No extra tax incurred if you leave property to your heirs

For no reason that he can identify, says Mike van Alphen, National Manager of the Rawson Property Group’s bond origination division, Rawson Finance, some people are under the impression that if they have a residential property to leave to an heir this will involve a higher tax level than if cash or shares are bequeathed.

“This,” said van Alphen, “is simply not the truth. The only cost that the beneficiary will pay on taking over his property is the relatively small attorney’s transfer fee. Transfer duty is not payable on a bequeathed property. The transfer costs, which work on a sliding scale calculated by the Law Society, are relatively low.”

When an estate is being wound up, said van Alphen, the current value of the property will be estimated and included in the total amount of the estate. If this comes to more than R3,5 million (or R7 million where the beneficiary was married in community of property), a 20% estate duty tax will be payable – but this is the only tax liable on the property. Any capital gain on the property since it was first bought by the benefactor is not payable by the heirs or the estate.

“I am often asked by older people,” said van Alphen, “whether they should leave their properties as they are to their heirs. As explained, from a tax view point, there is no reason why this should not be done. From an investment viewpoint, however, I believe it also makes a great deal of sense, especially if the benefactor prevents his heirs from selling the property for a stipulated period of time.”

The reason for this, said van Alphen, is that time and again he has seen inherited cash thrown away on unsound get-rich-quick projects or investments, but property almost always represents a very sound investment and rents collected each month by a reputable agent can support and simplify the lives of a young family to a remarkable extent.

“It should not be forgotten,” added van Alphen, “that right now property is starting to appreciate again and I have no doubt that this process will continue. It may not be the most spectacular investment, but from a safety and income producing angle property is a very sound bet.”

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