O-YES Properties | Property Inheritance

Property Inheritance

When a loved one dies, the remaining family members have more than enough stress to deal with without being burdened with problems relating to the inheritance of fixed property.

Saving your heirs unnecessary heartache requires forethought and planning, as well as an up-to-date and incontestable will. In addition, you need to nominate a competent person as the executor to deal with the complexities involved in winding up even the least complicated estate.

When planning your estate, there are several options for passing on fixed property to your heirs.

Direct transfer

If you intend to have your property inherited by an individual - your spouse or sibling, for instance – you can specify in your will that the title deed must be transferred directly into their name when you die.

You can also specify direct transfer to more than one beneficiary, but this often causes complications. All the nominated beneficiaries would be co-owners of the property and may not agree on how they will use the property or whether to sell it.

Transferring property into a beneficiary’s name can take a long time. The transfer can only be completed once certain estate formalities have been concluded, which can take several months – or even years in some instances.

During this time, municipal rates and taxes will still be payable on the property. Also, although no transfer duty will be payable, the estate will still need to cover conveyancing costs, deeds office fees and various other costs. Therefore, to ensure your beneficiaries are not left out of pocket, it is wise to leave enough funds in the estate to cover all these costs until the estate is finalised.

Sale

Another alternative is to instruct the executor to sell your fixed property after your death and include the proceeds in your estate. This method will make it easier to share your assets equally if you have several heirs.

The sale of fixed property in a deceased estate can take place as soon as the Master of the High Court has approved the appointment of the executor. However, the proceeds of the sale will remain in the estate until all the formalities have been completed.

As with the direct transfer method, you should also plan to have cash available in your estate to cover costs such as clearance certificates, rates and taxes and bond cancellation fees until the date of transfer. The buyer will be liable for the conveyancing costs, so these will not be for the estate’s account.

 

 

Trust

Trusts are considered legal entities in their own right and will not form a part of your estate. For this reason, placing fixed property into a trust before you die is regarded as an efficient way to pass on property – or properties – to the next generation.

If you nominate your heirs as beneficiaries of the trust that owns your property, they can reap the benefits – such as rental income – without being concerned with sales, transfers, estate duty or capital gains tax. They can also use the trust to pass on the property to their heirs when the time comes.

Another advantage of trusts is that they are not frozen when you die, unlike other assets such as bank accounts. Your dependents, therefore, can still have access to cash while your estate is being finalised.

Setting up a trust does incur some additional costs, and there are special rules for buying property in the name of a trust rather than as an individual. You can also transfer ownership of your existing property into a trust, which will incur extra costs. However, in spite of the upfront expense, the reduction in estate duty through the removal of major assets from your estate can be significant.

One disadvantage is that trusts are liable for income tax at a higher rate than most individuals, so limiting their liquidity to essentials is best. A tax adviser or estate planning specialist will be able to advise you about the optimal type of trust for your situation.

A will

Irrespective of how you plan to leave your fixed property, a carefully-worded will is indispensable when planning your estate. Whatever your assets, it is recommended that you get sound legal advice before deciding on your estate plan and make sure your beneficiaries know who to contact when the time comes.

Courtesy of Private Property | Sarah-Jane Meyer |

 

 

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