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HOW DOES INHERITANCE WORK?

When someone dies they normally have what is called a ‘will’. The people who benefit from this ‘will’ are known as the heirs. Upon someone death, the heirs receive an ‘inheritance’. The person who administers the will of the deceased is called an ‘executor’.

What legislation affects inheritances?

South Africa’s inheritance laws apply to every person who owns property in South Africa.

The three main statutes governing inheritances in South Africa are:

  1. The Administration of Estates Act, which regulates the disposal of the deceased’s estates in South Africa;
  2. The Wills Act, which affects all testators with property in South Africa;
  3. The Intestate Succession Act, which governs the devolution of estates for all deceased persons who have property in the Republic and who die without a will.

All property located in South Africa is subject to these laws, and there are no separate laws for foreigners. Immoveable property is not treated any differently to other types of moveable assets for inheritance purposes. Inheritance issues of foreigners and South African citizens are primarily dealt with by the Master of the High Court; however, if a dispute arises, then the case can be heard in any High Court of South Africa.

Foreigners who acquire immovable property in South Africa through purchase or inheritance must register their transfer of ownership by registering a deed of transfer with the Registrar of Deeds in whose area the property is situated. The process of registering a deed of transfer is carried out by a conveyancer, or specialised lawyer, who acts upon a power of attorney granted by the owner of the property.

Tax and inheritance

In South Africa, there is no tax payable by the heirs who get an inheritance. Capital Gains Tax (CGT) is also not payable by the recipient of an inheritance. Estate Duty and CGT, where applicable, are usually payable by the estate. If it is a foreign estate, it will be subject to the taxes of its country of origin.

What about donations or gifts?

Donations and gifts are treated differently to inheritance. For individuals, donations are subject to a Donations Tax of 20%, with an annual exemption of up to R100,000 of the value of all donations made during the tax year.

  • Non-residents are not subject to Donations Tax. However, in cases where the resident donor transfers his property to a non-resident (donee), and the resident donor fails to pay the Donations Tax, the non-resident (donee) and the resident (donor) will be jointly and severally liable for the tax.
  • Donations between spouses are exempt from Donations Tax, as are donations made to certain public benefit organisations. 

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Reference

The South African Revenue Service (SARS)

VERHUUR VAN EIENDOM AAN BUITELANDERS

Om eiendom in Suid-Afrika te verhuur, is ‘n eenvoudige proses. Die land beskik oor ‘n wye verskeidenheid huurakkommodasie, insluitend enkelwoonstelle in woonstelblokke, Victoriaanse kothuise, losstaande huise met groot tuine, en skakelhuise in moderne meenthuiskomplekse.

In Suid-Afrika is die reg van ‘n buitelander om vaste eiendom te koop, in die verlede beperk deur die Wet op Vreemdelingebeheer. Hierdie beperkings is egter in 2003 opgehef deur die nuwe Immigrasiewet (“die Wet”), wat die Wet op Vreemdelingebeheer en baie van die beperkende bepalings daarin herroep het en nou duidelik omskryf wie ‘n wettige buitelander is en wie nie. In kort, ‘n wettige buitelander is ‘n persoon wat in besit is van ‘n wettige tydelike verblyfpermit of ‘n permanente verblyfpermit wat deur die Departement van Binnelandse Sake goedgekeur is.

Die nuwe Wet maak voorsiening vir verskeie tydelike verblyfpermitte wat aan buitelanders uitgereik kan word, insluitend onder andere:

  • ‘n Besoekerspermit
  • ‘n Werks- en entrepreneurspermit
  • ‘n Afgetrede persoon permit

In beginsel mag ‘n huiseienaar of verhuurder wettiglik eiendom verhuur of vaste eiendom verkoop aan enige persoon wat volgens die Wet as ‘n wettige buitelander beskou word.

Buitelanders wat in Suid-Afrika werk met ‘n wettige werkspermit, word nie deur die Suid-Afrikaanse Reserwebank as nie-inwoners beskou nie. Hulle word as inwoners beskou vir die duur van die tydperk wat hul werkspermit toelaat en word dus nie beperk tot ‘n lening van slegs 50% van die koopprys nie.

Dit is ook belangrik om kennis te neem dat die Wet die verhuur of verkoop van vaste eiendom aan ‘n onwettige buitelander as krimineel beskou deur hierdie transaksie gelyk te stel aan die verleen van hulp en bystand aan ‘n onwettige buitelander, wat in terme van die Wet as ‘n kriminele oortreding geklassifiseer word.

Ten slotte, ‘n wettige buitelander mag eiendom huur of vaste eiendom in Suid-Afrika koop, mits hy die houer is van óf ‘n wettige tydelike verblyfpermit óf ‘n permanente verblyfpermit wat deur die Departement van Binnelandse Sake goedgekeur is. Doen deeglik navraag by u potensiële huurder of koper of hy wettiglik in Suid-Afrika is en versoek die vereiste bewyse van hom voordat u enige transaksie met ‘n buitelander aangaan. Neem ook kennis van die beperkings op plaaslike finansiering, veral waar die verkryging van finansiering ‘n voorwaarde van die ooreenkoms is.

