Blog images-01-02Limitations on freedom of testation can vary.

South African law values people’s ability to bequeath their belongings in a will as they see fit, but marital and other relationship regimes could limit a testator’s ability to freely pass on wealth.

“Drafting a will can be a complex affair and can be made even more complex by the presence or absence of a marriage, and by the choice of marital regime in the case of a marriage,” Louis van Vuren, CEO of the Fiduciary Institute of Southern Africa (FISA), says.

Due to historical developments and the move to a constitutional democracy, various marital regimes and life relationships exist in South Africa. These include civil marriages (solemnised under the Marriage Act of 1961), customary marriages (solemnised under the Recognition of Customary Marriages Act of 1998), civil unions (solemnised under the Civil Union Act of 2006), religious marriages and co-habitation.

Prior to the constitutional era, a civil marriage was the only marriage recognised by law. Customary marriages existed, but were only accepted in indigenous law before 1998. A civil union was created to recognise the constitutional rights of homosexual couples, but heterosexual couples may also choose to formalise their relationship in this manner.

After 2006, civil marriages, customary marriages and civil unions all have the same legal consequences. However, religious marriages and co-habitation arrangements are not recognised as marriages under any legislation, except tax legislation.

The sections below highlight how each marital or life relationship regime could affect an individual’s testamentary freedom:

Marriage in community of property

The biggest limitation on an individual’s ability to deal with any asset in a will is in a marriage in community of property. In such instances, both spouses own everything in equal shares, Van Vuren says.

In practice, this means that one party cannot bequeath what belongs to a partner without that spouse’s permission.

Van Vuren says the “sting in the tail” is that these individuals will likely have a joint will and although they may bequeath their assets as they see fit, the surviving spouse still has the right to reject the will after the death of his or her spouse.

“If the person rejects then that spouse will not receive anything from the joint will but will retain his or her half of all the assets. So in that instance the joint will then becomes completely ineffective.”

If the surviving spouse accepts the will, the assets will be divided as provided for in the will.

In the absence of an ante-nuptial contract, a marriage will automatically be regarded as in community of property.

But even if would-be spouses decide to marry in community of property, they could still enter into an ante-nuptial contract and exclude certain assets from the joint estate, Van Vuren says.

Assets may also be excluded from the joint estate where one spouse receives a donation or inheritance subject to a condition that it should not form part of the joint estate.

Marriage out of community of property

Van Vuren says because “in community of property” is the default regime, marriages and civil unions will only be out of community of property if an ante-nuptial contract exists in which community of property is excluded.

These marriages can be with or without the application of the accrual system.

With accrual

All marriages entered into after November 1, 1984 and all civil unions subject to an ante-nuptial contract are by default subject to the accrual system unless it is explicitly excluded in the contract, Van Vuren says.

“The accrual system aims to equalise the increase in wealth of the two spouses to the marriage or union during the subsistence of the marriage, by giving a claim to the spouse with the smaller increase, or accrual, against the spouse with the bigger accrual. Upon divorce or death of one of the spouses, the increase in the real value (after adjustment for inflation) of the estate of both spouses, is added up and divided by two.”

Not enforcing the claim amounts to a donation and could have donations tax implications, he says.

Where the first dying party has the smaller accrual, the claim will be against the survivor who will have to pay the claim unless he or she inherits more than the amount of the claim. Should the entire estate be bequeathed to someone else (e.g. children), administration can become quite complicated if the surviving spouse does not have sufficient cash to settle the claim. This can be a particularly thorny issue in a second or third marriage if the surviving spouse has to pay a claim to the estate, but the beneficiaries are not his or her own children, Van Vuren explains.

In a marriage out of community of property with the accrual system, legislation excludes all inheritances or donations received during the course of the marriage from the accrual.

Without accrual

A marriage out of community of property without the accrual system is the most simplistic regime with regard to the administration of the estate, because there is no accrual claim and parties will generally be able to dispose of their assets as they please. One exception is where the survivor is left with insufficient support, in which case there may be a claim under the Maintenance of Surviving Spouses Act.

Religious marriages

Since religious marriages do not legally recognise the partners in the relationship as spouses (except under tax law), there is no community of property and each party has the right to bequeath assets as he or she sees fit. Our courts have also extended the claim under the Maintenance of Surviving Spouses Act to parties in religious marriages, Van Vuren says.


