IT is often said that there are two things certain in life: death and taxes. What is also certain is that the two go hand in hand and death does not mean the end of the payment of taxes.

A personal representative (an executor or administrator) who intends to apply to the court for a grant of Probate or Letters of Administration to wind up a deceased person’s estate is required by law to pay two sets of taxes which are often referred to collectively as “death duties”. The law has recently been amended to ease the tax burden associated with death duties.

The first tax payable is stamp duty, which is now calculated on the following graduated scale:

*$5,000 — where the net value of the estate does not exceed $10 million;

*$10,000 — where the net value is above $10 million but does not exceed $20 million;

*$15,000 — where the net value is above $20 million but does not exceed $30 million;

*$20,000 — where the net value is above $30 million but does not exceed $40 million; and

*$25,000 — where the net value of the estate exceeds $40 million.

A ‘one-off’ sum of $2,000 is payable for the stamping of the Oath of the Personal Representatives.

The second death duty is transfer tax on death, which is now 1.5 per cent of the value of any real estate or shares owned by the deceased at the date of his or her death. Transfer tax is payable before the deceased’s estate can be transferred to the beneficiaries. In order to have this tax assessed, the personal representative has to submit a revenue affidavit to the Tax Audit & Assessment Department. This affidavit should include particulars of all real estate and shares that the deceased was competent to dispose of at the date of his or her death as well as their corresponding value, as at the date of death.

Allowances and Exemptions

The Transfer Tax Act makes certain allowances and provides certain exemptions that may reduce, or in some cases negate, the need for the payment of transfer tax on death. In particular, the law provides that where the deceased, immediately before his or her death, co-owned a dwelling house with either his or her spouse; mother or step-mother; father or step-father; children (including step-children) and grand-children; siblings; or grandparents; and that dwelling house was used as the principal residence of both the deceased and the relevant above-named relative(s), then transfer tax will not be levied against that dwelling house.

Moreover, certain funeral expenses, just debts, and encumbrances of the deceased and outstanding mortgage debts may reduce the amount of transfer tax payable on death.

The allowances and or exemptions should be noted in the revenue affidavit so that they can be taken into account on assessment.

Death duties are required to be assessed and paid within the year following the deceased’s death. Otherwise, interest is charged at the rate of six per cent per annum until the duties are paid.

Personal representatives should be mindful of the allowances and exemptions that apply to the payment of death duties. These can go a far way in easing some of the burdens they face in performing their functions to properly wind up the estates for which they are responsible.

Corrine Henry is an Associate at Myers, Fletcher & Gordon in the firm’s Litigation Department. Henry may be contacted at corrine.henry@mfg.com.jm or www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.