Use section 73 to reduce estate duty

Under section 73 of the Conveyancing and Law of Property Act, a policyholder can take up a life assurance policy and pledge it for the benefit of specified beneficiaries. Each policy will form a separate estate.

Here is an example of the use of Section 73 to save on estate duty

When a wealthy person passes away, the estate has to pay estate duty as follows:

- first $600,000 if free of tax
- next $x million will be taxed at 5%
- any excess will be taxed at 10%

The wealthy person can reduce the estate duty as follows:

- take a separate policy under section 73 for each beneficiary
- each policy is treated as a separate estate.
- the tax impact is lower.