Estate Duty is levied in terms of the Estate Duty Act 45 of 1955 (the Act) and constitutes a tax which is levied at a rate of 20% on deceased estates. Under current legislation it is levied on the “dutiable amount of the estate” exceeding R3 500 000. Estate duty is levied on property of residents and South African property of non-residents less allowable deductions. An estate for the purposes of the Estate Duty Act, consists of “property” and property “deemed” to be property.
Property is comprehensively defined and includes:
- All assets of the deceased whether movable, immovable, corporeal and incorporeal;
- All rights or interests in properties;
- Lump sum payments paid by pension/provident/retirement funds which are due and payable as a result of the death of the deceased;
- As well as any property that the deceased was competent to dispose of for his own benefit or for the estate’s benefit, immediately before his death.
But what then is “deemed property”? Deemed property refers to certain property items that did not exist at the date of death, however they are included in the dutiable estate of the deceased. “Deemed property” is any benefit received because of the death of the deceased. This includes:
- The amount due and recoverable under a policy of life insurance on the life of the deceased, irrespective of whether such proceeds are paid out to the estate or to a beneficiary;
o A policy on the life of a deceased person is not deemed property where:
- The policy proceeds are recoverable by die deceased’s surviving spouse (in terms of an antenuptial contract) or a child;
- The policy was owned by the deceased’s partner or co-shareholder with the purpose of buying the deceased’s partnership interest or shareholding where no premiums have been paid by the deceased;
- The policy was not effected at the instance of the deceased, no premiums was paid by the deceased and the proceeds will not be paid into the deceased’s estate, for the benefit of the deceased’s relatives or dependants or to a family company in relation to the deceased.
o If the deceased was the owner of the policy but not the life assured, the cash value of the policy at the date of death is included as property in his or her estate.
- Property that is donated in terms of a donation, where no benefit is passed until the death of the deceased;
- The right of the surviving spouse to claim under the accrual system in terms of the Matrimonial Property Act, 1984;
- Any property which the deceased was competent to dispose of immediately prior to his death.
Some of the above mentioned property may still be subject to an allowable deduction.
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