What you should know about deceased estates.
A loved one has passed away and you are left in turmoil. Dealing with deceased estates is a difficult task. The last thing one needs to deal with in a situation like this is laborious and tedious hold ups. There are tax implications, transfer- and cancellation costs. The assets could be frozen until the estate has wound down. In the meantime you could be left with bills to pay and not enough income.
There are things we can do to simplify life for our spouse before we pass away. Look at how insurance policies are structured, and how the payout is structured. Shared bank accounts in this instance are not advisable.
Once executors have been appointed, the law requires for all outstanding debts to be paid from the estate first. If the outstanding debt exceeds the estate you could leave your spouse with more debt.
If a property has to be sold to settle these debts then there is capital gains tax paid on the profit of the sales of those properties. Dividend tax could also be payable to distribute the proceeds of the sale.
Settlement costs of estates can be costly.
The cost of settlement can be as high as 30-40% of the total and this is excluding debt repayments. It is also important to keep in mind that it could take in some instances two or more years to reach settlement. During this time the beneficiaries could be withheld to access these funds.
There are ways to circumvent these pitfalls.
· One of these is to establish a trust.
· There are costs involved in transferring assets into a trust.
· Trusts are independent of estates and thus cannot be frozen.
· There are no estate duties payable in the case of trusts
· Certain insurance policies may be paid into a trust, which covers trust costs
· A trust is not held liable for the deceased debt
· Funds are thus immediately available
There are objections to assets being transferred into a trust,
· There are initial fees payable to establish a trust
· There are taxes payable when transferring assets into a trust
· Trusts are taxed at 40% of the income
· Selling property out of a trust is 10%
Tax experts agree that trust are a safe way to hold assets and can be transferred from generation to generation.
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