Tag Archives: ESTATE

MANAGING DISPUTES OVER A DECEASED RELATIVE’S ESTATE

If someone leaves a sizeable estate behind, it may cause conflict among the possible heirs. The help of an attorney, when settling an estate after a death, can avoid unnecessary troubles.

The Administration of Estates Act, 1965, determines what must happen with an estate after a person’s death. There are certain steps that should be taken to ensure the process is legal. However, if the estate is worth a lot of money or the deceased has children, then it is a good idea to seek the assistance of an attorney, as family disputes and debts of the deceased can be confusing. In order to do this an executor will be appointed to act on behalf of the estate.

Finding the will of a deceased relative

If the deceased person left a will the first thing to do is find it. If they did not tell you beforehand where their will was, you can try calling the probate court in their district or the office of the Master of the High Court to check if they have a copy of the will. Other places to call would be the deceased’s life insurance company, bank or lawyer. Otherwise, the deceased might have left a copy of it somewhere secure in their home.

Who is the executor?

An executor is the person appointed to handle the process of settling the estate. The executor will either be mentioned in the will of the deceased or appointed by the Master of the High Court. The Master will ultimately decide who will take the role of executor. If the chosen executor doesn’t know how to handle the estate or is unfamiliar with the legal procedure, he or she can go to a lawyer for help. Once the executor has been chosen, the Master will give them “Letters of Executorship”, which will give only them the authority to handle the estate.

What does the executor need to do?

The executor has several responsibilities such as arranging the valuation of the estate’s property and assets. They will also be responsible for contacting and dealing with all the beneficiaries.

Some other responsibilities of the executor include:

  • Arranging provisional payments for the family’s immediate needs.
  • Opening a bank account for the estate and depositing the estates money in it.
  • Paying all the necessary estate duties.

It’s important that any person who wants to act on behalf of the deceased person’s estate have the Letters of Executorship. If not, their actions would be considered illegal. This also applies to the spouse of the deceased person. This eliminates the possibility of several different family members trying to influence the estate’s dealings. The executor will also decide how the assets will be divided between the heirs and if any or all assets need to be sold. If a will is in place the executor will base his/her decisions on it.

Eventually, the executor will prepare a liquidation and distribution account. This would include what they intend to do with all the assets left after expenses. This account would be delivered to the Master, who will check to see if the executor’s actions reflect the will of the deceased and that all legal requirements have been fulfilled.

Important things to keep in mind?

The Master of the High Court should be notified of the deceased person’s estate not later than 14 days after the death. According to the Department of Justice, the death of anyone who owned property in South Africa must be reported to the Master, whether or not they died in the country.

All estates that exceed R50 000 should be reported to the Master of the High Court directly because magistrate’s offices have limited jurisdiction. If reported to the magistrate’s office, estates will usually be referred to the Master.

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).

References

The Department of Justice and Constitutional Development. 2012. “Reporting the estate of the deceased”. Accessed from: http://www.justice.gov.za/services/report-estate.html/ on 11/05/2016.

Administration of Estates Act 66 of 1965. Accessed from: http://www.justice.gov.za/ on 11/05/2016.

DEMYSTIFYING THE EXECUTOR IN A DECEASED ESTATE

During a person’s lifetime s/he will gather assets, in other words, belongings such as a house or a motor vehicle. These assets and liabilities will form part of a person’s estate. At the death of that person, his/her deceased estate must be administered, in other words, divided, distributed and controlled by someone. This person is called an executor.

However, the role of an estate executor and who can be appointed as one has been largely misunderstood.

What does the executor do?

“Executor” is the legal term for referring to the person, or people, nominated in your will to carry out the directives you set out in your will.

  1. This means that it is the executor’s responsibility to disburse your property to the mentioned beneficiaries in your will, but also obtain information on potential heirs, collecting and arranging payments, and approving or disapproving creditors’ claims.
  2. It is the executor’s duty to calculate and pay the estate tax, and to ensure that the correct documentation is filed with the relevant authorities.
  3. The executor is the individual that represents your estate.

Who can be appointed as the executor?

It has become normal to appoint a friend, family member or beneficiary to act as the executor, as they most likely have intimate knowledge of your estate and your affairs, but also, they will not rack up the fees that a legal body might accrue.

However, there is a misconception that you can avoid the fees by appointing a family member as the estate executor, but this could also mean that you are deferring the cost to the nominated family member.

  1. Family members appointed as executors on larger estates immediately find themselves out of their depth, and not only end up hiring a professional executor, but may also pay more for these services than necessary.
  2. A simple way to address this is by appointing a “professional” executor during your lifetime. This allows you to negotiate the executor fees.

