It all comes down to your Will!
Posted: 28th September 2010
There are two certainties in life, death and taxes. On
death, your estate is transferred by transmission to an executor or
administrator and eventually to the beneficiaries of your
estate. From a tax perspective, this raises some interesting
issues.
Tax rules were introduced in 2005 to deal with a transfer of
property where the recipient provides no consideration, including a
transfer of a deceased's estate to an administrator or executor and
a distribution of property made by an administrator, executor or
trustee to a person who is beneficially entitled to receive the
property under a Will or an intestacy. It is important to
note that an interest in a joint tenancy does not form part of the
deceased's estate.
Essentially, the tax rules ensure that a beneficiary has a
cost base for inherited assets that he or she brings into the tax
base. This is achieved by treating the death of a taxpayer as
two market value transfers; first when the estate transfers to the
administrator or executor and, second, when the administrator or
executor distributes to the beneficiaries.
This general rule is subject to rollover relief.
Generally, the rollover relief allows for the transactions to occur
at cost, meaning no tax liability results. There are various
exceptions, including property left to a spouse or de facto partner
and property left to close relatives and charitable bequests.
For property left to a spouse, civil union partner or de
facto partner in terms of a Will or an intestacy to be exempt from
taxation, there are specific requirements to be met. If the
deceased has left any tax base property to any person outside the
second degree of relationship (a grandparent, parent, child,
grandchild, or sibling), no rollover relief is available.
Even if rollover relief does apply, it does not apply to property
left to other individuals.
In some circumstances, rollover relief is also available
for distributions from an estate to persons who are related within
the second degree of relationship to the deceased person or
charities. As with the rollover relief for spouses and de
facto partners, it is only available where specific criteria are
met.
Source: WHK