HOW DO I REGISTER A TRUST?

a1_bA trust is an agreement between the person who owns the assets and the appointed trustees. A trust can be a good way to preserve your wealth for your family and children. A well-managed trust will make sure that anyone who is a beneficiary of the trust benefits from it. The trustees have the important job to administer the trust and its assets objectively with the best interests of the beneficiaries in mind.

Trusts and their administration fall under the Trust Property Control Act no 57/1988.

What types of trusts are there?

It’s important to note that there are two types of trusts. An inter vivos trust and a testamentary trust. A testamentary trust is one that’s formed from the will of a deceased person. In the case of a testamentary trust the deceased’s last will serves as the trust document. An inter vivos trust is created between living persons, and will form the basis of this article. Inter vivos trusts can limit estate duty and preserve your assets and wealth for your descendants. Certain financial institutions assist in setting up a trust and can act as trustees.

Registering an inter vivos trust

To register an inter vivos trust with the Master of the High Court, the following documents must be lodged.

1. Original trust deed or notarial certified copy thereof.
2. Proof of payment of R100 fee, for registration of a new Trust.
3. Completed Acceptance of Trusteeship (J417) and Acceptance of Auditor Application (J405) forms.
4. Bond of security by the trustees – form J344 (if required by the Master)

* There are no costs involved in amending an existing Trust.

These documents are also required for the Master to issue the trustees with letters of authority for administering the trust. A trustee may not proceed to administer the trust without the written authority of the Master.

If the trust’s assets or majority of its assets are located in a particular area, then the inter vivos trust has to be registered with the Master who has jurisdiction in that area.

De-registering of a trust

The Master can de-register the trust only once it has been terminated. The common law makes provision for the termination of a trust as the Trust Property Control Act makes no such provision. The following circumstances can be grounds for a trust to be terminated:

1. by statute
2. fulfilment of the object of the trust
3. failure of the beneficiary
4. renunciation or repudiation by the beneficiary
5. destruction of the trust property
6. the operation of a resolutive condition

You will still need the original letter of authority, bank statements reflecting a nil balance on the final statement and proof that the beneficiaries have received their benefits.

Administering the trust

Trustees are required to comply with the Trust Property Control Act, which determines how trusts should be administered and the role of the trustees. If trustees fail to comply with the Act they may face criminal prosecution. The trustees have to always act with the best interests of the beneficiaries in mind.

Some legal requirements of trustees include not being able to make secret profits, taking care and being objective when administering trust assets and always acting in good faith.

References:

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)

WHAT HAPPENS IF I DIE WITHOUT A WILL?

a2_bAttorneys often emphasise the fact that you should have a will drawn up and revise it regularly in order to facilitate the administration of your possessions after your death. Many people still neglect to do this. The problem is that, should a person die without leaving a valid will, in other words intestate, his/her estate will be administered and distributed according to the stipulations of the Intestate Succession Act, 1987.

Below is a basic example of the effect an intestate death will have on the distribution of an estate. Should the composition of the beneficiaries of the deceased be more complex, the administering of the estate in terms of the Intestate Succession Act will also become more complicated.

Let us assume that person A dies and the value of his estate is R1.8 million. He is survived by his wife (B) and two children, of which one is of age and the other is a minor.

Scenario 1:

A and B are married out of community of property.

B inherits R125 000 or a child’s portion, whichever is the largest.

A child’s portion is calculated by dividing the total value of the estate by the spouse and number of children, in other words R1.8 million/3 = R600 000.

The spouse and children therefore inherit R600 000 each.

Scenario 2:

A and B are married in community of property.

B inherits 50% of the estate due to the marriage in community of property.

B also inherits R125 000 or a child’s portion, whichever is the largest, with regard to the other half of the estate.

A child’s portion is calculated by dividing half of the total value of the estate by the spouse and number of children, in other words R900 000/3 = R300 000.

The spouse inherits R1.2 million and the children R300 000 each.

How does a minor receive their inheritance?

The inheritance of the minor will be paid to the Master’s Guardian’s Fund, as there is no will which determines that a minor’s inheritance should be placed in e.g. a testamentary trust, where the funds will be administrated on behalf of the minor until he/she becomes of age or reaches any other specified age.

The fact that the inheritance of a minor will be paid to the Master’s Guardian’s Fund may place the spouse in a dilemma such that he/she has to devise plans to finance the amount payable to the Master’s Guardian’s Fund to the benefit of the minor. Alternatively, she could register a mortgage against an immovable property in favour of the Master’s Guardian’s Fund.

