Deceased Estates

[oscar 87]

As we are going through a Global Pandemic its  been a good time to make provisions for the afterlife. Especially living in NYC

Regarding Wills and Beneficiaries. 

On life insurance policies whoever you nominate as a beneficiary gets paid out directly by the insurance company. This money does not get paid into the Estate unless you specify it on your policy.  If you are Bankrupt your creditors can claim from your estate, so its a good thing to nominate beneficiaries on a insurance policy as if you are in Bankruptcy or Chapter 13 your creditors cannot claim the proceeds.

On 401k plans its always good to have one beneficiary as the proceeds from a 401k is Taxable.

So my question if I nominate family in South Africa as beneficiaries on life insurance cover do they just deposit the check in SA or does this have to be declared to SARS. Does anyone know the procedure involved.

 

 

 

[Malamute 127]

Probably best to consult a tax expert, but my understanding is this:
1.  If your life insurance policy is in the USA and the beneficiary is in South Africa, then the funds paid out in South Africa would be treated according to South African tax law.  This means that while the payout from a life insurance policy in the USA is not taxed, this is not the case in South Africa.

2.  In South Africa, only if the beneficiary is a spouse/partner, is the payout not taxed.  If it is someone else, it is taxed.

3.  As the life insurance policy in the USA may not be deemed to be the same - from an actuarial standpoint - as one in the RSA, even this concession may not apply.  (e.g. if you, as a US citizen are the beneficiary of a life insurance policy held in South Africa, that policy is not deemed to be a USA compliant life insurance - and would be subject to normal tax - and not exempt from tax like a USA based policy

4.  So, if your beneficiary, who is not your spouse, but is in South Africa, were to receive a payout, it would not be deemed to be a life insurance type payout - but in anycase, subject to tax.  They could claim the R100k annual exemption from paying tax on a donation from someone not their spouse, but would have to declare the amount received to SARS and be taxed on it.  This would be the same way it is treated if you gave them a payout while you were alive, vs an insurance company giving them a payout when you were deceased.

Keen to hear what anyone else can add.

[SJ272 139]

Similar question asked to SARS on their site, below. Must be declared but doesn’t sound it like it will be taxed in SA

https://www.sars.gov.za/FAQs/Pages/2100.aspx

Agree that consulting a SA tax expert is a good idea. 

[oscar 87]

Thanks for the replies, My plan is to make some family members in SA as beneficiaries on a life insurance policy. When converted into South African rand it will be about ZAR 4 million each. (Total of ZAR 8 Million)  So looks like I need to make copies of the life assurance application and last will and Testament. I guess it may well be taxable in SA.

 

[SJ272 139]

My tax guy in Cape Town was really good navigating SARS/money moving in and out etc, lmk if you want a recommendation for some advice.

[oscar 87]

Thanks would appreciate it. I have a Executor of my estate here and a lawyer in Baltimore , but just want things to run smoothly in the end.    

[SJ272 139]

Ok not sure if it would be seen as advertising so I’ll PM you the details 

[oscar 87]

Thanks SJ272 & Malamute, I appreciate all the advice and suggestions. Not that I'm checking out soon. With this Covid-19 Pandemic it almost forces you to get your affairs in order.

We have also purchased / booked a burial plot - with a good view. LOL