If you appoint a family member, make sure that they understand that they will have to appoint a professional agent, and that they should negotiate the fee and be very cautious of agreeing to a fee arrangement in terms of which the professional agent charges their professional fee, instead of the legislated scale.

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)

References:

https://www.legalwise.co.za/help-yourself/legal-articles/duties-executor

http://www.fin24.com/Money/Wills-and-trusts/Role-of-executor-of-deceased-estate-20150513

WHEN LIFE HAPPENS – WHO WILL LOOK AFTER YOUR AFFAIRS?

a2_aCuratorship is the power given by authority of law, to one or more persons, to administer the property of an individual who is unable to take care of his/her own estate and affairs. Curatorship is intended to protect the person and the person’s property.

In terms of Rule 57 of the High Court Rules any person may apply to the High Court for an order declaring another person (“the patient”) to be of unsound mind and as such incapable of managing his/her affairs.

This type of High Court application is usually made by a family member of the patient. The Notice of Motion must state the grounds upon which the applicant claims locus standi, in other words, what his/her interest in the matter is and why the court should entertain the application. The court is normally requested to do three things:

  1. To declare the patient of unsound mind and incapable of managing his/her affairs;
  2. To appoint a curator ad litem; and
  3. To appoint a curator bonis and/or curator personae.

Furthermore the applicant must state inter alia the following in the application:

  1. The grounds upon which locus standi is claimed by the applicant;
  2. Why the court has jurisdiction to hear the matter;
  3. Information regarding the patient’s age, sex, full particulars of his/her means and general state of the patient’s physical health;
  4. The nature and duration of the relationship and association between the applicant and the patient;
  5. Facts and circumstances serving to show that the patient is of unsound mind and incapable of managing his/her affairs;
  6. The names, occupations and addresses of the persons suggested as curator ad litem and curator bonis or personae.

After hearing the application the court may appoint a curator ad litem. The curator ad litem is someone who conducts a court case or court proceedings on behalf of another. The most important function of the curator ad litem is to manage the patient’s interests in court and acts on the patient’s behalf as the patient is unable to do so because of mental illness. Upon the appointment the curator ad litem must without delay interview the patient and he/she should explain the nature of the application and the appointment to the patient. The curator then draws up a report. Such report is then submitted to the registrar of the court and the Master of the High Court.

After receipt of the report by the Master, the applicant may place the matter on the court roll and request the court for an order that the patient be declared incapable of managing his/her affairs and that the suggested person be appointed as curators bonis and personae. The curator bonis must manage the estate of the patient in accordance with the court order, subject to certain directions of the Master.

Compiled by: Annerine du Plessis

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)

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)

YOUR WILL – AN IMPORTANT DOCUMENT

a4Life is unpredictable, therefore we advise our clients to lose no time in drawing up their will and planning their estate. Below are important reasons why this should be one of your top priorities.

 

Q: Why should I have a will?

A: A will enables you to name your heirs. Should you die without a will (intestate) your assets will be divided according to the Intestate Succession Act. That may advantage people whom you did not wish to name as heirs.

Q: Who is allowed to sign your will as witness?

A: Your will must be signed in the presence of two witnesses, who also sign in each other’s presence. Only persons older than 14 years are qualified to sign as witnesses.

Q: What is the cost of Executor’s fees?

A:The maximum remuneration payable to an Executor is determined by law and is currently fixed at 3.5% of the total gross estate value. Executor’s fees should, however, be negotiated with the person who has been appointed as Executor of your will.

Q: How often should I revise my will?

A:  It is recommended that wills be revised at least every 2 years. It is also important to review your will after events like marriage, birth, divorce or the purchase of property.

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)

IMPLICATIONS OF ESTATE DUTY

A4_BEstate duty is charged on the dutiable value of the estate in terms of the Estate Duty Act. The general rule is that if the taxpayer is ordinarily resident in South Africa at the time of death, all of his/her assets (including deemed property), wherever they are situated, will be included in the gross value of his/her estate for the determination of duty payable thereon.

The current estate duty rate is 20% of the dutiable value of the estate. Foreigners/non-residents also pay estate duty on their South African property.

To minimise the effects of estate duty you need to understand the calculation thereof. The following provisions apply in determining your liability:

  1. Which property is to be included.
  2. Which property constitutes “deemed property”.
  3. Allowable deductions: the possible deductions that are allowed when calculating estate duty.

Property includes all property, or any right to property, including immovable or movable, corporeal or incorporeal – registered in the deceased’s name at the time of his/her death. It also includes certain types of annuities, and options to purchase land or shares, goodwill, and intellectual property.

