Estate planning is not just for the ultra-wealthy — it’s essential for anyone who wants to control how their wealth is passed on, reduce estate taxes, and minimize legal complications for heirs. A good estate plan ensures that a client’s legacy is preserved and transferred efficiently.
In South Africa, estate duty applies to estates exceeding R3.5 million. The first R3.5 million is exempt (abatement), and the remainder is taxed at 20% (or 25% for amounts above R30 million). Understanding this threshold is key to structuring wealth effectively.
One common strategy is inter vivos gifting — giving assets during the client’s lifetime to reduce the taxable estate. However, donations tax (currently 20% above R100,000 per year) must be factored in.
Trusts are another powerful tool. When structured correctly, a trust can protect assets from creditors, reduce estate value, and allow for intergenerational wealth transfer. However, the trust must be compliant with South African tax laws to avoid adverse tax treatment.
Proper will drafting ensures that the estate is distributed according to the client’s wishes. Inadequate or outdated wills can result in costly legal battles or forced asset sales.
Life insurance is often used to cover anticipated estate duty, providing liquidity to heirs and preventing the need to sell illiquid assets like property or businesses.
Advisors should regularly review estate plans to reflect changes in family structure, asset holdings, or legislation. Effective planning today ensures a smoother and more tax-efficient tomorrow.