Hierdie artikel bevat slegs algemene inligting en moenie gebruik of beskou word as regsadvies of ander professionele advies nie. Geen aanspreeklikheid word aanvaar vir enige foute of weglatings of vir enige verlies of skade weens vertroue op hierdie inligting nie. Raadpleeg altyd u regsadviseur vir spesifieke en gedetailleerde inligting. Foute en weglatings uitgesonder (FWU).

Verwysings:

http://www.expatarrivals.com/south-africa/accommodation-in-south-africa

http://www.avidfirefly.co.za/00000/index.php?option=com_k2&view=item&id=92:can-i-lease-or-sell-my-house-to-a-foreigner?

INHERITANCES AND TAX

IS TAX IMPOSED ON SUMS OF MONEY WHICH HAVE BEEN INHERITED?

Any asset which is attained by an heir to a deceased estate is termed as a ‘capital receipt’ and is not included in the heir’s gross income. Thus, tax is not payable by an heir who receives an inheritance from a deceased estate. Further, an heir to a deceased estate is not liable for payment of Capital Gains Tax (CGT). Any CGT which would be due by the estate is payable before the inheritance is transferred to the beneficiaries. As mentioned above, an asset does not give rise to a capital gain at the time of its inheritance – any capital gain or loss is only worked out once the asset is ultimately sold or disposed of in any other manner.

WHAT IS ESTATE DUTY?

During a person’s lifetime, all one’s income is taxable, that is, up until one’s date of death. After a person’s death, a new taxable entity is formed, which is called an “estate”. Every death must be reported to SARS, even if the estate is not liable for the payment of ‘Estate Duty’.

The estate of a deceased individual is subject to an amount of 20% Estate Duty. This percentage is only imposed once a deduction of R3.5 million against the net value of the estate has been taken into account. To illustrate this, see the worked example below:

Net value of estate:                                                                         R4 million
Estate duty only dutiable on the amount exceeding: R3.5 million
Amount exceeding R3.5 million:                                             R500 000.00
20% of R500 000.00:                                                                     R100 000.00

Thus, the executor of the estate will be responsible for paying the amount of R100 000.00 to South African Revenue Service (SARS) in Estate Duty.

Estate Duty is due to SARS within one year of date of death, or 30 days from date of assessment if assessment is issued within one year of date of death. Currently, interest is charged at 6% p.a. on late payments.

Compiled by: Laura Ames

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

APPOINTMENT OF THE EXECUTOR OF MY WILL

A3This is a subject which causes more and more discussion and people become more knowledgeable about Executor’s fees and how it is calculated once a person dies and his or her estate is left to the Executor to wind up.

The maximum Executor’s fee is fixed by law. The current maximum permissible Executor’s fee is 3.5% of the gross estate value plus 14% VAT (should the Executor be registered for VAT).

It seems as though this fee is very fair or even at a very low percentage, but let us illustrate with an example:

Let us suppose that the gross estate value is R2 million. Due to the drastic increase in the value of fixed property over the last few years it is quite possible to attain a gross estate value of R2 million and very realistic if you own fixed property.

R2 million x 3.5% = R70 000-00

Plus 14% VAT = R9 800-00

Total Executor’s fee = R79 800-00

This Executor’s fee does not include any additional administrative costs such as transfer fees of the fixed property or funeral costs. Thus it becomes clear that the cost of administering an estate to the value of R2 million could easily escalate to R100 000. The result is that more and more individuals consider appointing the person who lives longest or another family member as Executor, assuming that the appointed Executor is then enabled to negotiate an Executor’s fee with an institution or law firm which will then act as the appointed Executor’s agent.

It does happen, however, that the appointed Executor (e.g. the surviving spouse) is not well-informed about the actions he/she should take when his/her spouse dies, therefore he/she often appoints the first agent who offers his/her services. No negotiation takes place and the agent imposes the maximum tariff as fixed by the law.

Our recommendation is therefore the following:

  1. Appoint the person who lives the longest or another family member as Executor of your estate, but ensure that the appointed Executor is fully aware of the fact that he/she may negotiate the Executor’s fee with an institution; or
  2. Should you have every confidence in an institution, appoint that institution as Executor of your estate, but negotiate beforehand and fix the agreed tariff in your will. Do not leave it up to any other person to negotiate Executor’s fees after you have passed away.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

THE INTERPLAY BETWEEN THE CONSUMER PROTECTION ACT AND THE NATIONAL CREDIT ACT, AND THE POSSIBILITY OF PENALTIES WITH EARLY SETTLEMENT OF CREDIT AGREEMENTS

A4Mr Black buys a BMW car in terms of a hire purchase agreement and the financing is done through BMW Finance. After a few months Mr Black inherits a huge sum of money and decides that he wants to settle the outstanding amount. Mr Black’s concern is whether the credit provider is entitled to charge a penalty fee for early settlement of the outstanding finance amount.