Deemed property

  1. Insurance policies
  1. Includes proceeds of domestic insurance policies (payable in South Africa in South African currency [ZAR]), taken out on the life of the deceased, irrespective of who the owner (beneficiary) is.
  2. The proceeds of such a policy are subject to estate duty, however this can be reduced by the amount of the premiums, plus interest at 6% per annum, to the extent that the premiums were paid by a third person (the beneficiary) entitled to the proceeds of the policy. Premiums paid by the deceased himself/herself are not deductible from the proceeds for estate duty purposes.
  3. If the proceeds of a policy are payable to the surviving spouse or a child of the deceased in terms of a properly registered antenuptial contract (i.e. registered with the Deeds Office) the policy will be totally exempt from estate duty.
  4. Where a policy is taken out on each other’s lives by business partners, and certain criteria are met, the proceeds are exempt from estate duty.
  1. Donations at date of death

Donations where the donee will not benefit until the death of the donor and where the donation only materialises if the donor dies, are not subject to donations tax. These have to be included as an asset in the deceased estate and are subject to estate duty.

  1. Claims in terms of the Matrimonial Property Act (accrual claim)

An accrual claim that the estate of a deceased has against the surviving spouse is property deemed to be property in the deceased estate.

  1. Property that the deceased was competent to dispose of immediately prior to his/her death (Section 3(3)(d) of the Estate Duty Act), like donating an asset to a trust, may be included as deemed property.

Deductions

Some of the most important allowable deductions are:

  1. The cost of funeral, tombstone and deathbed expenses.
  2. Debts due at date of death to persons who have their ordinary residence in South Africa.
  3. The extent to which these debts are to be settled from property included in the estate. This includes the deceased’s income tax liability (which includes capital gains tax) for the period up to the date of death.
  4. Foreign assets and rights:
  5. The general rule is that foreign assets and rights of a South African resident, wherever situated, are included in his/her estate as assets.
  6. However, the value thereof can be deducted for estate duty purposes where such foreign property was acquired before the deceased became ordinarily resident in South Africa for the first time, or was acquired by way of donation or inheritance from a non-resident, after the donee became ordinarily resident in South Africa for the first time (provided that the donor or testator was not ordinarily resident in South Africa at the time of the donation or death). The amount of any profits or proceeds of any such property is also deductible.
  1. Debts and liabilities due to non-residents:
  2. Debts and liabilities due to non-residents are deductible but only to the extent that such debts exceed the value of the deceased’s assets situated outside South Africa which have not been included in the dutiable estate.
  1. Bequests to certain public benefit organisations:
  1. Where property is bequeathed to a public benefit organisation or public welfare organisation which is exempt from income tax, or to the State or any local authority within South Africa, the value of such property will be able to be deducted for estate duty purposes.
  1. Property accruing to a surviving spouse [Section 4(q)]:
  1. This includes that much of the value of any property included in the estate that has not already been allowed as a deduction and accrues to a surviving spouse.
  2. Note that proceeds of a policy payable to the surviving spouse are required to be included in the estate for estate duty purposes (as deemed property), but that this is deductible in terms of Section 4(q).
  3. Section 4(q) deductions will not be granted where the property inherited is subject to a bequest price.
  4. Section 4(q) deductions will not be granted where the bequest is to a trust established by the deceased for the benefit of the surviving spouse, if the trustee(s) has/have discretion to allocate such property or any income out of it to any person other than the surviving spouse (a discretionary trust). Where the trustee(s) has/have no discretion as regards both the income and capital of the trust, the Section 4(q) deduction may be granted (a vested trust).

Portable R3.5 million deduction between spouses

The Act allows for the R3.5 million deduction from estate duty to roll over from the deceased to a surviving spouse so that the surviving spouse can use a R7 million deduction amount on his/her death.

Life assurance for estate duty

Estate duty will also normally be leviable on these assurance proceeds.

Source: Moore Stephens’ Estate Planning Guide.

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)

VALIDITY OF ANTENUPTIAL CONTRACTS

A2BOne must be careful when drafting and signing an Antenuptial Contract. Aside from ensuring that the contents is all correct, one must also ensure that all the necessary provisions are contained therein to make the contract valid. The consequences of neglecting to do so may result in a marriage in community of property even though the parties had no intention of this at the time of their marriage.

Attorneys are often trusted with the task of drafting an Antenuptial Contract. This is a contract, which one signs to regulate the property regime of a marriage. If a couple does not sign, an Antenuptial Contract then the marital property regime will be that of in community of property. The presence of an Antenuptial Contract means that the marital property regime is that of out of community of property and the parties must specifically stipulate whether they would like the accrual system to apply to their marriage or not.

