Planning your estate is not only about the distribution of assets, but also about managing taxes, such as estate tax, which can reduce the inheritance you leave behind. With smart strategies, you can lower this tax burden and ensure that more of your assets are preserved for your loved ones.
What is Estate Tax?
Estate tax, South Africa's inheritance tax, is applied to the value of your estate when you die. This is calculated as:
- 20% on estates up to R30 million
- 25% on any amount above R30 million
This tax is levied on your assets, minus liabilities, which means that, without proper planning, it can significantly affect your legacy.
Ways to reduce estate taxes
Set up Trusts
Trusts help remove assets from your personal estate and therefore reduce the taxable value. Options include:
Living Trust: Assets transferred to this are no longer part of your estate, meaning there is no estate tax on them.
Testamentary Trust: This trust is established after your death and provides control over the distribution of inheritance with certain tax advantages.
Donate Assets
You can donate up to R100,000 annually without donation tax, gradually reducing the size of your estate. Charitable donations are tax-free and can help reduce the value of your estate while supporting important causes.
Since charitable donations are exempt from estate tax, they offer a dual benefit: tax minimization and support of your values.
Life insurance
By structuring life insurance policies so that they belong to a trust or beneficiaries, these payouts remain outside of your estate and are not subject to estate tax. You can also get a policy specifically designed to cover estate taxes, so your family doesn't have to sell assets to pay taxes.
Transfers to a spouse
Assets transferred to a spouse are exempt from estate tax, so it is tax efficient to transfer assets to your spouse during your lifetime or in your will. However, both spouses should have an individual estate plan to avoid high estate taxes later.
Review your estate plan regularly
Life events can affect your tax obligations, so it's essential to regularly review and update your estate plan. This keeps your assets optimally structured and preserves wealth efficiently for your beneficiaries.
Protect your legacy to your family with strategic planning
With strategic estate planning, you can significantly reduce the impact of estate taxes, save your family money and protect your legacy. By working with a professional estate planner, you can develop a personalized plan that aligns with your goals and secures your family's financial future.
Get assurance today from Eksekuteurs vir Boedels en Testamente, your estate specialist, we will be happy to come and see you.
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