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.  

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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.