems, such as the forced sale of assets, and the inability to pay taxes and debts. This could render the estate unable to provide sufficiently for the surviving spouse.
 
Estate duty is charged at a rate of 20% on the dutiable amount of an estate which is less than R30 million, and a rate of 25% on the dutiable amount of an estate which exceeds R30 million. Estate duty is calculated by determining the gross value of an estate, then subtracting allowable deductions and expenses, and then applying the appropriate rate of duty (20% or 25%) depending on the dutiable amount of the estate.
 

Who is responsible for paying the estate duty?

The executor of the deceased’s estate is responsible for paying the estate duty. The executor must pay the estate duty within one year of the date of death or within a further extended period as approved by the Commissioner of the South African Revenue Service (SARS).
 
Estate duty is one of the reasons why proper estate planning is imperative and your advice as a financial advisor to your clients in their unique circumstances is invaluable.
 
By carefully structuring finances and assets, estate taxes can be minimised. Provision can be made so that there is enough cash on hand to pay the estate's debts, and, ultimately, ensure that inheritances are distributed according to the testator’s wishes or preserved for vulnerable and/or minor beneficiaries.
 
Source: Based on an article by Johann van Vuuren, Legatus Trust Estate Manager (as amended)

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ADMINISTRATION PROCESS CHALLEGES
 
To fully understand the unmanageable aspects of the administration of deceased estates, Legatus Trust would like to point out the most common challenges that we face:
 

The above represents, in a nutshell, the most common challenges that we face and which you should take note of as any of the above will affect the usual process of estate administration.
 
You deserve efficient service and, despite all of the challenges that we must deal with, we always endeavour to provide you with the best possible service.