93 – The costs of implementing your will and bequeathing your estate

by | Oct 15, 2024 | Financial Planning

Question

I retired three years ago, with half my income coming from my company pension fund and the other half from interest from investments. I am paying tax at a rate of 41%. Is there anything that I can do to reduce this amount?

Answer

It is always a good idea to get an executor and financial planner to look at your will and calculate the costs of implementing it. I remember being shocked when I calculated the cost of implementing my own will. I went back to the drawing board and was able to achieve a very similar result through a different but cheaper structure.  

Visit Daily Maverick’s home page for more news, analysis and investigations 

There are a couple of things you need to look out for: 

  • Liquidity

When you bequeath anything to a child, the capital gains tax and estate duty will be payable immediately.  

As you are bequeathing half of your estates to your children, you need to ensure that you have the necessary funds to pay these taxes. You do not want to be in a situation where you have to sell your family home to meet these costs.  

  • Ensure your life partner is treated as a spouse

If you bequeath everything to your spouse, the capital gains tax and estate duty would only be payable when the second person dies. A life partner is treated like a spouse if it is clear that your partner is indeed a life partner. This can be done through a separate agreement or by specifically referring to your partner as a life partner in the will. You do not want any tax deductions disallowed because there is uncertainty as to whether you are life partners.  

  • Transfer duty

No transfer duty is payable on the inheritance of fixed property, regardless of whether it goes to a child or a spouse.  

  • Conveyancing fees

Conveyancing fees will have to be paid to the lawyer to get the property in the new person’s name, regardless of who it goes to.  

Based on the above, it looks as though your current arrangement of giving half of your estates to the children will result in the immediate payment of taxes and duties when the first partner dies. I would recommend that you speak to a lawyer or financial planner who specialises in estates and look for a creative solution that will get you the same result but without the immediate payment of taxes.  

KENNY MEIRING IS AN INDEPENDENT FINANCIAL ADVISER

Contact him via phone, email or via contact phone on the financialwellnesscoach.co.za website

Read more of our articles on the Daily Maverick website or newspaper weekly!

Mar 03 2025

196 – Don’t have all your eggs in one overseas basket

Question The new land expropriation law has been giving me sleepless nights. A friend of mine suggested that I should do as he has done and move all my investments into...
Mar 03 2025

195 – Essential questions to ask when you see your financial adviser

Question I left university ten years ago and have been managing my own investments. After reading your column, I am concerned that this may not have been the wisest...
Feb 18 2025

194 – How retirees can benefit from investing in retirement annuities

Question I have a question about contributing to RAs to save tax when one is my age, that being almost 80.  As we took the full lump sum when we retired, any one-third...
Feb 18 2025

193 – Ensuring a tax-savvy retirement income stream

Question I am 72 and will shortly be retiring.  I will receive an income of R10k a month which is sufficient for my living costs.  My wife is 9 years younger than me...
Feb 04 2025

192 – Ensuring income security amid health concerns

Question My husband is 82 and is not in the best of health. We are concerned that he may be showing early signs of dementia and we will be seeing a specialist next...
Jan 31 2025

191 – To beat inflation, retirees need a mix of safe and volatile portfolios

Question I recently turned 65 and besides my pension, I have R3m invested in various funds, some of which are overseas.  When does one start moving money into totally...
Jan 31 2025

190 – Finance basics: budget, emergency fund and debt

Question I would like to get my finances in order this year.  What is the best way of going about it?Answer I recommend following a systematic approach towards managing...
Dec 02 2024

189 – Retirement and risk cover options for employees

Question I have a business with 20 employees.  I would like to put in some kind of retirement fund for them.  Is this financially feasible for our sized company? If so,...
Dec 02 2024

188 – Finding the right annuity for you takes thought

Question I recently heard someone talking about a with profit annuity.  I only know about living annuities and guaranteed life annuities.  How does a with-profit...
Dec 02 2024

187 – What to do if you get retrenched

Question I have just been retrenched and I'm feeling quite overwhelmed by all the decisions that I need to make.  Do you have any suggestions on what the big pitfalls...

Download the Life File