Nobody wants to think about death, but the sad truth is that you have to make provisions for it.
There are a number of things you need to think of when doing your Estate Planning, but today I would like to highlight the importance of having enough cash in your estate to cover liabilities and any other costs associated with winding up your estate.
Should there be a shortfall in your estate to cover costs at your death, the beneficiaries of your Last Will and Testament will potentially be asked to pay in an amount to cover the shortfall. If they cannot pay the shortfall, the Master of the high court will force your Executor to sell assets to cover the shortfall.
Let’s look at some of those costs:
1. Master’s Fee
These fees are on a sliding scale with a maximum fee set at R 600
2. Executor’s Fee
The maximum legislated fee is 3.5% plus VAT of the value of your assets. However, many banks and companies do add other costs and specify in your Will that they will do so. Check the details
3. Income Tax
An annual tax return up to the date of your death will need to be submitted. Should there be outstanding tax, a deduction will be made from your estate to pay the tax.
4. Capital Gains Tax
At death, you are deemed to have disposed your assets at market value. Your Estate could be liable for Capital Gains Tax on the assets, unless you bequeath the assets to your spouse. There is no Capital Gains Tax payable on the assets bequeathed to a spouse as it “rolls-over”.
5. Estate Duty
Currently, if your Estate is above R 3, 500, 000, your estate will be liable to pay estate duty at 20% of the amount in excess of R 3, 500, 000. However, if your spouse inherits your entire estate, Section 4 (q) of the Estate Duty Act will apply which states that any bequests to a spouse will be deductible for Estate Duty purposes. Therefore your spouse will be liable for the estate duty on the amount above R 7, 000, 000 when she/he dies.
6. Advertising costs
The Administration of Estates Act 66 states that once the Letter of Executorship is received, the Executor must advertise the estate in the Gazette and a local newspaper in order for your creditors to lodge a claim.
7. Debts
At your death all debts must be settled. Creditors are given 30 days from when the estate is advertised to submit claims.
Do you need assistance with establishing whether there will be enough cash in your estate at your death? Do you need assistance on how to reduce liquidity shortfall?
