Not even dollar millionaires are safe from scrutiny by the South African Revenue Service (SARS) upon death.<\/p>\n\n\n\n
Richus Nel, a wealth adviser and principal at PSG Wealth, said that multi-millionaires would face SARS regarding capital gains, estate duty and executors that levy fees.<\/p>\n\n\n\n
Nel said that estate duty, capital gains taxes, and executor\u2019s fees can be reduced and sometimes completely avoided by intentional estate planning. <\/p>\n\n\n\n
He added that there are various solutions that can reduce tax implications, ideally bringing taxable amounts within the exemption thresholds to avoid paying unnecessary taxes. <\/p>\n\n\n\n
According to the wealth adviser, one strategy is to reduce your personal estate as much as possible by using separate legal structures and tax-friendly investment vehicles.<\/p>\n\n\n\n
Nel said that it is important for people to do proper estate planning when:<\/p>\n\n\n\n
To best mitigate excessive tax, The group provided the following possible solutions:<\/p>\n\n\n\n
Usufruct<\/strong><\/p>\n\n\n\n \u201cA registered usufruct gives a legal right to the usufruct holder for the use and enjoyment of someone else\u2019s asset,\u201d said Nel.<\/p>\n\n\n\n Retirement annuities and living annuities<\/strong><\/p>\n\n\n\n A recommended estate planning strategy is investing a lump sum into a retirement annuity. <\/p>\n\n\n\n It benefits \u201clazy money\u201d like cash and fixed interest assets, which earn interest exempted within the annuity. <\/p>\n\n\n\n These funds are also not subject to estate duty and executor\u2019s fees if a beneficiary is designated. However, it\u2019s important to focus on using capital for retirement purposes.<\/p>\n\n\n\n Donations<\/strong><\/p>\n\n\n\n Nel says that donations may seem unattractive due to the immediate capital gains tax (CGT) and contributions tax implications of 20% (or 25% for amounts larger than R30m). <\/p>\n\n\n\n \u201cPre-death donations of liquid assets into a separate legal structure can make a lot of sense because no additional CGT or transfer taxes will be triggered. Further, donations tax will be paid on the current value instead of estate duty on increased future value. Attributions rules might apply to change the tax structure of, e.g. a trust, so seek professional advice.\u201d<\/p>\n\n\n\n Buy fixed property in a company or trust<\/strong><\/p>\n\n\n\n Buying investment property in a company or trust is wise, said Nel.<\/p>\n\n\n\n Providing mortgage security may be necessary if the entity lacks assets or income. He added that financing the premiums on behalf of the company\/trust can be considered a donation, eligible for reduction using the donation exemption.<\/p>\n\n\n\n Estate pegging<\/strong><\/p>\n\n\n\n \u201cEstate pegging is a concept by which an individual reduces their dutiable estate value by moving assets, via a loan account, into a trust or company at the current value,\u201d Nel said.<\/p>\n\n\n\n \u201cWith this, all future asset growth takes place outside their personal estate.\u201d<\/p>\n\n\n\n When it comes to estate pegging, Nel said that the following two things must be considered:<\/p>\n\n\n\n\n
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