Unless the partners in a co-habitation arrangement had a formal agreement there is no protection under law, and partners won’t have any claims against each other’s estates.

“In the case of partners in same-sex co-habitation arrangements, however, there is an anomaly. Despite the existence of the Civil Union Act and the fact that same-sex couples can now enter into a civil union with the same consequences as a marriage, the courts have extended the right to inherit in intestacy to such partners in co-habitation arrangements. Because unmarried, heterosexual couples do not qualify under the Maintenance of Surviving Spouses Act it is unclear how a court will deal with the issue of one homosexual life partner disinheriting another in a will,” Van Vuren says.

Ingé Lamprecht  /  2 August 2017 00:10

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)



Blog images-01-01Every serious businessman in the world understands that money needs to be spent in order to make a profit, but this does not actually mean that you can go all out and expect things to be good. Saving company money is a necessity since it is so easy to lose control of everything. The company can easily end up losing control as uncompromising customers have to be dealt with and expenses are simply way too high. Bad decisions are really common but the good news is there are many ways in which a company can save money. We will highlight some of the very best, those that can be respected right now.

Developing ownership mentality in employees

Out of all the things that companies can do, this is probably the most important practice that can help save a lot of money. When employees understand how important it is to save money, various unnecessary expenses are going to be naturally eliminated. For instance, let’s say that a firm uses research chemicals. The employees that have an ownership mentality will look for the best prices and save a lot by buying affordable chemicals.

As the employee feels empowered and trusted, he/she will pick up work ownership. This is something that sounds simple but that can only happen through trust. Trusting employees is definitely something that is going to help a lot at the end of the day but this is only possible through proper training.

Optimising expenses

Optimising expenses is a necessity for every single company but this is not something that is done with ease, as some managers think. Expense optimisation identifies business efficiency, pushes it one step further and identifies strategic partners that are going to save a lot of money on the long time through opportunity, focus and time cost.

Every single company has expenses but how they are managed is what can increase or decrease profits. As an example, instead of getting new staff, the company might want to allocate that budget to improve marketing efficiency and overall business operation efficiency. Having a company that runs better and uses tools better can help save money much faster than other options.

Using partners

When the company grows expenses can easily get out of control. This is when it is a really good idea to find some partners that you can quickly grow with. That can save a lot of cash but only in the event the right partner is found. The idea is to locate someone that has access to tools that the company needs in order to grow. However, even if the partners look as if they are great, this may not be the case. You want to be sure that the interested partner will also be interested in company growth.


Generally speaking, there are hundreds of things that you can do in order to save money for your company. The options mentioned above may be the most important in most cases but you should never underestimate all the other ones. Sometimes, something as simple as leading by example can help.

Boris Dzhingarov

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Domestic workers & UIF

Blog images-01-04How to avoid UIF Arrears with the Unemployment Insurance Fund?

If you have employees working 24 hours or more in a month, it is your responsibility as employer to register yourself and your employee/s with the UIF in order to avoid UIF arrears at a later stage.

When an employee becomes unemployed for whatever reason, or are unable to work due to illness, maternity or adoption leave, they can claim for a few months from the fund, if their previous employer contributed to the fund. If the employer did not contribute they are facing UIF arrears to be settled before the employee can claim any UIF.

The employer needs to contribute 1% of the employee’s salary and the employee also needs to contribute 1% of their salary. It is the responsibility of the employer to deduct the employee’s contribution and pay it over together with the employer’s contribution to the fund to avoid any UIF arrears. Always aim to be up to date with your payments!

Domestic employers and their workers are included in the Unemployment Insurance Act and Unemployment Insurance Contributions Act since the 1st of April 2003.

These acts apply to all employers and workers, with the exception to the following:

workers working less than 24 hours a month for an employer;
public servants;
foreigners working on contract;
workers who get a monthly State (old age) pension; or
workers who only earn commission.

If you have a domestic worker working for you from before 1st of April 2003 and you did not pay UIF ever, you are liable to pay UIF from 1 April 2003.

If you as the employer did not pay UIF for a few years, you cannot deduct the 1% employee’s contribution now from the employee’s salary. You will have to pay your 1%, the employee’s 1% plus penalties and interests. Once the backlog has been settled you can now start paying over every month your and your employee’s contributions to the fund.


