082 494 5624
 
Estate Pegging

This is one of the best ways of reducing estate duty and is more effective the earlier it is implemented, which is why the sooner you plan your estate, the better.

One of the tools used to peg an estate would entail the establishment of an inter vivos trust.
Another option would include the establishment of a company whereby the planner merely holds preference shares with the ordinary shares being held by an inter vivos trust or the planner's family. If you transferred some of your growth assets into (for example) a trust, they would no longer form part of your estate.

To avoid donations tax you would normally sell your assets to the trust through an interest-free loan. This loan would usually be due and payable on demand. As mentioned, the outstanding balance owing on the loan would constitute an asset in your estate. If you died 15 years after transferring your assets, the value of the assets will have quite likely quadrupled, but the value of the loan at the original asset value is the amount that will be included in your estate.
Thus your assets will have been "pegged" at the value of 15 years prior.

For example:


Assets of R10 000 000 were sold to a trust set up by Michael.
15 years later, when Michael died, those assets were worth R25 000 000.
His personal estate was valued at R2 500 000.
If he had not transferred the assets to the trust then he would have been liable for estate duty on:
R27 500 000 less the R3 500 000 rebate R24 000 000 x 20% [R4 800 000]
However, through estate pegging, the estate duty payable will be :
R12 500 000 less the R3 500 000 rebate R9 000 000 x 20% [R1 800 000]
This illustrates a saving = of R4 200 000
.

 
 
 
Address: 697 Amandelboomroad, Pretoria
 
FSB at www.fsp.co.za: 25405