select
|

Deceased estate assets can be frozen for a long time



When dealing with the transfer of deceased estates there is often a variety of hurdles and taxes that need to be taken into account and avoided, if possible, says Bill Rawson, Chairman of the Rawson Property Group.

Property owners, especially those who own multiple properties, need to consider the best ways to minimise tax and avoid difficulties when passing on their assets after their death.

'The major hurdle facing the surviving spouse or other heirs to an estate,' said Rawson, 'is that, as soon as the person dies, his or her accounts could be frozen ? making it impossible to access their funds. 

'There have been many cases, which could have been avoided, where people have had to endure serious hardship: these people, being unable to access the deceased's bank account, have had to resort to borrowing money to pay for their daily expenses.'

The problem, added Rawson, is exacerbated by insurance policies being paid into the estate. This is usually the case when the beneficiary shares a bank account with the deceased.

'When executors have been appointed,' said Rawson, 'the law requires that all outstanding debts owed by the deceased have to be settled first ? and this can lead to one or more of the properties having to be sold in a hurry. After these sales, Capital Gains Tax may then have to be paid on any profit made, as well as dividend tax paid to distribute the proceeds.'

'The cost of settling an estate,' he said, 'can be as high as 30 or 40% of the total, excluding the debt repayments. Equally serious, it can take two or more years to reach full settlement ? during which benefactors may have no access to the funds in the estate.'

The best way to circumvent these difficulties, and to save a great deal of the family's assets, says Rawson, is for the bequeather to establish a trust before their death and to transfer the majority of their assets into this trust.

'One of the major advantages of a trust,' said Rawson, 'is that it is not frozen on the death of a spouse, as it is entirely independent of the estate and is therefore not subject to any estate duties. The surviving spouse, who is usually a trustee, can then draw money as and when they need it.'

'An additional benefit of transferring assets to a trust is that certain insurance policies may be paid into the trust which can help cover the trust's costs and, as the trust is not responsible for the deceased debts, there will be no need to sell off properties or to pay Capital Gains Tax.'

There are however a few objections to using a trust, says Rawson, the most common of these is that it will cost money, payable immediately, to establish a trust and the taxes incurred in transferring property into a trust are higher than those involved in passing it onto an individual.

'One must be aware that trusts are taxed at 40% on their incomes. Expert advice from legal and accounting professionals is therefore highly recommended.'

'My experience,' said Rawson, 'shows that establishing a trust is the best way to achieve a smooth handover of property and assets, especially if you expect them to be passed on to subsequent generations.'

When seeking a professional's advice and assistance on planning your estate, says Rawson, it is often better to deal with an accountant or a lawyer who has specialised in these matters and who has kept up-to-date with all the relevant legislation rather than an 'expert estate planner' ? whose main goal may be to sell expensive insurance policies.


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 21 Nov 2017
      The buying process is over, and the moving truck has delivered your household goods to your new property. Now it’s time to unpack and turn your new house into a home.
    • 21 Nov 2017
      When an offer to purchase a property is signed by both buyer and seller, this constitutes a binding agreement or “Deed of Sale” between the two parties. However, in most cases the “standard contract” might not be enough to cover all the specifics pertaining to the sale. The agreement may require some additions or alterations to clauses, which needs an expert hand in the drafting of such
    • 21 Nov 2017
      As more and more South Africans look to invest in property abroad, Spain is offering them one of the best deals in global real estate.
    • 20 Nov 2017
      Since 2012, sectional title complexes have been leading the South African property market, not only in terms of price growth, but sales volumes as well. Remaining relatively strong, even in the face of 2017’s political and economic turmoil, experts say this market segment could offer valuable insight into South Africans’ property purchase priorities.
    • 20 Nov 2017
      Regardless of whether you are purchasing your first start-up home, downsizing or moving in with roommates, finding ways to maximise small spaces can be a big advantage, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
    • 20 Nov 2017
      Property valued at approximately R1 billion is on High Street Auctions’ sales floor during the month of November, including the much-anticipated sale of the Tshwane Mayoral Residence and the land occupied by one of South Africa’s oldest operating gold mines.
    • 17 Nov 2017
      FWJK has announced the launch of its latest residential brand, the Lil’ Apple, which will be launched simultaneously in two developments in Cape Town and Umhlanga totaling 600 apartments. The Lil’ Apple is set to be a brand of FWJK’s New York style apartments which will be rolled out nationally.
    • 17 Nov 2017
      It’s been a tumultuous year on many fronts, with socio-political uncertainty setting the tone for much of South Africa’s economic activity yet despite this and seemingly counter-intuitively, the residential property market has held up well.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK