The reader is an only child and inquires whether such a transfer is possible and what costs would be involved in doing so.
In this scenario, both parties need to be cognisant of the potential costs involved in such a transfer.
The transfer of a fixed property normally takes place in two ways.
It is sold by the owner to a purchaser, or, it is donated by the owner to a beneficiary.
It would not appear that the intention is for the reader’s mother to sell the property to her daughter but rather to give the property to her.
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While such a transaction is permissible in law, it may carry certain tax consequences because SARS treat donations and gifts differently to inheritances.
Thus, where a donation is made, donations tax of 20% is payable, subject to an annual exemption of R100 000.
Although we are not advised of the value of the property concerned, we can safely assume in today’s market that it exceeds the exempted amount of R100 000.
If, for example, the fixed property is valued at R800 000, the first R100 000 will be exempt from donations tax and the balance will attract donations tax of R140 000.
Other more tax friendly solutions may exist but such solutions should be sought with aid of an expert in the field, who will take into account the personal financial circumstances of the reader’s mother.
Notwithstanding whether the fixed property concerned is sold or donated, other costs will also need to be considered.
If there is an outstanding bond on the property, it will need to be settled before the bondholder consents to the transfer of the property.
Depending on the circumstances, the reader may be required to obtain a bond in her name in respect of the property before the transfer will be permitted.
Bond cancellation and/or registration will attract a prescribed fee.
Additionally, the conveyancing attorney will charge a fee to see to the registration of transfer of the fixed property into the name of the reader.
In the aforementioned circumstances, transfer duty will be payable at prescribed rates which, at this time, are those applicable as from March 1, 2016.
Properties with a value below R750 000 are exempt while properties with a value from R750 001 to R1 250 000 attract duty at 3% on the value above R750 000.
Higher value properties attract increasing duties.
The scenario where the reader’s mother leaves the property to the reader in her will may be a preferable option depending on costs and estate planning considerations.
It may be preferable for the property to be transferred in advance of demise, perhaps to reduce the value of the estate and, accordingly, estate duty.
This should be weighed against the costs involved as mentioned above.
Transfer duty is not applicable to property transfers from an estate to a beneficiary under a will.
The will should be drafted so as to properly reflect the wishes of the reader’s mother and the required formalities for a valid will should be applied.
The estate will have to cover any other costs in order to effect the transfer so the estate should ideally have sufficient cash available to cover any such costs.
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