By Heather Muller, Estates Product Head at FNB Fiduciary
More than 70% of South Africans die without a valid Will, leaving families at risk of financial stress and emotional strain.FNB Fiduciary urges South Africans to prioritize estate planning to avoid unnecessary costs. Proactively understanding these expenses and planning is essential to preserving your legacy and protecting your loved ones, especially as new financial goals and responsibilities take shape. When someone passes away, their estate faces multiple costs and tax obligations before assets can be distributed. An expense that is often misunderstood is Capital Gains Tax (CGT) which form part of a deceased person's final income tax return.
What is Capital Gains Tax (CGT)?
When someone passes away, the tax law treats it as if the deceased "sold" all their assets such as property, shares, or investments to the beneficiaries at today's market value. This is called a "deemed sale." If those assets have grown in value since they were bought, the estate pays tax on that growth.
Everyday items like furniture, cars, and cash are excluded. Helpful exemptions include up to R2 million on your main home and R300,000 in the year of death. Planning ahead with a Will, trusts, or donations can reduce this tax and prevent delays for your family.
"Many families underestimate the impact of these estate expenses," says Heather Muller, Estates Product Head at FNB Fiduciary. "Without proactive planning, beneficiaries can face delays, unexpected liabilities, and even disputes over reduced inheritances."
In addition to taxes, estates often incur executor fees, property transfer costs and legal expenses. A lack of liquidity can force the sale of assets, adding more complexity and emotional stress.
Start by ensuring you have a valid Will it's the simplest way to protect your family. Consider trust structures to defer CGT and simplify administration and explore strategic donations to reduce estate value. Keeping accurate records is key to avoiding delays and penalties.
Consider an Estate Protector Plan
An Estate Protector Plan can provide much-needed liquidity to cover expenses such as executor fees, property transfer costs and taxes. This ensures that your loved ones don't have to sell assets under pressure and can preserve the value of your estate. Including this in your estate planning strategy can help ease the financial burden during a difficult time.
"Estate planning isn't just for the wealthy; it's for anyone who wants to protect their family's financial future," adds Muller. "Clear communication and early engagement with SARS are vital."
The cost of dying isn't only emotional; it's financial too. With estate duty, CGT, and income tax all involved, planning ahead can help preserve your legacy and give your loved one's peace of mind.
Click here for a comprehensive view of the costs associated with the administration of an estate.
