- Forum Admin wrote:
- Bart Hi,
Thank you for a very informative piece.
Do you have any indication what the Estate Duty implications are. Will , for instance, a Key-man policy still be Estate Duty exempt if it conforms to the old rules ( not having been taken out at the instance of the insured, Family Co etc etc)
Keyperson policies will still enjoy the Estate Duty exemption if it conforms with the requirements of sec 3(3)(a)(ii) of the Estate Duty Act, and just to confirm these requirements:
Policies on the life of the deceased owned by a third party are deemed to be property in the estate of the deceased for estate duty purposes (s.3(3)(a) of the Estate Duty Act).
However, the proceeds of a keyperson policy will not be deemed to be property in the deceased’s estate if the requirements of s.3(3)(a)(ii) are met, namely:
(i) the policy was not effected by or at the instance of the deceased; and
(ii) no premium was paid or borne by the deceased; and
(iii) no amount due or recoverable under the policy has been or will be paid into the estate of the deceased; and
(iv) no amount has been or will be paid to or utilised for the benefit of:
· any relative of the deceased, or
· any person who was wholly or partially dependent on the deceased, or
· any company which was at any time a family company in relation to the deceased.
A “family company”, as defined in the Estate Duty Act, means any company other than a quoted company which at any relevant time was controlled or capable of being controlled directly or indirectly, by way of majority holding of shares or any other interest or in any other manner by the deceased, or by the deceased and one or more of his/her relatives.
A “relative” of a person, as defined in the Estate Duty Act, means the spouse of that person or anybody related to him/her or his/her spouse by blood within the
third degree or any spouse of anybody so related. Parents, brothers and sisters and their spouses, and the children of brothers and sisters and their spouses thus qualify as relatives.
If the policy does not qualify for this exemption, the policy proceeds less premiums plus 6% compound interest will be deemed an asset in the estate in terms of section 3(3)(a) of the Estate Duty Act.
In terms of present departmental practice only the net proceeds of the policy after the estate duty has been deducted, will be subject to income tax.