Financial Planning 3B
Estate Duty (Part 1) Tutorial
Question 1
Darren Murphy moved to South Africa 15 years ago. He is 45 years old and married Jolene out of
community of property. They have 2 children, Mike and Tamara. Darren contracted Covid-19 and
died in July 2021.
Footnote
2
His estate consists of the following:
House in Botswana
R1 800 000
Farm in Rustenburg (Note 1)
R6 100 000
Beach house in Port Edward (RSA)
R2 200 000
Shares in company (private)
R1 000 000
Motor vehicles
FNB money market fund (Note 2)
R3 000 000
Life Policy – Jolene nominated beneficiary
R1 300 000
Policy ceded to bank
R1 100 000
Policy payable to estate
Footnote
R600 000
R300 000
3
Notes
1. Bona fide farming was conducted on the farm in Rustenburg
2. The FNB money market account will be bequeathed to a discretionary trust for the benefit of their
children.
3. Darren’s will provides that his entire estate devolves on Jolene
4. Executor is registered for VAT.
Required:
Calculate executor’s fees – show all calculations
Footnote
4
Solution
Farm in Rustenburg
R6 100 000
Beach house in Port Edward (RSA)
R2 200 000
Shares in company (private)
R1 000 000
Motor vehicles
R600 000
Policy payable to estate
R300 000
Policy ceded to the bank as security
R1 100 000
FNB Money Market Account
R3 000 000
R14 300 000
Executor’s fees @ 4.025% = R575 575
Footnote
5
Question 2
Peter (59) and Bonnie (57) were married out of community of property with accrual system. They
were in a motorcar accident on their way back from the holidays and Peter passed away on 10 June
2021. The couple had only one son, Nathan (31).
Peter’s assets and liabilities at the date of his death consisted of the following:
Assets
Home in Parys
Jewellery (Note 2)
Holiday cottage in Drakensburg- inherited from father in 1986
R3 700 000
R25 000
R4 500 000
Cash investments
R250 000
Policy to spouses
R1 500 000
Policy ceded to the bank as security
Liabilities
R500 000
Income tax
R60 000
Credit card
R80 000
Footnote
6
Notes
1. An accrual claim calculation was conducted and it was determined that Bonnie was entitled to an
accrual claim of R557 150 against Peter’s estate.
2. Peter promised his nephew that he would inherit his jewellery when Peter died one day. The
jewellery has a market value of R25 000 on the date of death.
3. Administration and other costs, including the Master’s fee amounted to R123 000.
Required:
Calculate the estate duty payable by Peter’s estate
Footnote
7
Solution
Property
Home in Parys
R3 700 000
Holiday cottage
R4 500 000
Cash investments
Sub-total
R250 000
R8 450 000
Deemed Property
Donatio Mortis Causa to nephew
Life policy to spouse
Life policy ceded to the bank as security
Gross Estate
R25 000
R1 500 000
R500 000
R10 475 000
Calculation of executor’s fees:
R8 450 000 + 500 000 + 25 000 = 8 975 000 * 4.025% = R361 244
Footnote
8
Continuation of the solution
Less: Deductions
Income tax
(R60 000)
Credit card
(R80 000)
Section 4(q) – policy payable to spouse
(R1 500 000)
Administration and other costs (including Master’s fees)
(R123 000)
Executor’s fees
(R361 244)
Section 4(IA)(accrual)
(R557 150)
Net Estate
R7 793 606
Less: Section 4A Abatement
Dutiable Estate
Estate Duty @ 20%
Footnote
(R3 500 000)
R4 293 606
R858 721
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