What to do when you as an employer did not make UIF contributions and wants to settle the UIF arrears and paying from now on every month?

If you did not submit and pay over UIF since 1 April 2003, there are penalties (10% of the UIF amount due) and interest (which is calculated daily only by the finance department of the UIF, as there are fluctuations)

The process is as follows:

  1. Register yourself and your employee for UIF
  2. Get a UIF reference number
  3. Submit the information to the UIF for the periods you did not submit or pay UIF (Only one form per year is needed for backlog periods, thereafter you need to submit a form every month)
  4. Only after you have submitted the salary information for the backlog periods, the finance department of the UIF can calculate what the amount for interest will be.
  5. In the meanwhile you can calculate the penalties, here is an example:

Your domestic worker STARTED to work for you from 1 January 2010 (this is the actual start date) and earned R2000 per month from 1 January 2010 until 31 December 2010. Therefore for this period the 2% UIF contribution which you did not pay was R40 per month x 12 months = R480 UIF for the 12 month period. Plus 10% of R480 = R48. This R480+R48 = R528. You owe the UIF R528 for 2010. This amount is the actual UIF (R480) plus the 10% penalty (R48) = R528.

NOW your domestic worker got an increase on 1 January 2011. Her salary for the next 12 months was R2200 per month. The same process as above needs to be done for the next period (until she got another increase)

2011:    Monthly salary R2200

UIF contribution per month R44

UIF contribution for period (in this case 12 months) R44 x 12 months = R528

10% penalty: R52.80

UIF + penalty (R528 + R52.80) = R580.80

Thus you owe the UIF R580.80 for the 2011 period

2010: You owe R528

2011: You owe R580.80

2012: You owe R600 (imaginary amount)

Total you owe the UIF: R1708.80

2013: Start to pay each month and submit salary information each month!

If your domestic worker got an increase every 6 months, you need to calculate the 6 month period as above.

  1. The next step is to start submitting and paying EVERY MONTH as soon as possible.
  2. As soon as the finance department of the UIF has calculated the penalties and interest, you can make the payment for the amount due.

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Estate planning for young adults

Blog images-01-01It is very important for you to plan your estate, which could include a living will, a last will and a living trust. This can help families prepare for difficult times when you are no longer around to assist or advise them. Our lives get busier and more complicated by the day, so estate planning for young and old becomes increasingly important. Young people should consider preparing certain estate planning documents.

When to start with estate planning?

At the age of 18 a young man or woman officially becomes an adult in the eyes of the world. This means that you are entitled to make important financial, legal or health decisions about your life. But what if something happens and you are unable to make these decisions at a critical time? Such situations can range from a small inconvenience to a life-threatening crisis, but if your estate is in order, it can speak on your behalf. Consider the following:

  1. Financial power of attorney

A financial power of attorney allows you to appoint someone you trust, like another family member, to make financial decisions on your behalf. This document can be activated when you are incapacitated or right after it has been signed, and it will remain effective until you can resume charge of your own decisions again.

A financial power of attorney will allow the appointed person to handle important legal and financial matters on behalf of the grantor. In the case of a business or financial situation which involves the young adult, such as a passport or car registration renewal, it is convenient for the power of attorney to act on his/her behalf if they cannot tend to the problem. This arrangement may come in very handy when there is a legal situation which requires quick action and the young adult is unable to attend. Families with a disabled family member can also benefit from the security of a power of attorney.

  1. Living will

A living will enables you to state specific medical wishes if you are alive, but unable to communicate them. Artificial life support in the case of a coma or terminal illness is an issue often discussed in such a document. Preferences regarding administering of pain medication, artificial nutrition and other treatments can be dictated in this document.

  1. Health care power of attorney

With this type of power of attorney, you give someone else the power to make health decisions on your behalf. These decisions, regarding serious health and emotional problems, will be made based on instructions which you have given to your power of attorney beforehand. Sometimes a living will is combined with a health care power of attorney, because both of these can be revoked, i.e. it can be cancelled at any time by destroying it, communicating your wishes to your doctor, writing a letter regarding the cancellation or by creating a new living will and health care power of attorney, indicating that the new will revokes all the previous ones.

