Clever estate planning involves finding ways for reducing estate duty costs and is an essential part of the financial planning process, as this ensures that your heirs benefit fully from their inheritance.
Apart from reducing estate taxes, estate planning can also help you:
In this article, we look at 4 smart estate planning tips which can assist you in reducing estate duty costs.
This is one of the best financial moves you can make, especially from a tax point of view. Some of the benefits of a retirement annuity include the following:
By taking out a life insurance policy, you pay a monthly premium in return for a lump-sum payment in the event of your death.
In case you have not made other provisions for reducing estate duty costs, this lump-sum can be used to pay the relevant taxes incurred on your estate.
In this way, your beneficiaries are still able to enjoy the full extent of their individual inheritances.
Inter vivos is a legal term which refers to a transfer or gift made during one’s lifetime. This sort of trust allows you to purchase lifestyle assets such as additional property or land, without facing the exorbitant costs of transferring them to the next generation.
In this way, you can avoid paying capital gains and estate duty taxes, but only if you’ve set up the trust during your lifetime.
If you have not set up an inter vivos trust before purchasing these assets, then taking out a life insurance policy is your best solution for addressing the transfer costs.
By taking assets from your estate and donating it to a trust instead, you can avoid donations tax as long as your donation is no more than R100 000 per person, per annum.
In other words, if you donate R100 000 to your trust every year for 10 years, you effectively reduce the value of your estate by removing one million rand from your estate and in turn, you reduce the amount taxable on your estate.
In addition, you would save 20% (R200 000) in donations tax.
When it comes to reducing estate duty costs, there are several financial moves that can be made during the estate planning process.
Estate planning is a crucial part of the overall financial planning picture and should not be overlooked should you want your beneficiaries to enjoy their inheritances fully.
For more information on smart estate planning and reducing estate duty costs, please contact our financial advisors in Johannesburg.
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