No real tax benefit in early inheritance
IF you are thinking of leaving your spouse or children inheritance before you kick the bucket – think again.
The opportunity of seeing loved ones enjoy their inheritance while you are still alive may come at a price for South Africans.
A recent report by HSBC Bank in the UK found that more than half of retired people were already giving money to their family and friends.
Research conducted revealed that one in five retired people regularly gave money to one of the grown-up children, while one in 10 said they were helping grandchildren.
This, according to the study, has seen people escaping inheritance tax, but that is not necessarily the case in South Africa.
Roy Bregman, of Bregmans Attorneys, said there was no real tax advantage in giving a living inheritance.
The SA Revenue Service charges a donor 20% tax in cases where more than R10 000 is donated as casual gifts by companies and trusts per year, and donations by individuals exceeding R100 000 per year.
The estate duty also requires a 20% payable flat rate on the net dutiable estate.
Deon Beachen, senior associate in the private clients department at ENSafrica, said using trusts as an appropriate estate planning vehicle would reduce “traditional inheritances”.
By transferring assets from your personal estate to a trust, you freeze the growth of those assets in your personal estate at the value at which the assets are transferred to the trust.