4. Start the conversation

Every family’s legal needs are different, so perhaps you should take the first step in being prepared for the worst. Remember that every time your family changes, such as when a child is born, you need to adapt your will to include them. Start the process and be prepared.

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Board members can be held accountable for company losses

Blog images-01-02The recent resignation of Eskom board chairperson and non-executive director, Ben Ngubane, has once again shone a spotlight, not only on governance at the embattled power utility, but also on the role board members and directors play in their respective positions.

According to a study by the Centre for Corporate Governance at the Institute of Directors in Southern Africa (IoDSA), board composition is probably the single most important governance factor determining an organisation’s future success. Appointing members for political reasons, blurred lines of accountability and a lack of industry knowledge and financial skills are cited as key challenges for the composition of boards.

“Board members have a lot of responsibility,” says Associate Professor Mark Graham from the University of Cape Town’s Graduate School of Business (GSB). “For example, all board members need to be able to understand financial statements. It is no longer good enough to simply have one person on the board who is a chartered accountant, for instance, and skilled at reading and interpreting these documents.”

IoDSA’s Parmi Natesan has said that directors have such an important role to play, and the issues they face are so complex, that a new cadre of professional directors is required.

Graham says the Centro case in Australia, where a court found that each director of the company was liable for incorrect classification of debt – and could be held liable for losses suffered as a result – was a big wake-up call for board members in South Africa as well.

“The South African Companies Act requires local directors to exercise a similar level of scrutiny,” he says. “This means board members cannot hide behind a lack of financial skills or know-how when it comes to the way statements are compiled and presented.”

“Often doctors or engineers will be appointed to boards and while they may be experts in their field, their financial skills may not be up to speed. But someone who understands the financial statements of a business, understands the business in a way that is not otherwise possible,” says Graham.

Over the past few decades, the process behind drafting financial statements and the guidelines governing their contents have changed significantly, he says, with the documents becoming increasingly complicated; “Not all information is equally significant and it can be vital to be able to discern what is imperative and what is not, especially for new board members trying to find their way through a maze of numbers.”

Extracts from article from UCT Graduate School of Business
Understanding Financial Statements for Directors Programme

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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2017 Tax Season made easy

Blog images-01-03The 2017 Tax Season has opened for individuals on 1 July, and SARS has released some handy tips and information to make the process pain free for taxpayer.

In preparation for tax season, taxpayers can start gathering all the supporting documents that are needed to submit tax returns.

These documents include IRP5/IT3(a) certificates from one’s employer or pension fund; IT3(b) certificates for investment returns, medical aid contribution certificates and receipts; bank account details as well as retirement annuity fund certificates.

Those who use eFiling to submit their tax returns will be able to do so when tax season opens on Saturday, 1 July, while those who file their returns at South African Revenue Service (SARS) branches will be able to do so from 3 July onwards.

In addition to preparing to file their returns, taxpayers must check that details on their IRP5 form — which discloses the total employment remuneration earned for the year of assessment and the total deductions — is correct before attempting to submit the return.

Accurate claims  

The revenue service has urged taxpayers to ensure that they have the correct documents and proof for every claim they make.

This is by using only information and figures that reflect on supporting documents as well as using only the amounts reflected on contribution certificates (retirement annuity fund, income protection scheme, medical aid etc).

SARS has also urged taxpayers to make sure they keep an accurate logbook and do not fabricate kilometres travelled or inflate the value of vehicles.

Honesty on returns

Taxpayers should also remember that overstating the number of dependants or expenses for medical claims is a criminal offence.

In addition, taxpayers should not overstate their out of pocket medical expenses, as SARS will ask for receipts.


The deadline for non-provisional and provisional taxpayers submitting their tax returns manually through the post or at a SARS branch drop box is 27 September 2017.

Meanwhile, the deadline for non-provisional taxpayers submitting their returns via eFiling or electronic filing at a SARS branch is 24 November 2017.

The deadline for provisional taxpayers using eFiling is 31 January 2018.


Taxpayers should not be fooled by scams asking for their personal information, as SARS will not request a taxpayer’s banking details in any communication received via post, email or SMS. The revenue service will not send taxpayers any hyperlinks to other websites, including those of banks.

