When a person passes away and their estate is wound up, to the extent that anything is bequeathed to a surviving spouse, that bequest will not be considered dutiable for Estate Duty purposes but will instead be precluded and exempted by section 4q of the Estate Duty Act (“the Act”). However, is there a limit on the number of times (and spouses) this deduction can be claimed?
For ease of reference, section 4q of the Act reads -
“(q) so much of the value of any property included in the estate which has not been allowed as a deduction under the foregoing provisions of this section, as accrues to the surviving spouse of the deceased: Provided that—
(i) the deduction allowable under the provisions of this paragraph shall be reduced by so much of any amount as the surviving spouse is required in terms of the will of the deceased to dispose of to any other person or trust;
(ii) no deduction shall be allowed under the provisions of this paragraph in respect of any property which accrues to a trust established by the deceased for the benefit of the surviving spouse, if the trustee of such trust has a discretion to allocate such property or any income therefrom to any person other than the surviving spouse.”
In order to answer this question, it is necessary to consider two scenarios. The first is where the Deceased was married to multiple spouses in terms of Customary law. The second scenario is where the Deceased was married to one spouse who then predeceased him/her. The surviving spouse then remarried only for that spouse to also predecease him/her and so on.
In the first scenario, the surviving spouses of the Customary law marriage share whatever is left of the section 4A abatement (the first R3.5 million that is free of Estate Duty) that was not left to them. This is as per the wording of section 4A(3) of the Act. To simplify it by way of an example is if there are two surviving spouses and only R1 million of the section 4A abatement is used by the Deceased’s estate, then the surviving spouses are entitled to their respective section 4A abatement on their deaths together with an equal share of the Deceased’s residual R2.5 million (being the R3.5 million less the R1 million utilised so each surviving spouse in this example will be able to claim R4.75 million abatement).
The second scenario is more tricky but is dealt with in terms of section 4A(2) of the Act. As per this section, if the surviving spouse was married to a predeceased spouse, then on his/her death, the full R7 million is deducted from the estate as an abatement from his/her estate (their R3.5 million abatement as well as the predeceased spouse’s R3.5 million abatement). In addition, the share of the predeceased spouse’s estate bequeathed to the surviving spouse is then offset from the R7 million. If the surviving spouse had a number of predeceased spouses, then this is done for each of the predeceased spouses.
As can be seen, the Act is quite thorough. Although the Act allows for ‘double dipping’, section 4A ensures that regardless of the number of predeceased and surviving spouses, the net effect is that each estate can claim an abatement of up to a maximum of R7 million.
