Changes to put an end to a popular estate duty avoidance scheme are underway. An amendment to the Estate Duty Act in 2008 inadvertently created an opportunity, which translated into lump sums from retirement funds, not being subject to estate duty.

Such transfers gave rise to large amounts getting invested into a retirement annuity as part of their estate planning. As a result proceeds of the retirement annuity, after the member’s passing, would be paid to its beneficiaries as a lump sum – free of paying estate duties.

In its 2015 Budget Review the Minister of Finance stipulated that contributions to a retirement annuity – not tax deductible in the year they were made and therefore available as part of the tax-free lump sum upon the members’ death – will, for estate duty purposes, in future be included in the deceased member’s estate and could attract 20% in duties.

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