The importance of ensuring that all the necessary provisions are contained in the Antenuptial Contract to result in a valid contract was discussed in the 2014 Supreme Court of Appeal Case of B v B[1]. In this case, no values were stated in respect of any of the assets listed in the Antenuptial Contract and they were also not properly identified. In B v B the court stated that if the terms of a contract are so vague and incoherent as to be incapable of a sensible construction then the contract must be regarded as void for vagueness.[2]

According to Section 6(1) of the Matrimonial Property Act[3] ,a party to an intended marriage which does not, for the purpose of proof of the value of his or her estate at the time of the commencement of the marriage, declare the value in the contract, then he or she may do so within six months of the marriage in a statement attested to by a notary. If this is not done, according to Section 6(4) of the Marital Property Act, the net value of the estate of a spouse is then deemed to be nil at the time of the marriage. In effect, such a contract is valid but it will effectively render the marriage in community of property since nothing was excluded from the accrual.

However, if a contract is contradictory and incoherent in other respects then it cannot be seen as a valid contract since there is no certainty as to the meaning of the contract and what the parties seek to achieve. This means that the contract would not embody terms that would enable to court to give effect to the intention of the parties at the time the contract was concluded.

The result of such a contract is that the Antenuptial Contract would be void for vagueness and that the marital property regime would be the default position according to the Marital Property Act, which is in community of property.

Therefore, parties are encouraged to read their contracts thoroughly and ensure that they understand the terms thereof and that the contract embodies their intentions without any further explanations or evidence.

[1] (952/12) [2014] ZASCA 14 (24 March 2014).

[2] B v B (952/12) [2014] ZASCA 14 (24 March 2014) par 7.

[3] 88 of 1984.

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)

IMPLICATIONS OF ESTATE DUTY

Estate duty is charged on the dutiable value of the estate in terms of the Estate Duty Act. The general rule is that if the taxpayer is ordinarily resident in South Africa at the time of death, all of his/her assets (including deemed property), wherever they are situated, will be included in the gross value of his/her estate for the determination of duty payable thereon.

The current estate duty rate is 20% of the dutiable value of the estate. Foreigners/non-residents also pay estate duty on their South African property.

To minimise the effects of estate duty you need to understand the calculation thereof. The following provisions apply in determining your liability:

  1. Which property is to be included.
  2. Which property constitutes “deemed property”.
  3. Allowable deductions: the possible deductions that are allowed when calculating estate duty.

Property includes all property, or any right to property, including immovable or movable, corporeal or incorporeal – registered in the deceased’s name at the time of his/her death. It also includes certain types of annuities, and options to purchase land or shares, goodwill, and intellectual property.

Deemed property

A. Insurance policies

i)  Includes proceeds of domestic insurance policies (payable in South Africa in South African currency [ZAR]), taken out on the life of the deceased, irrespective of who the owner (beneficiary) is.

ii)   The proceeds of such a policy are subject to estate duty, however this can be reduced by the amount of the premiums, plus interest at 6% per annum, to the extent that the premiums were paid by a third person (the beneficiary) entitled to the proceeds of the policy. Premiums paid by the deceased himself/herself are not deductible from the proceeds for estate duty purposes.

iii)   If the proceeds of a policy are payable to the surviving spouse or a child of the deceased in terms of a properly registered antenuptial contract (i.e. registered with the Deeds Office) the policy will be totally exempt from estate duty.

iv)  Where a policy is taken out on each other’s lives by business partners, and certain criteria are met, the proceeds are exempt from estate duty.

B.  Benefits payable by pension and other funds by or as a result of the death of the deceased

C.  Donations at date of death
Donations where the donee will not benefit until the death of the donor and where the donation only materialises if the donor dies, are not subject to donations tax. These have to be included as an asset in the deceased estate and are subject to estate duty.

D.  Claims in terms of the Matrimonial Property Act (accrual claim)
An accrual claim that the estate of a deceased has against the surviving spouse is property deemed to be property in the deceased estate.

E. Property that the deceased was competent to dispose of immediately prior to his/her death (Section 3(3)(d) of the Estate Duty Act), like donating an asset to a trust, may be included as deemed property.

