What is Estate Planning?
What is Estate Duty?
What is meant by Net Assets?
What is meant by Base Cost?
How is CGT calculated?
What are the exclusions?
Given the huge growth in property values over the last couple of years, these exemptions, although they seem substantial, may not be large enough to cover your property portfolio’s growth. It is also important to take into consideration that the R1,5 million primary residence exclusion cannot be used for properties bought for investment purposes. It is only applicable to the property you call ‘home’, i.e. the one in which you reside permanently.
Utilising the roll-over that is available between spouses at death is not a way to avoid paying CGT. CGT will have to be paid at a later stage when the receiving spouse disposes of the assets. The base cost will also be the base cost of the first dying spouse and not the value at which the survivor received it.
Why Worry About Estate Planning when Investing in Property?
On your death your assets are automatically considered ‘disposed of’, whether they are sold or not. Your estate will need liquidity in order to carry the costs of taxes, duties and winding-up costs. All your debt will need to be settled before any remaining funds or assets can be distributed to your beneficiaries. If there is not enough liquidity in your estate, some of your fixed assets, like your home, may need to be sold at less than market value to cover all your debt.
No one plans to be a victim, but you must keep in mind that in today’s day and age, it is crucial that you protect your family and your assets against unexpected crisis that have financial consequences. Your death may be the result of an accident or a violent crime. You must review your estate plan at least once a year in order to make provision for your growing property portfolio, so that in the event of your death, your estate can cover the 20% Estate Duty and 10% Capital Gains Tax, where potentially payable.
Safeguard Your Property Investment.
A financial adviser can assist you:
Professional advice is necessary regardless of the size of your estate. One persons estate will vary from another’s in terms of complexity, i.e. a will might suffice for some, while for others different structures and vehicles like trusts are required to minimise their tax liabilities.
An example of how you can safeguard your property investment is to take out life and disability coverage which will take care of your liquidity needs during the winding-up of your estate, whereby a lump sum payment could be made on your death or disablement that can be used to pay all outstanding liabilities or provide income for dependants. Life cover is still one of the most affordable options available to estate planners to ensure that there is enough liquidity in their estate and to maximise their legacy to dependants.
NB! Remember to let your loved ones know where to find all the relevant documentation to speed up the process of winding-up your estate.
We strongly recommend that you seek professional assistance when drawing up an Estate Plan.
This article was provided by
Estate Planning and your Property Investment
Private Property South Africa
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