Page 39 - Nexia SAB&T Estate Planning Guide 2024

n On death, the proceeds from an insurance policy go to the designated
beneficiary. If there are minor children, the estate planner may want the
proceeds to be held in a trust for them.
South African “domestic” life policies
n All proceeds of South African “domestic” policies taken out on the estate
planner’s life, where there is no beneficiary nominated on the policy, will fall
into his estate on his death.
n Where a beneficiary is nominated on the policy, the proceeds will be deemed
property for estate duty purposes, even although they are paid directly to the
beneficiary (subject to partial exemptions based on policy premiums).
n Policies which are exempted from exclusion for estate duty purposes are buy
and sell, key man policies, and those policies ceded to a spouse or child in
terms of an antenuptial contract.
n The main aim of this tool is to provide liquidity in the estate. The estate
planner may wish to take out life assurance cover, not only to provide his
spouse and /or dependants with liquidity on his death, but for the purpose of
providing for estate duty liability or to cover the mortgage bond liability over a
fixed property, vehicle finance agreements, taxes and winding up costs such
as executor’s fees. To prevent the executor from having to sell an asset out
of a deceased estate to cover these liabilities, it may be preferable and cost
efficient to take out life assurance to ensure estate liquidity.
Living Annuities
n An annuity is a policy taken out that will provide a pension to the estate
planner from the age of 55 years and older.
n Upon maturity, the insurance company invests the proceeds and the estate
planner receives a monthly pension from the proceeds. He may take a lump
sum payment (up to one third of the value) on maturity.
n Should he die before the policy matures, and he has nominated beneficiaries
on the annuity, the proceeds will not form part of his deceased estate and
will attract no estate duty or capital gains tax.
n However, so much of all the contributions made by the deceased in
consequence of membership or past membership of any retirement annuity
fund, that has not been deducted at the time of death for income tax, will be
subject to Estate Duty.

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