Deductions
Some of the most important allowable deductions are:

  1. The cost of funeral, tombstone and deathbed expenses.
  2. Debts due at date of death to persons who have their ordinary residence in South Africa.
  3. The extent to which these debts are to be settled from property included in the estate. This includes the deceased’s income tax liability (which includes capital gains tax) for the period up to the date of death.
  4. Foreign assets and rights:
    a. The general rule is that foreign assets and rights of a South African resident, wherever situated, are included in his/her estate as assets.
    b.  However, the value thereof can be deducted for estate duty purposes where such foreign property was acquired before the deceased became ordinarily resident in South Africa for the first time, or was acquired by way of donation or inheritance from a non-resident, after the donee became ordinarily resident in South Africa for the first time (provided that the donor or testator was not ordinarily resident in South Africa at the time of the donation or death). The amount of any profits or proceeds of any such property is also deductible.
  5. Debts and liabilities due to non-residents:
    a.  Debts and liabilities due to non-residents are deductible but only to the extent that such debts exceed the value of the deceased’s assets situated outside South Africa which have not been included in the dutiable estate.
  6. Bequests to certain public benefit organisations:
    a.  Where property is bequeathed to a public benefit organisation or public welfare organisation which is exempt from income tax, or to the State or any local authority within South Africa, the value of such property will be able to be deducted for estate duty purposes.
  7. Property accruing to a surviving spouse [Section 4(q)]:
    a.  This includes that much of the value of any property included in the estate that has not already been allowed as a deduction and accrues to a surviving spouse.
    b.  Note that proceeds of a policy payable to the surviving spouse are required to be included in the estate for estate duty purposes (as deemed property), but that this is deductible in terms of Section 4(q).
    c.  Section 4(q) deductions will not be granted where the property inherited is subject to a bequest price.
    d.  Section 4(q) deductions will not be granted where the bequest is to a trust established by the deceased for the benefit of the surviving spouse, if the trustee(s) has/have discretion to allocate such property or any income out of it to any person other than the surviving spouse (a discretionary trust). Where the trustee(s) has/have no discretion as regards both the income and capital of the trust, the Section 4(q) deduction may be granted (a vested trust).

Portable R3.5 million deduction between spouses

The Act allows for the R3.5 million deduction from estate duty to roll over from the deceased to a surviving spouse so that the surviving spouse can use a R7 million deduction amount on his/her death. The portability of the deduction will only apply when the entire value of the estate of the first dying spouse is left to the surviving spouse.

Life assurance for estate duty

Estate duty will also normally be leviable on these assurance proceeds.

Source: Moore Stephens’ Estate Planning Guide.

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.

MUTUAL WILLS

The most general mutual will is that of a married couple. This does not mean, however, that the estates are joined and that the Testator and Testatrix have to make a joint decision about the distribution of their estates. Each party may make independent decisions about the distribution of his/her estate within one will.  As a result a mutual will is very popular among married couples, but the person who draws up the will, should take into consideration each party’s assets, liabilities and needs regarding inheritance to determine whether he/she should draw up separate wills or a mutual will, i.e. 2 separate wills within one document or one will which determines that merging of the respective or mutual wills should take place.

In the case of a mutual will there should be a description regarding the execution of the will should the spouses die simultaneously or within a short period, e.g. 30 days of each other. For argument’s sake, the Testator and Testatrix could be in a car accident. The testator dies and the Testatrix is in a critical condition, rendering her unable to draw up a new will; provision should be made in the will  for such scenarios.

Legislation acknowledges the principle of freedom of bequeathment; each person therefore has the right to bequeath his/her assets according to his/her preference. Despite a Testator and Testatrix having a mutual will, one of the parties could decide, for whatever reason, to have another individual will drawn up which is dated later than the mutual will. The surviving spouse will not be able to insist that the mutual will be accepted as the last will and testament.

One party also does not need the other party’s permission to amend a mutual will. Each party has the right to draw up a new will at any time, without any obligation to inform the other party thereof. Should the mutual will turn out to be the last will of the deceased, it will become the valid will regarding the deceased, regardless of whether the surviving spouse had already drawn up another will.

Merging of estates takes place when the estates of two people are joined into one upon the death of  the first spouse, mainly with the aim of managing an asset in which both parties had an interest. Normally a limited right, such as a usufruct, should be created in terms of any of the assets in the estate to the benefit of the surviving spouse. Even with merging of estates the surviving party has the right to accept or reject the mutual will and the resulting merging of estate assets after the death of the first party. It boils down to the fact that, even where merging of estates is determined in the will, the mutual will does not have much value if the surviving party rejects the stipulations of the will after the death of the deceased party.

The way in which the creation of the merge is worded in a will is of extreme importance, as the wrong choice of words could have a major impact on the payment of policies outside the estate which should fall to the surviving party’s lot. The acceptance or rejection of a will in which a merge was created should also be considered carefully, as there are several implications, e.g. Transfer duty, Donations tax and Capital Gains Tax.

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.