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[FAQ] Deceased Estate Life Wrapped Investment Value For Estate Duty
- 08 March 2023
- Administration of Estates
- The Tax Faculty Tax Specialist
This article is based on tax law for the year ending 28 February 2023.
Background
What would the dutiable amount be for a policy on the life of the deceased? Her 2 sons and 4 grandchildren were the beneficiaries. Three beneficiaries took the cash pay-out and the other 3 took a transfer of the investments to their portfolios. Would the amount be the cash plus the transferred portion value? Or Market value at the date of death. The underlying investments were unit trusts.
Also, what would be a suitable voucher for the L&D account and SARS?
Answer
The dutiable amount for a life insurance policy on the deceased would typically be the market value of the policy at the date of death, or the cash surrender value, whichever is higher. The market value is the value of the underlying investments in the unit trusts, as well as any other amounts such as bonuses, etc. that would be payable to the beneficiaries.
The dutiable amount is based on the value of the asset at the date of death therefore market value at the date of death should be used. It should not be affected by the final amounts paid to beneficiaries. In the instance where units are encashed, there could be a cost that could reduce the final cash amount and make it less than the value at the date of death as well as market movements.
The voucher for the L&D account and SARS would be the IT3b or IT3c issued by the financial institution.