Estate Duty

Question 1

What is Estate duty?

Answer 1

Tax payable on net asset value of taxpayer’s estate at the time of his/her death.

Question 2

What is the purpose of Estate duty?

Answer 2

To transfer tax of wealth from one person to anoher in the event of death

Question 3

What is property?

Answer 3

Any right in property = movable or immovable

Question 4

Specific rules of valuation of property?
* Unlisted shares
* Condition imposed on property

Answer 4

• Unlisted shares: Fair MV; ignore selling price
• If a condition has been imposed on the property: Fair MV, ignore condition

Question 5

What is valuation of property in liquidating the estate?

Answer 5

Selling price, even for farming property not reduced with 30%

Question 6

What is valuation of property not sold?

Answer 6

Fair market value UNLESS Farming property THEN - 30%

Question 7

What is the Valuation of limited interests: Annuity?

Answer 7

Passed on to a beneficiary
Ceased = no value

Question 8

Annuity charged upon property

Answer 8

Use life expectancy of
* Beneficiary if passed on
* Owner if annuity ceases at death

Question 9

Purchased annuities (not charged upon property)

Answer 9

Use life expectancy of:
* Beneficiary if passed on
* None if annuity ceases at death

Question 10

No value is included for?

Answer 10

Annuities originating upon death from Pension/Retirement annuity funds

Question 11

What is the Valuation of limited interests: Bare dominium?

Answer 11

The deceased was the owner of Bare Dominium at death
Full MV of property is not included in the estate

Question 12

The formula for Bare dominium in Estate Duty

Answer 12

(Fair MV @ date of death - Value of the usufruct) / life expectancy of Usufuctuary/Shortest Period of Usufruct

Question 13

What does Deemed property include?

Answer 13

• Domestic life insurance policies
• Property donated by deceased under donatio mortis causa
• Claim against spouse
• Any property to dispose of prior to death to his/her own benefit

Question 14

Domestic life insurance policies: Value of property included in estate

If deaceased paid premiums

Answer 14

Proceeds of policy

Question 15

Domestic life insurance policies: Value of property included in estate

If beneficiary paid premiums

Answer 15

Proceeds of policy - Premiums paid + Interest @ 6% per annum

Question 16

Domestic life insurance policies: Value of property included in estate

If spouse married IN community of property paid premiums

Answer 16

Proceeds of policy - 50 % of Premiums paid + Interest @ 6% per annum

Question 17

Domestic life insurance policies: Value of property included in estate

Answer 17

Included in the estate of the person whose life was insured, irrespective of who the beneficiary is

Question 18

Domestic life insurance policies: Exlusions

Answer 18

• Ante-nuptial or postnuptial contract
• Beneficiary is co-shareholder & will enable him/her to purchase deceased shares
• Policy taken out by third party & proceeds are paybale to such a person

Question 19

Married under the accrual system (claim against spouse)

Answer 19

IF married OUT of community of property (under accrual system)
AND one of the spouses passes away
THEN the growth/accrual of both estates calculated & spouse with smallest accrual has a claim against the estate of the other spouse for HALF of the difference between the estates

Question 20

Married under the accrual system (claim against spouse): Exclusions

Answer 20

• Inheritances, legacies & donations received
• Donations between spouses
• Assets excluded in terms of ante-nuptial contract

Question 21

Deductions

Answer 21

• Debts due by deceased to resident
• Costs of administration & liquidation of estate
• Expenses incurred in meeting requirements of the Estate Duty Act
• Debts due to non-resident
• Donation to PBO’s
• Accrual claim by spouse married under the accrual system
• Books pictures and statues lent to the estate for > 30 years

Question 22

Allowable deuctions from estate

Certain foreign assets

Answer 22

• Purchased before becoming a resident
• Donated or inherited from non-resident
• Profits or proceeds from above

Question 23

Allowable deuctions from estate

Funeral- , tombstone and death bed expenses

Answer 23

Amount comissioner considers fair (including medical expenses incurred in deceased’s last ilness)

Question 24

Allowable deuctions from estate

Deduction of certain limited interests: Annuity charged against property

Answer 24

If the person who donated the the annuity to the deceased, was the owner of the property at the time of donation and is still the owner at the deceased death, a deduction will be allowed

Question 25

# Allowable deuctions from estate Improvements made by beneficiary if

Answer 25

* Incurred by person who inherits the property * Incurred during the lifetime of deceased, with their consent **THEN** $ by which value of property increased (due to improvements) will be deducted from estate

Question 26

# Allowable deuctions from estate Limited interest & annuity charged against property created by pre-deceased spouse if

Answer 26

* The property formed apart of the estate of pre-deceased spouse (**Estate duty already paid on it**) * No deduction was allowed against the estate of pre-deceased spouse (**Estate duty was paid on full value** )

Question 27

# Allowable deuctions from estate Deemed property taken into account in valuing unlisted shares

Answer 27

Value of unlisted shares - Value of deemed property to AVOID being taxed twice

Question 28

# Allowable deuctions from estate Property bequathed to surviving spouse ## Footnote sec 4(q)

Answer 28

Unless the spouse has to dispose of the property to another person in terms of deceased's will

Question 29

Successive death rebate

Answer 29

Person bequests property to another person (**dies within 10 years**), estate duty is reduced by % established under succcessive death rebate **BUT ONLY IF ** second-dying person had to pay the estate duty of first-dying person's esate & property is included in both estates

Question 30

Married **IN** community of property: **Included in deceased estate**

Answer 30

* 1/2 of Net joint estate * **ADD** Property owned by him **excluded** from joint estate * **ADD** Fiduciary/Usufuctiary interests **excluded** from joint estate * Right to annuities **included** in joint estate * Liabilities which arise after the death of deceased **don't form part** of joint estate

Question 31

# Calculation of estate duty payable First provision

Answer 31

When bare doinium owner purchsed right to bare dominium from origial owner

Question 32

# Calculation of estate duty payable Second provision

Answer 32

When Bare Dominium holder becomes full owner after death of usufuctuary **AND** Usufruct & Bare Dominium were created in the same transaction