Just as artists are inspired to create cultural wealth, so Sanlam Private Wealth is driven to craft custom solutions to grow and preserve the wealth of its clients.
Just as artists are inspired to create cultural wealth, so Sanlam Private Wealth is driven to craft custom solutions to grow and preserve the wealth of its clients.
Image: Sanlam Private Wealth

If you've worked hard to create something of meaning and value to last for generations, proper and timely estate planning is essential. It'll ensure the smooth transfer of wealth to your descendants after you're gone.

Failing to make plans for your estate — and review them regularly — can lead to unintended complications for your heirs.

The purpose of estate planning

The main idea behind estate planning is to structure your affairs in such a way that you achieve these objectives:

  • Protection of assets against a forced sale by providing sufficient liquidity during the winding up of the estate; 
  • Protection of business interests;
  • Facilitation of the administration of the estate;
  • Flexibility to ensure future adjustments can be made;
  • Harmony in the family; and
  • Tax efficiency. 

Factors to consider

The following factors must be taken into account when you draw up your estate plan:

Your will

A will is the cornerstone of any estate plan. It helps to ensure your wishes are clearly stated and makes provision for who will inherit your assets after you've passed away.   

Marriage regime

Your marital status and regime will have an effect on the division of assets after you've passed away. For example, if you're married out of community of property with the accrual system, your surviving spouse could have a claim against your estate or your estate could have a claim against the surviving spouse. This may create liquidity problems.

Estate duty and donations tax

These two taxes have different effects on your estate and heirs. From March 1 2018 the estate duty rate is 20% on the first R30m of the dutiable estate and 25% on the dutiable amount of estates valued above R30m. 

By incorporating a donations strategy into your estate planning, you could, for example, essentially pay estate duty 'in advance' to benefit your heirs

Any donations you have made in your lifetime are subject to 20% tax on the first R30m (cumulative during your lifetime) and 25% on donations above this amount. You have an annual exemption of R100,000 of the value of donations made during the tax year and donations between spouses are exempt from donations tax.

By incorporating a donations strategy into your estate planning, you could, for example, essentially pay estate duty “in advance” to benefit your heirs.

Capital gains tax (CGT)

You will be deemed to have disposed of your assets to your estate after you've passed away, which will have CGT implications. The annual exclusion in the year of death is R300,000. You qualify for a primary residence exemption of R2m and R1.8m on small business assets with a market value not exceeding R10m on disposal.

Liquidity

You need to ensure enough liquidity will be available for costs, liabilities and taxes to be met without having to dispose of assets at the wrong time and at low prices. 

Since compiling a comprehensive estate plan can be highly complex, it’s crucial to obtain professional advice. If you need assistance, call Sanlam Private Wealth Fiduciary and Tax on 011 778 6600.

About the author: Stanley Broun is head of Fiduciary and Tax at Sanlam Private Wealth. 

This article was sponsored by Sanlam Private Wealth.

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