PROPERTY NEWS - By definition, inheritance is the practice of passing on private property, titles, debt, rights, and obligations upon the death of an individual. The rules of inheritance differ among societies and have changed over time.
The testator (the individual signing the will) can bequeath his or her property to any person or persons by drawing up a will.
• The Administration of Estates Act, which regulates the disposal of the deceased's estate.
• The Wills Act, which affects all persons with a will for their property.
• The Intestate Succession Act, which governs the distribution of estates of all deceased persons who have property and who die without a will.
Heirs who inherit property are typically children, descendants, or other close relatives of the descendant. Spouses typically are not legally considered to be heirs, as they are instead entitled to properties via marital or community property laws.
While home inheritance is beneficial for most recipients, others may experience financial difficulty due to the estate or inheritance taxes.
Therefore, anyone receiving a house or property or both from a loved one needs to understand essential factors in this regard.
There are three main ways that people typically pass down properties that are a part of their estate. All of them require forethought and planning, and the establishment of an up-to-date and indisputable will.
Having a capable executor also goes a long way in minimising stress and the complexities involved in the process.
• Direct transfer to a beneficiary
If you plan to pass on your property to an individual - your spouse or child for example - you can specify that the title deed is transferred directly into their name on your passing. This can also be done for multiple beneficiaries, who would then become co-owners of the property.
• Deceased sale with profits distributed to heirs
An alternative to transferring your property as a whole asset is to instruct your executor to sell it after your death and add the proceeds to your estate. This can make it easier to split the value of your property between multiple heirs, particularly if none of them are likely to want to live in your home.
• Property placed in trust before death
Placing your property, or properties, into a trust before you die is often regarded as one of the most efficient and least traumatic ways to ensure that your legacy is enjoyed for generations. This is because trusts do not form a part of your estate at all - they are considered immortal legal entities in their own right.
By nominating your heirs as beneficiaries of the trust that owns your property, they can enjoy its benefits, including any rental income, without having to worry about dealing with sales, transfers, estate duty or capital gains tax. This is a simple and cost-effective option.
• Leaving a legacy is gifting an asset and its related future wealth.
• Renting out the inherited house or apartment will provide passive income and the increase in the value of the property adds monetary value to grow the owner's asset portfolio.
• Additional tax deductions can also be applied if the property is used for the generation of income.
• It can be a huge boost to an individual or family's private wealth.
Cons of property inheritance
• There might be outstanding debt on the property.
• Beneficiaries need to consider the estate taxes and other financial implications associated with the inheritance.
• Other expenses related to maintenance, possible renovations and monthly rates and taxes need to be taken into account.
Any person of 16 years and over is free to make a will in order to determine how his/her estate should devolve upon his/her death. If you die without leaving a valid will, your estate will devolve in terms of the rules of intestate succession, as stipulated in the provisions of the Intestate Succession Act, Act 81 of 1987.
• If the deceased is survived by a spouse, but no descendants, then the spouse will inherit the whole estate.
• If the deceased is not survived by a spouse, but is survived by descendants (children), then the descendants inherit the entire intestate estate equally. In this instance, should any one child have predeceased the deceased parent, leaving children of his own, then his children (the deceased's grandchildren), will inherit the share of his/her deceased parent.
• Where the deceased person is survived by a spouse and children, the surviving spouse inherits whichever is the greater of either a child's portion (also called a child's share) or an amount fixed from time to time by the Minister of Justice. The amount is presently R250 000. The descendants of the deceased then inherit equally what is left (called the residue) of the intestate estate.
• In case of a marriage in community of property, one half of the estate belongs to the surviving spouse and, although it forms part of the joint estate, will not devolve according to the rules of intestate succession.
Inheriting a property is an opportunity for wealth creation and a way in which to solidify wealth across generations, while retaining and celebrating history, culture and family ties. What is key is writing a legal will and possibly discussing the matter of bequeathing a property with the potential beneficiary.
This way the beneficiary can carefully consider the various expenses and legalities in good time.
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