In terms of the Estate Duty Act, Act 45 of 1955 as amended (‘the Act’), an amount of R3.5-milion can be deducted from the nett value of the deceased estate to arrive at the dutable amount (i.e. the amount of tax the estate will pay).

The nett value of an estate is the gross value of the estate (all the property of the estate plus all property deemed to be property) less all the deductions and rebates. The rebate being the R3.5-million.

The Act was amended to include roll-over estate duty. In terms of Section 4A of the Act a second dying spouse can roll over any unused portion of the estate duty abatement which the first dying spouse was entitled to. This amendment is effective for any estate of a person who died after January 2010.

Section 4 thus stipulates that the amount of R3.5-million can be rolled over to the surviving spouse and the surviving spouse can thus use a R7-million dedcution on his/her death. The dutable value of the estate of the surviving spouse will be reduced by whatever portion of the primary abatement was unused in the first dying spouse’s estate.

It is important that the surviving spouse keep a copy of the predeceased spouse’s estate duty return in order for him/her to make use of the roll-over abatement.

An example of how section 4 would work in practice:

Mr X and Mrs Y are married. Mr X passes away. The net value of Mr X’s total estate is R 500 000.00. The executor of his estate uses R 500 000.00 of the abatement to eliminate any estate duty. Mrs Y passes away and the net value of her estate is R10-million. Mrs Y’s estate is entitled to the total R7-million deduction, minus the R500 000 used for Mr X’s estate. Thus a deduction of R6.5-million will be allowed.

The reason for the roll-over estate duty was because couples use various other means to eliminate estate duty and to ensure that persons who are unable to afford estate planning will also be benefitted.

Written by Anye Jansen van Rensburg, Schoeman Law Inc