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Portable R3,5 million deduction between spouses

The Act allows for the R3.5 million deduction from estate duty to roll over from
the deceased to a surviving spouse so that the surviving spouse can use a
R7 million deduction amount on death. The portability of the deduction will apply
to the extent that the first dying spouse did not use the whole abatement

The past technique of bequeathing R3,5 million away from the surviving spouse
(often to a trust) so as to reduce the estate of the surviving spouse, and thus
reduce estate duty liability in the second dying’s estate, was not always a viable
one as often this meant that access to cash and capital became more difficult
for the surviving spouse.

The portable deduction between spouses now allows any part of the abatement
not used upon the death of the first-dying to be available to the surviving spouse,
making it possible for spouses not to use this mechanism to save duties.

However, should the spouses have substantial estates, such that the surviving
spouse would not require the additional R3,5 million worth of assets, it is still
preferable to bequeath this amount away from the survivor upon the death of the
first dying, as it would otherwise increase the future growth of the surviving spouse’s
estate, and consequently increase estate duty liability in the survivor’s estate.

This list is not exhaustive. Due to the limitations in scope of this guide, only the
most pertinent allowable deductions have been expanded upon. Detail on other
allowable deductions such as limited interests received as a gift, improvements
made by beneficiaries, improvements to property subject to limited interest,
accrual claims (by surviving spouse against deceased estate), books and works
of art lent to the state, limited interests created by a predeceased spouse and so
on, have not been detailed, and it is advisable to consult with your professional
adviser for further information on these.

E Rebates

R3,5 million abatement

■■ The Act allows for the R3,5 million deduction from estate duty.

■■ This applies to all estates, which means that all estates under R3,5 million
are exempt from estate duty.

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