According to the last will and testament of a taxpayer, a testamentary trust shall be created on his death for the residue of the estate and his wife is the income beneficiary and his children the capital beneficiaries. In calculating the net value of the estate in terms of Section 4 of the Estate Duty Act, will the property in the trust reduce the Estate Net value due to it being left to the spouse in the Trust? Also, will the CGT roll over relief for assets between spouses fall away as the assets will go to the trust?
Important:
This answer is based on tax law year ending 28 February 2020.
Answer:
Section 4(q) of the Estate Duty Act is relevant and reads as follows: The net value of any estate shall be determined by making the following deductions from the total value of all property included therein in accordance with section 3, that is to say … so much of the value of any property included in the estate which has not been allowed as a deduction under the foregoing provisions of this section, as accrues to the surviving spouse of the deceased: Provided that- (i) the deduction allowable under the provisions of this paragraph shall be reduced by so much of any amount as the surviving spouse is required in terms of the will of the deceased to dispose of to any other person or trust; (ii) no deduction shall be allowed under the provisions of this paragraph in respect of any property which accrues to a trust established by the deceased for the benefit of the surviving spouse, if the trustee of such trust has a discretion to allocate such property or any income therefrom to any person other than the surviving [sic] spouse.