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
    • 22 Jun 2018
      While estate agents can help the seller with correctly pricing the property and marketing a property to the right pool of potential buyers, at the end of the day it’s the impression that the property will make on buyers that counts the most.
    • 21 Jun 2018
      Anyone who’s ever been involved in a building project that’s gone wrong will appreciate the importance of adequate insurance cover in the construction industry.
    • 21 Jun 2018
      A recent news story about a blind tenant caught in a legal battle with his body corporate over letters and notices he was unable to read and consequently comply with has raised the question: what are the legal obligations for landlords with disabled tenants?
    • 21 Jun 2018
      A trend that’s taken the world by storm in recent years is that of hygge (pronounced: hue-guh), a Danish concept that is about creating intimacy, connecting with loved ones and taking pleasure in small, ordinary things.
    • 20 Jun 2018
      Buying or selling real estate isn’t as easy as it is portrayed sometimes, especially if there is a death of a party during the transaction which can make it awkward, tricky and inconvenient.
    • 20 Jun 2018
      With interest rates remaining at historic lows and banks continuing to compete for mortgage finance business, first-time buyers with funds at their disposal are currently well-placed to gain that initial foothold on the property ladder, particularly in the light of the slightly lower growth rates currently experienced in residential property values.
    • 20 Jun 2018
      The average size of bond granted in SA has grown 7,7% in the past 12 months to R934 000, according to BetterBond, the country’s biggest bond originator.
    • 19 Jun 2018
      In the current market, letting out a property can be a good option as rental demand remains strong, especially in the northern suburbs of Johannesburg. This is according to Chris Renecle, MD of Renprop. However he says that before homeowners let their property out, there are five key points they should make sure are covered before they market the property for rent and sign any lease agreements.
        
    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