However for the purpose of telephonic engagement and authentication purposes, SARS will verify your personal details.

Extracts from article By Staff Writer

June 17, 2017

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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A-04The new Companies Act stipulates that only listed companies, and companies deemed to be in the public interest, are required to be audited and that non-public companies may choose between an independent review or an audit.

Given the value of an audit for non-listed companies – mostly small-to medium-sized entities (SMEs) – this “choice” with regard to the previously mandatory requirement seems like a “privilege” with very little benefits.

It becomes imperative for these directors to understand that an audit is not an expense, but an asset that will yield returns far greater than the original investment. An audit provides a platform, both financial and non-financial, on which non-public companies should build to meet future challenges.

According to the International Federation of Accountants (IFAC), SMEs account for more than 95% of all companies around the world. Governments – including South Africa – believe that provisions, as outlined in the new act, help to lower the regulatory burden and cost for SME’s thereby promoting entrepreneurship in this vital sector of the economy. While few dispute the need to reduce red tape, lessen the regulatory burden and remove the “one-size-fits-all” approach to regulation, certain checks and balances must remain in place so that growing businesses establish good management practices as they become economically significant.

In a recent paper entitled “The Value of an Audit to Small and Medium Sized Businesses,” Pitcher Partners indicate that an independent audit provides far more than “public accountability” and plays a key role in promoting good business practices throughout the economy. It emphasises that the role of audit is critical to guiding governance in smaller companies before they become economically significant, thereby reducing business failure.

An audit provides immediate benefits, with one of the most practical and beneficial returns being the management letter that identifies any processes or operational deficiencies requiring correction or improvement. Having an audit performed on its financial statements will prepare a company for the immense challenges it will encounter as it grows and develops into a more complex organisation, especially if it is a potential candidate for external funding to facilitate expansion or even, ultimately, listing on the JSE.

Removing audit requirements for non-public, owner-managed companies may not result in less bureaucracy and lower cost obligations says IFAC. In its recent research entitled “The Expanding Role of SMPs in Advising SME Clients,” IFAC points out that due to limited capacity and expertise, SMEs frequently need to seek external advice and support. The publication highlights that the changes in regulation in other areas, such as employment rights and environmental regulations, overshadows the relaxation in statutory audit provisions. Despite movements to reduce regulatory “burdens” on SMEs, The World Bank found that the market for advice and support is substantial. In the UK, for example, the Business, Enterprise and Regulatory Reform estimate that businesses spend at least £1.5bn to help them deal with regulations.

An external audit regulation for SMEs ensures that they comply with other laws – a by-product of any audit – which, according to the research paper, remain as unavoidable costs for SMEs in any case. Audits not only reduce the risk of business failure, but equip smaller businesses with an understanding of how to develop management practices that enable them to grasp opportunities while mitigating risk. To grow and prosper in a vibrant SME market, concludes the report, requires an audit which provides the essential outcomes and skills necessary to do so.

The corporate law reform process by allowing non-public entities to choose between an audit and an independent review may do more harm than good. What may seem like a blessing to those who view audits as an unnecessary and costly annual exercise may turn out to be their only safeguard when faced with multiple offences and breaches of the Companies Act. Directors should not fall victim to the misconception that an independent review is necessarily cheaper than an audit. Based on this erroneous belief, the choice of an independent review could prove to be a fatal mistake by not considering the potential cost of a lower level of assurance.

According to research commissioned by KPMG and conducted by Opinion Leader Research, involving an in-depth survey of 200 UK companies, the underlining “importance of the audit process to businesses, nearly two thirds (62%) of the companies that participated in the survey claim that they would conduct their own audit process even if it were not a statutory obligation”.

The advantages of engaging an external auditor to audit financial statements far outweigh the cost of not having one since auditors play an important role in the success and growth of a company – more so for non-public companies that are expanding rapidly.

Ashley Vandiar

(Project director of assurance at the South African Institute of Chartered Accountants (Saica))

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice.

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A-03SARS recently published two Binding General Rulings (number 40 and 41) that have put the tax treatment of non-executive director’s fees to bed, which will come in effect on 1 June 2017.

As it stands, a Non-Executive Director (NED) earning more than R1 million in director’s fees in any 12-month period should register for VAT.

What will happen when the Rulings become effective?