The first step in answering the abovementioned question will be to determine which laws regulate the situation. The legislation that applies here will be the National Credit Act 34 of 2005 and the Consumer Protection Act 68 of 2008.

In the above scenario a distinction should be drawn between the scope of each of these Acts, as the one pertains to the credit agreement itself and the other to the goods, being the BMW car. Section 5 of the Consumer Protection Act lists the situations in which this Act will apply. Section 5(2)(d) is of particular interest to Mr Black as it excludes credit agreements which are regulated by the National Credit Act. However, the goods or services provided in terms of the credit agreement are included and will be regulated by the Consumer Protection Act, whereas credit agreements as contemplated in the National Credit Act, specifically section 8(4)(c), includes hire purchase agreements (instalment agreements) in the ambit of the National Credit Act.

Mr Black’s situation illustrates the position as stated in Article 5(2)(d) of the Consumer Protection Act. The implication of this section is that all credit agreements that are subject to the National Credit Act will be governed by the National Credit Act, but the goods and services in terms of the agreement will fall within the scope of the Consumer Protection Act. It is here that the above acts overlap with each other. The overlap actually lies in that both acts can apply to one agreement. The credit agreement must comply with the National Credit Act, but the goods and services must comply with the Consumer Protection Act. If there is a defect in the quality of the goods or the service the Consumer Protection Act will provide the appropriate remedy, but if it is about the credit agreement itself, then the National Credit Act will apply.

Section 2(9) of the Consumer Protection Act deals with the interpretation of the Act and more specifically on how the law has to be interpreted in cases where there are discrepancies between the Consumer Protection Act and any other law. The Consumer Protection Act should be read in harmony with other legislation as far as possible, but if it is not possible, then the law that offers the most protection to the consumer shall apply.

The two sections in the National Credit Act which deals with the early settlement of credit agreements are sections 122 and 125 of the Act. According to section 122 of the National Credit Act, a consumer may terminate the credit agreement at any time. The consumer can do this by paying the settlement amount as calculated in accordance with section 125 of the National Credit Act.

Section 125 states that a consumer is entitled to cancel a credit agreement at any time with or without prior notice to the credit provider. The settlement amount will be the sum of the following amounts:

  • The outstanding balance of the principal debt / capital amount.
  • All rates and charges up to and including the settlement date. For example, if the outstanding amount can be settled after 3 months, then 3 months’ interest would be charged. The interest will be calculated on the principal amount borrowed.

In the case of a large credit agreement (R250 000.00 or more) the outstanding amount will be calculated as above, but with additional interest, known as an early settlement fee. The fee may not exceed an amount equal to three months’ interest on the capital amount.

Conclusion:
Therefore, if the BMW that Mr Black bought was worth more than R250 000.00 the credit provider will be entitled to charge a penalty fee of not more than 3 months’ interest on the capital amount. In the event that the purchased item’s worth is less than R250 000.00 the credit provider will not be entitled to charge a penalty fee.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice.

DON’T SPEED THROUGH LIFE

A3Jack Louw was used to driving fast cars – he was practically born with one foot on the accelerator. Jack was also born into a very rich family, which meant there was always money to pay for the fines he kept receiving for exceeding the speed limit. However, Jack’s luck would soon change and he might end up with more than a fine.

According to the National Road Traffic Act 93 of 1996 and the Regulations published on 17 March 2000, the general speed limits are: 60 km/h on a public road within an urban area; 100 km/h on a public road outside an urban area which is not a freeway, and 120 km/h on every freeway.

Prosecution or the imposition of a spot fine is automatic if you are caught exceeding the 60km/h and general speed limits. However, if you speed in a 60km/h zone, and it is greater than 100km/h, you will not have the option of paying an admission-of-guilt fine, but will have to appear in court to answer a charge of reckless or dangerous driving and contravention of the Act.

Depending on the seriousness of the offence, you may or may not be given the alternative of an admission-of-guilt fine as opposed to having to appear in Court. An admission-of-guilt fine is a fine that a person is issued with after admitting guilt. It may seem like an easy exit to all problems. However, once admitting guilt, the person will have a criminal record.

Admission-of-guilt fines for speeding are calculated on the basis of rands per km/h in excess of the speed limit. These fines may be paid at any office of the South African Police Service in the Magisterial district where the offence occurred, by the date stipulated on the notice that will be posted to you within two weeks after you received the ticket. You must produce the ticket when paying the fine.

Should you choose not to pay the admission-of-guilt fine, but rather state your case in court, you should check the fine to ascertain the date on which you must appear in Court and the case number. Queries about the fine must be directed to the clerk of the criminal court of the Magisterial district of issue, and the actual document must accompany your query.

It is important to take notice of the speed you are driving. It may be important for you to get to your destination in time, but is it worth paying a fine, or having a criminal record? It is also important to remember that if you get a fine in a town other than your home town, you will have to travel back to that town to appear in court.

Think before admitting guilt to a speeding offence, or even better, think twice before committing an offence that would put you in that position.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice.