A Fin24 user writes:
I would like to structure my estate so that my heirs will
pay less in estate duty tax when I die. What would be the implication of
transferring my assets, such as my home or business, into my child's name?
Heather Robertson, a consultant at Blink Consulting,
When you simply give an asset away for no value, this would
be considered a donation.
Likewise, if you sell an asset for less than its actual open
market value, the difference between the price paid and the price that should
have been paid will also be considered a donation.
Donations tax, levied at a rate of 20%, must be paid by the
donor within three months of making the donation.
To determine when the taxman will deem the consideration
paid to be inadequate, we need to apply the test of a willing buyer and a
There are certain exemptions when it comes to estate
planning. The first R100 000 donation per person is exempt, donations between
spouses are exempt and up to 10% of your taxable income can be donated to
recognised public benefit organisations (for which you also receive an income
High net worth individuals should consider donating R100 000
per annum (or R200 000 for a couple) to someone other than their spouse, for
example their children, grandchildren or possibly a trust.
A recurring annual investment paid by the donor (but owned
by the child/grandchild/trust) lends itself to this form of donation.
Also bear in mind that a loan account in a trust can be
reduced by using the R100 000 annual donation. Importantly, from a capital
gains tax perspective on a "deemed disposal of the loan account"
there must be a physical passing of money.
Donations tax does not often attract much attention. However,
you can derive certain benefits from using the exclusions provided and in this
way shift the value of your estate into the hands of your ultimate
beneficiaries sooner rather than later.