BRG40: Director fees paid to a Non-Executive Director (NED) do not qualify as remuneration and there is no employees’ tax withholding obligation for the employer.

  • The NED may still voluntarily request the employer to withhold employees’ tax.
  • The disallowance of deductions in terms of section 23(m) will not apply to director fees paid to NEDs.
  • BRG40 does not apply to non-South African tax resident NEDs because they cannot qualify as independent contractors by virtue of their tax residence status.

BRG41: Non-Executive Directors (NEDs) must register for VAT and account for VAT on the fees charged to the company.  A non-resident Non-Executive Director (NED) may also be liable to register for Vat, if the services are physically performed in South Africa on a continuous or regular basis, or if the services are conducted on a continuous or regular basis through a fixed or permanent place in South Africa, this will place an additional admin burden on the non-resident Non-Executive Director (NED).

  • Non-Executive Directors that earns less than the VAT threshold of R1 Million in any 12-month period may voluntarily register for VAT;
  • VAT registered Non-Executive Directors (NEDs) can claim input tax on any taxable expense incurred in respect of goods or services utilised or consumed in the course of rendering the service.

What is the role of Non-Executive Directors (NEDs)

Independence is central to the NED’s role and is interpreted to mean “the absence of undue influence and bias”.  Since the Income Tax Act, No 58 of 1962, does not define a non-executive director (NED), SARS shares the view of the King III report in Binding General Ruling 40 (BGR40).

The King III Report on Governance for South Africa states that the crucial elements of an NED’s role are that an NED –

  1. must provide objective judgement independent of management of a company;
  2. must not be involved in the management of the company; and
  3. is independent of management on issues such as, amongst others, strategy, performance, resources, diversity, etc.

Feel free to contact us should you require any assistance in this regard.

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice.



A-02Ensure sufficient cash is available to avoid sale of assets – Fisa.

Ingé Lamprecht  /  7 March 2017 00:27

JOHANNESBURG – The death of a spouse, friend or relative is often an emotional time even before estate matters are addressed.

And truth be told, death can be an expensive and cumbersome affair, particularly if estate planning was neglected, the claims against the estate start accumulating and there isn’t sufficient cash to settle outstanding debts.

People generally underestimate the costs related to death, says Ronel Williams, chairperson of the Fiduciary Institute of Southern African (Fisa). Most individuals have a fairly good grasp of significant expenses like a mortgage bond that would have to be settled, but the smaller fees can also add up.

To avoid a situation where valuable assets have to be sold to settle outstanding debts, it is important to do proper planning and take out life and/or bond insurance to ensure sufficient cash is available, she notes.


The costs involved in an estate can broadly be classified as administration costs and claims against the estate. The administration costs are incurred after death as a result of the death. Claims against the estate are those the deceased was liable for at the time of death, the notable exception being tax, Williams explains.

Administration costs as well as most claims against the estate will generally need to be paid in cash, although there are exceptions, for example the bond on the property. If the bank that holds the bond is satisfied and the heir to the property agrees to it, the bank may replace the heir as the new debtor.

Williams says quite often estates are solvent, but there is insufficient cash to settle administration costs and claims against the estate. In the event of a cash shortfall the executor will approach the heirs to the balance of the estate to see if they would be willing to pay the required cash into the estate to avoid the sale of assets.

If the heirs are not willing to do this, the executor may have no choice but to sell estate assets to raise the necessary cash.

“This is far from ideal as the executor may be forced to sell a valuable asset to generate a small amount of cash.”

If there is a bond on the property and not sufficient cash in the estate, it is not a good idea to leave the property to someone specific as the costs of the estate would have to be settled from the residue. Where a particular item is bequeathed to a beneficiary, the person would normally receive it free from any liabilities. This could result in a situation where the beneficiaries of the residue of the estate may be asked to pay cash into the estate even though they wouldn’t receive any benefit from the property, Williams says.

The most significant administration costs are generally the executor’s and conveyancing fees.

If the will does not explicitly specify the executor’s remuneration, it will be calculated according to a prescribed tariff, currently 3.5% of the gross value of the assets subject to a minimum remuneration of R350. The executor is also entitled to a fee on all income earned after the date of death, currently 6%. If the executor is a VAT vendor, another 14% must be added.

