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Newsletter 25

Newsletter 25


Dear Colleague
 
WELCOME BACK IN 2019!
 
What a blessing to enter a new year and to put one’s nose to the grindstone, once again. May this be a year filled with new adventures, positive changes, great breakthroughs and to utilize the ability to get the best out of the potential for growth and development presented in this new year.
 
We remind you of the Clientèle Estate Preservation Plan that was introduced to you in the previous edition.   
 
For more information on the plan, please use LEGATUS TRUST as reference and contact the following persons:
 
 
Also visit our website, www.legatus.co.za, for more information on the plan.
 
 
THE USE OF TRUSTS IN ESTATE PLANNING
…..  Read more in the upcoming edition!


HOW DOES INHERITANCE WORK?
 
It is important that there is a relevant and valid Will in which, amongst other things, assets are being distributed and beneficiaries nominated to receive an inheritance from the estate.  It nominates an executor who then gets appointed by the Master of the High Court to administer the estate of the deceased. 
 
South Africa’s inheritance laws apply to every person who has assets or owns property in South Africa.  There is specific legislation that affects inheritances and the three main statutes governing inheritances in South Africa are:
 
  1. The Administration of Estates Act, which regulates the disposal of the deceased’s estate in South Africa.
  2. The Wills Act, which affects all testators with assets in South Africa.
  3. The Intestate Succession Act (discussed in Newsletter 23), which governs the devolution of estates for all deceased persons who have assets or own property in the Republic of South Africa and who die without a Will.
 
All property located in South Africa is subject to these laws, and there are no separate laws for foreigners. 
 
Immovable property is not treated any differently from other types of moveable assets for inheritance purposes. Inheritance issues of foreigners and South African citizens are primarily dealt with by the Master of the High Court.  However, if a dispute arises, then the case can be heard in any High Court of South Africa.
 
Foreigners who acquire immovable assets (property) in South Africa, through purchase or inheritance, must register their transfer of ownership by registering a deed of transfer with the Registrar of Deeds in the area where the property is situated.  The process of registering a deed of transfer is carried out by a conveyancer, or specialised lawyer, who acts on power of attorney granted by the owner of the property.
 
Tax and inheritance
In South Africa, most taxes are payable by the estate and not the heirs.  Capital Gains Tax (CGT) on estate assets is not payable by the recipients of the inheritance but by the estate.  Estate duty is usually payable by the estate at a rate of 20% for estates with a gross asset value of up to R30 million.  For estates above R30 million the tax rate increases to 25%.  In the case of certain policy payments outside the estate i.e. deemed property, estate duty may be payable by the heir if the total nett value of the estate exceeds R3,5 million.  If it is a foreign estate, it will be subject to the taxes of its country of origin.
 
Donations or gifts
Donations and gifts are treated differently to inheritance.  For individuals, donations are subject to a donations tax of 20% up to R30 million made during that tax year, with an annual exemption of up to R100,000 of the value of all donations made during that period.  Donations exceeding R30 million, will attract 25% donations tax, in line with the estate duty rates.
 
  • Non-residents are not subject to donations tax.  However, in cases where the resident donor transfers his property to a non-resident (donee), and the resident donor fails to pay the donations tax, the non-resident (donee) and the resident (donor) will be jointly and severally liable for the tax.
 
Donations between spouses are still exempt from donations tax, as are donations made to certain public benefit organisations.
 
References
The South African Revenue Services (SARS); madeleyn.co.za/Blog;
https://www.fin24.com/Money/Wills-and-trusts/the-cost-of-dying-has-just-gone-up-20180413


THE GENEROUS JANITOR
 
The name Ronald Read might not mean much to anyone, but it certainly means a lot to Vermont’s Brook Memorial Library and Brattleboro Memorial Hospital. These institutions received gifts from his estate in 2014, totalling $6 million.  He was not a titan of industry or big-name philanthropist, but a janitor and a gas station attendant. 
 
He died in June 2014 at the age of 92, with an estate valued near $8 million.
 
How did he do it?  Ronald graduated from high school (the first in his family to do so) but never from college.  He was a good stock picker and had the control to buy and hold stocks over a long period of time - a strategy that billionaire Warren Buffet recommends.  He waited patiently, lived frugally, drove a second-hand Toyota Yaris, chopped his own firewood and parked far away to avoid parking meters.
 
He, however, treated himself to coffee shop breakfasts.  He was disciplined about reaching his goals but still enjoyed life along the way.  Having the fitting surname of Read, he regularly read The Wall Street Journal, where he could learn of companies far and wide.  His attorney noted, “'He only invested in what he knew and what paid dividends.”
 
Just goes to show that one doesn’t need fancy degrees to invest well.
 
 
Until next time.
“'The Legatus Times” Team


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