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C Deemed property
Insurance policies
i) Includes proceeds of domestic insurance policies taken out on the life of the
deceased, irrespective of who the owner (beneficiary) is.
The policy must be a ‘domestic’ one, in other words, a policy payable in
South Africa in South African currency (ZAR).
ii) The proceeds of such a policy are subject to estate duty, however these can
be reduced by the amount of the premiums, plus interest at 6% per annum,
to the extent that the premiums were paid by the person (the beneficiary)
entitled to the proceeds of the policy. Premiums paid by the deceased
himself are not deductible from the proceeds for estate duty purposes.
iii) If the proceeds of a policy are payable to the surviving spouse or child of
the deceased in terms of a properly registered antenuptial contract (i.e.
registered in the deeds office) the policy will be totally exempt from estate
duty.
iv) Where a policy is taken out on each other’s lives by business partners, and
certain criteria are met, the proceeds are exempt from estate duty.
v) The proceeds of any other policy not covered by the exemptions listed in (iii)
and (iv) are also exempt from estate duty if (a) the policy was not affected
by or at the instance of the deceased (b) no premium on the policy was paid
by the deceased (c) no part of the proceeds have been or will be paid into
the estate of the deceased and (d) no part of the proceeds will be utilised for
the benefit of a relative or dependant of the deceased. This could cover the
scenario of key man insurance.
Benefits payable by pension and other funds by or as a result of the death of
the deceased
u Payments by such funds (pension, retirement annuity, provident funds)
usually consist of two components – a lump sum payment on death and
an annuity afterwards. The lump sum component used to be subject to
estate duty. However as from 1 January 2009, no amount received from
such a fund will be included in the estate of the deceased for estate
duty purposes. However, so much of all the contributions made by the
deceased in consequence of membership or past membership of any
retirement annuity fund, that has not been deducted upon death, will be
subject to Estate Duty.
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