When there’s no will

In the case of a death without a valid will there will be no person or institution appointed to support the surviving spouse in the administering of the estate. This should not usually present a huge obstacle, but the spouse should consider carefully which person or institution he/she appoints to assist them in this task. He/she should also negotiate the executor’s fee with the relevant person or institution before the administering of the estate commences.

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)

OCCUPIERS WHO CAN’T BE EVICTED UNDER THE EST ACT

a3_bThe Prevention of Illegal Eviction and Occupation of Land Act 19 of 1998 (PIE Act) provides, inter alia, the procedures for the eviction of unlawful occupiers. Section 1 of the PIE Act defines an “unlawful occupier” as someone who occupies land without the express or tacit consent of the owner or person in charge or without any other right in law to occupy the land. This definition expressly excludes a person who is an occupier in terms of the Extension of Security of Tenure Act 62 of 1997 (EST Act). Section 29 (2) of the EST Act states that the provisions of the PIE Act will not apply to an occupier in respect of land which he is entitled to occupy in terms of this Act. Who are occupiers in terms of the EST Act and why are they excluded from the ambit of The PIE Act?

The EST Act

The EST Act has as its aim the provision of measures to facilitate long-term secured land tenure with state assistance. This Act grants occupiers the right to obtain a secured long-term right to occupancy with the permission of the owner, upon request on or after 4 February 1997.

Occupiers of rural land, farms and undeveloped land are specifically protected under this Act. The EST Act does not apply to, inter alia, occupiers living in already proclaimed township areas, land invaders, labour tenants and people using land for mining and industrial purposes and for commercial farming purposes. Occupiers in terms of the EST Act receive a secured right in law to live on and use the land they have been occupying, under permission, for continued periods of time. The occupier thus enjoys protection of this right and as a result such a secured right may not be unreasonably altered or cancelled by the owner or person in charge of the land without notice to, and the permission and/or consent of, the occupier. This includes protection against unfair or arbitrary eviction and, in fact, provides its own specific mechanisms for the eviction of long-term secured occupants, which must be followed.

Actions such as the removal of a right to occupancy, access to the land, water or electricity, denial of family or visitors on the said land and the prohibition of the use of the land for personal reasons are all forms of evictions in terms of the EST Act and are strictly regulated by this Act when applicable to occupiers classified under and granted rights in terms of this Act.

Conclusion

Many occupiers of land who do so with the proper and necessary consent and permission of the owner are not aware that they possess tenure rights to occupy the land on a long-term basis. Unless such an occupier commits a serious wrong or fails to honour any terms of the agreement with the owner, he/she may not be arbitrarily evicted in terms of any eviction process available to owners, including those available under the PIE Act. Such occupier’s rights are protected and regulated under the EST Act.

References:

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)

USUFRUCT AND CAPITAL GAINS TAX

a4_bWhat is a usufruct?

“A usufruct provides to the usufructuary a right of use of property or assets, lifelong or for a specific period, but the usufructuary does not acquire ownership of the relevant property or assets.”

Usufruct is often applied as part of estate planning in order to save on Estate duty, as the calculated value of the usufruct qualifies as deduction for Estate duty, should the usufructuary be the surviving spouse. E.g. a woman may bequeath her property to her son provided that her spouse has lifelong usufruct from it.

Obviously this kind of bequest may create problems, as the son is not able to utilise the property for personal use or rent it out as long as his father is still alive. If we talk about agricultural property the problems escalate and the practical administration of the usufruct can result in many a headache.

These issues are, however, of a personal nature and our opinion is that the root of the problem is actually the accountability of Capital Gains Tax which will revert to the owner when the property is eventually sold.

The value of the usufruct when it is created is recovered from the market value of the property in order to determine the bare property value. This calculated value will then represent the base cost of the property when it is eventually sold.

Example:

I, TOUGH TINA, bequeath my immovable property to my son, LITTLE JOHN, subject to the lifelong usufruct of my spouse, BIG JOHN. BIG JOHN is thus the usufructuary and LITTLE JOHN the bare owner.

Suppose the value of the property for the purpose of this example is R1 million. The usufruct value is calculated by capitalising R1 million allowing for BIG JOHN’s life expectancy (according to tables) and multiplying it by 12% (or a % as approved by SARS), in other words R1 million x [ table determined factor amount ] x 12%. Assume this translates to R800,000.

The bare property value at the death of TOUGH TINA is thus R1 million minus R800,000 = R200,000. Should LITTLE JOHN sell the property at R1.5 million before BIG JOHN’s death, taxable Capital Gains will potentially amount to R1.3 million on which tax is payable.

We are not in principle against usufruct, but it is clear that costs and the influence of Capital Gains Tax on usufruct should be studied thoroughly before considering such a stipulation in your will.

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)