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Newsletter 30

Newsletter 30

Dear Colleague
The happiness of your life depends upon the quality of your thoughts: therefore, guard accordingly, and take care that you entertain no notions unsuitable to virtue and reasonable nature.
Marcus Aurelius
Charitable bequests have been included in Wills for centuries.  They are a way of keeping ideals and compassion alive for years and even generations to come.  It offers an opportunity to make a worthwhile gift to a cause dear to one’s heart, perpetuate one’s name or that of a loved one.  They help to make the world a better place and touch the lives of those in need.  Apart from the fact that charitable bequests might save on estate duty, one also leaves a legacy that lives on for years after passing on. A bequest can be monetary, property, insurance policies, shares, a percentage or even the residue of an estate - any type of asset.
In the next few editions we will place a short summary on a few of these Non-profit Organisations (NPOs), should your clients wish to benefit a charitable organisation.
An NPO is an organisation dedicated to furthering a particular social cause or advocating for a shared point of view. They are tax exempt or charitable, meaning they do not pay income tax on the money that they receive and do not distribute its income to shareholders, leaders or members, but rather to achieve its ultimate objective.  They can operate in religious, scientific, research or educational settings. The South African Government has recognized that this kind of organisations are dependent upon the generosity of the public and to encourage that generosity, has provided tax deduction for certain donations made by taxpayers.  A taxpayer making a bona fide donation in cash or of property in kind to a section 18A-approved organization, is entitled to a deduction from taxable income if the donation is supported by the necessary section 18A-receipts issued by the organisation. The amount of donations which may qualify for a tax deduction is limited.
Read more in the next edition!
In the previous edition we defined property which attracts estate taxes.  In this edition we concentrate on the deductions allowed in terms of the Estate Duty Act.
Some of the most important deductions are the following:
  1. The cost of the funeral, tombstone and death-bed expenses.
  2. Debts owed to people who primarily live in South Africa.
  3. The extent to which these debts must be paid out of property included in the estate.  It includes the deceased’s income tax payable (also capital gains tax) until date of death.
  4. Certain deductions are allowed for foreign assets, not specified in this article.
  5. Debts and liabilities due to non-citizens:
These are deductible - but only in so far as such debt exceeds the value of the deceased’s assets situated outside South Africa, which are not included in the taxable estate of the deceased.
  1. Bequests to certain public welfare organisations:
Where property is bequeathed to such organisations which are exempt from income tax or to the state or any local authority in South Arica, the value of such property will be deducted from the estate tax.
  1. Property rights bequeathed to the surviving spouse [Article 4(q)]:
  • This includes the value of the property which is bequeathed to the surviving spouse and which is not an allowable deduction yet.
  • The yield of an insurance policy payable to the surviving spouse is deemed property for the calculation of estate taxes, but deductible according to Article 4(q).
  • Article 4(q)-deduction will not be allowed for property bequeathed subject to a bequest price.
  • Article 4(q)-deduction will not be allowed for benefits to a trust established for the benefit of the surviving spouse, if the trustees have the discretion to allocate the property or income derived from it to any other party besides the surviving spouse (discretionary trust). Where the trustees have no discretion to both the income and capital of a trust, an Article 4(q)-deduction will be allowed (established trust).
Allowable R3,5 mil deduction between spouses
The law makes provision that the R3,5 mil-deduction from estate tax can be rolled over to the surviving spouse so that a R7 mil-deduction can be utilised at the surviving spouse’s death.  This rollover is only applicable if the entire estate of the first dying spouse is bequeathed to the surviving spouse.
Life insurance for estate taxes
Normal estate tax will be charged on insurance yielding.
This is a general information article and not legal or professional advice.  Always consult a qualified financial advisor for specific and relevant advice.
Source: Moore Stephens “Estate Planning Guide”.

Some people win the lottery and some acquire fortunes through other means. But then there is John Hall, an English retiree who received an unexpected fortune from another source. 
In 2015, John Hall found himself heir to a distant cousin and mysterious widow whom he had never known.
The childless and sibling-less Shirley Diane Street died intestate at a nursing home in Folkstone, in Kent, where she lived for 23 years after retiring from work in London.  Finders International was investigating her ₤1 million-plus estate for an episode of BBC Heir Hunters and contacted Hall, who suddenly gained a branch on his family tree and a sweet ₤200,000 share of the estate as well.
This pensioner was over the moon about this ‘out of the blue’ monetary surprise, floating on “heir” – who wouldn’t be?
Until next time.
“The Legatus Times” Team

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