Assuming an estate value of R2 million comprising of a fixed property of R1 million, shares, furniture, vehicles and cash, the executor’s fee at a tariff of 3.5% would amount to R70 000 (plus VAT if the executor is a VAT vendor). Conveyancing fees will be an estimated R18 000 plus VAT. Depending on the situation, funeral costs may be another R20 000, while other fees (Master’s Office fees, advertising costs, mortgage bond cancellation and tax fees) can easily add another R10 000. By law advertisements have to be placed in a local newspaper and the Government Gazette, with estimated costs of between R400 and R700 and R40 respectively. Master’s fees are payable to the South African Revenue Service (Sars) in all estates where an executor is appointed with a gross value of R15 000 or more. The maximum fee is R600.

Where applicable mortgage bond cancellation costs, appraisement costs, costs of realisation of assets, transfer costs of fixed property or shares, bank charges, maintenance of assets and tax fees will also have to be paid. The executor is also allowed to claim an amount for postage and sundry costs, while funeral expenses, short-term insurance, maintenance of assets and the cost of a duplicate motor vehicle registration certificate may also have to be taken into account.

Luckily, there are ways to reduce the costs involved

Williams says the first step is to try and negotiate the executor’s fee with the appointed executor when the will is drafted. The fee could then be stipulated in the will or the executor could give a written undertaking confirming the agreed fee. But even if the deceased did not negotiate it at the time of drafting, the family or heirs can still approach the nominated executor and negotiate a competitive fee when they report the estate to the executor.

“Depending on who the executor is and what the composition of your estate is, you can probably negotiate up to a 50% discount.”

The composition of assets will generally be a good indicator of the amount of work that needs to be done and the executor will quote a fee against this background. The sale of a fixed property and business or offshore interests may complicate the process of winding up the estate.

If the surviving spouse is the sole heir, and/or there are no business interests and sufficient cash is available to cover the costs, the executor will generally offer a larger discount. Ultimately, the executor is responsible for signing off the liquidation and distribution account, confirming that all the costs are correct and that it will be settled.

Unfortunately, most of the smaller administration costs will have to be paid, with limited scope for negotiation, Williams says.

Costs of security can be avoided completely by exempting the nominated executor from lodging the bond of security in the will, Williams says.

This article was brought to you by the Fiduciary Institute of Southern Africa.

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice.

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A-01South African tax resident individuals are liable to income tax on their worldwide income. In other words, where a South African tax resident individual were to earn a salary for employment which may from time-to-time be exercised outside of the borders of the Republic, that income earned is still included in that South African tax resident individual’s gross income.

An exemption is available though to South African employees where the extent of the services rendered abroad are significant.[1] The exemption is however limited to income earned in the form of remuneration from an employer and only to the extent that the remuneration received is for those services rendered abroad. In terms of the relevant provision, salaries earned in whatever form for services rendered outside of South Africa will be exempt from income tax in South Africa where the employee has been absent from the Republic for:

  • At least 184 days during a 12-month period (in other words for more than 50% of a 1-year period); and
  • More than 60 days of the above will have continuously been spent beyond South Africa’s borders.

As above, it is important to appreciate that it is not the entire salary earned by the employee for the year of assessment which will be exempt from South African income tax. The exemption is limited to only so much as relates to services rendered abroad. In other words, to the extent that the salary is earned for services that will be rendered in South Africa, that portion of a salary earned will still be taxable in South Africa.

The exemption is typically applicable to employees seconded for periods of time to render services abroad. It is quite likely that even though the income earned may be exempt from South African income tax, that the country in which the services are rendered will seek to levy tax on the employee’s income based thereon that the source of the income earned will be in that other country.

It is therefore possible for employees to benefit from the exemption on foreign earned salaries, whilst also paying very little income tax in the other country, if such a country is one with very low individual income tax rates (typically countries in the Middle East, such as Dubai). This incidence of “double non-taxation” has recently drawn the attention of National Treasury, and the Minister of Finance warned in this year’s Budget Speech that South Africa is considering rescinding the exemption if the other country in which the employment services are rendered does not seek to significantly tax the income earned by the employee.

[1] Section 10(1)(o)(ii) of the Income Tax Act, 58 of 1962

This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice.

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