Advantages and disadvantages of Trusts

A2 Trusts blog

Trusts have various advantages and often offers protection against problems, but unfortunately there are also disadvantages.

Although this is not a complete synopsis of all the pros and cons, our experience may assist you in making decisions about Trusts and to show you how important it is to be informed.



  • Growth taking place in the Trust assets settles in the Trust and not in your personal estate.
  • By selling the assets to the Trust, the amount owed to you by the Trust will remain outstanding on the loan account and shall be regarded as an asset to your estate. This amount may be decreased for Estate duty purposes by utilising the annual Donations Tax exemption of R100 000.
  • A Trust offers protection against problems should you become mentally incompetent. This may also make the appointment of a curator to handle your financial affairs unnecessary.
  • A Trust remains confidential as opposed to documents like wills and records of deceased estates which are public documents and therefore open for inspection.
  • A Trust can offer financial protection to disabled dependents, extravagant children or beneficiaries with special needs.
  • A Trust can evade the administrative costs of consecutive estates by making provision for consecutive beneficiaries.
  • A Trust can lighten the emotional stress on your family when you die because the Trust will continue without any of the formalities that are required from a deceased estate.
  • By choosing your Trustees well you can ensure professional asset and investment management.
  • The Trust will enable you to have a degree of control over the assets in the Trust after your death, via the Trustees.
  • After your death and before the estate has been settled the Trust can provide a source of income for your dependent(s).
  • You will prevent your minor child’s inheritance from being transferred to the Guardian’s Fund.
  • You will avoid the problem of trying to distribute assets equally among the heirs.
  • Trust income can be divided among the beneficiaries with lower tax categories after the death of the initiator when individual exemptions may be utilised, but all taxable income kept in the Trust will be taxed at 40% without exemption benefits.
  • Levels of income may be varied according to the changing needs of the beneficiaries at the discretion of the Trustees.
  • Due to the assets remaining the property of the Trust and not the beneficiaries it need not be included in people’s estates as part of their assets when they die, which effects a saving in Estate duty.
  • The Trust assets will be protected from creditors for the same reason.


  • You don’t have full control of your assets, as the other Trustees also have a say in the matter.
  • A Trust is registered and the authorities can gain access to it.
  • You could possible choose the wrong Trustees. You could expect problems if the Trustees are vying heirs. This shows how important it is to have at least one independent Trustee.

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.

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Your will and foreign assets

Each country hA1 foreign assets blogas its own legislation regarding inheritance and signing of wills. It would therefore be possible that your South African will does not comply with all the requirements of the country where your foreign
assets are located. This may result in the non-inheritance of your foreign assets in terms of your last will and testament. It is therefore imperative that you should have two wills if you have foreign assets; one for your South African assets and one regarding your foreign assets according to the regulations of the country where these assets are located. It is always important to plan your estate carefully; should you have foreign assets, however, you must take extra care to ensure that you meet all the requirements of the relevant country’s legislation.

The aim with planning an estate is ultimately to reach your goals in the distribution of your assets and liabilities. These goals should make provision for the management of your estate during your lifetime, but also after your passing.

A further consequence of the increasing  exposure to international investments is that South Africans are also exposed to foreign fiduciary services, including wills for their foreign assets.

Whether it is truly necessary to draw up a separate foreign will or just one global will depends on the following:

  • where your foreign assets are located;
  • the nature of the assets and the type of products in which these assets have been invested; and
  • who takes care of the administration of your foreign assets/investments.

Should your South African will be drawn up in Afrikaans, it may be necessary to have it translated and sealed before sending it to the foreign executor/agent. This could be time-consuming and very costly.

A separate foreign will also has other advantages: your foreign will is administered in line and simultaneously with your South African assets; an executor/agent who is familiar with the required procedures in the relevant country where your assets are located will save you time and money; and someone who draws up wills professionally within the jurisdiction of the relevant country can provide you with advice regarding the possible dangers in relation to tax accountability and hereditary succession when it comes to assets outside the borders of South Africa.

Although we would recommend drawing up a second will with reference to foreign assets, we suggest that, should there be any mention of foreign assets, your South African will must be drawn up in English and it should not pertinently refer to the fact that the document is only applicable to your South African assets.

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.

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Sale of immovable property and the National Credit Act

A4 - MadeleynIt often happens during a sale of immovable property that the parties agree to a deferred payment of the purchase price. The purchaser will then pay the purchase price in instalments and the seller will charge interest on the outstanding amount from time to time. Sometimes the parties even agree to the registration of a bond over the property to secure the payment of the purchase price.

What the parties don’t keep in mind, however, is that this agreement between the parties constitutes a credit transaction as defined in the National Credit Act (hereinafter called the Act) and that in certain circumstances the seller will have to register as a credit provider in terms of the Act.

To establish if the Act will be applicable and if the seller should register as a credit provider one should carefully consider the following:

  1. The Act will apply to all written credit agreements between parties dealing at arm’s length. This is probably to curb underhand dealings between family members at the peril of other third parties.
  1. Arm’s length transactions are not defined in the Act but they exclude, for example, transactions between family members who are dependent or co-dependent on each other and any arrangement where each party is not independent of the other and does not strive to obtain the utmost possible advantage out of the transaction.

The Act does not apply where:

  1. The consumer is a juristic person whose annual turnover or asset value is more than R1m;
  1. The purchaser is the State or an organ of the State;
  1. A large agreement (i.e. more than R250 000, such as a mortgage) is entered into with a juristic person whose asset value or turnover is less than R1m.

A credit agreement includes a credit facility, credit transaction and credit guarantee or a combination of these. The relevance is the following:

  1. A credit facility requires fees or interest to be paid;
  1. A credit transaction does not necessarily require interest or fees to be paid. An instalment agreement would suffice to qualify as a credit transaction.
  1. An instalment agreement is defined and relates only to the sale of movable property.
  1. A credit transaction also includes any other agreement where payment of an amount owed is deferred and interest or fees are charged.

A mortgage agreement qualifies as a credit transaction [Section 8(4)(d)] and the importance is that mortgage is defined in the Act as a pledge of immovable property that serves as security for a mortgage agreement. Mortgage agreement is also defined as a credit agreement secured by a pledge of immovable property.

Section 40 of the Act requires one to register as a credit provider should you have at least 100 credit agreements as credit provider OR if the total principal debt under all credit agreements exceeds R500 000. Principal debt means the amount deferred and does not include interest or other fees.

It follows that if you sell your home to an individual in a private sale (i.e. where he does not get a bond from the bank) and you register a bond as security, you have to register as a credit provider UNLESS the principal debt is less than R500 000 or the buyer is a juristic person and the price is more than R250 000.

The implications for the seller could be far-reaching if he is not registered, as the agreement will be unlawful and void, and a court must order that:

  1. The credit agreement is void as from the date the agreement was entered into;
  1. The credit provider must refund to the purchaser any money paid by the purchaser under the credit agreement, together with interest;
  1. All the purported rights of the credit provider under the credit agreement to recover any money paid or goods delivered to, or on behalf of the purchaser in terms of the agreement, are either cancelled or forfeited to the State.

The application form to register as a credit provider and also the calculation of the registration fee that is payable to the National Credit Regulator (NCR) can be found on the NCR’s website. If the seller has not registered by the time he enters into the loan agreement he may still register within 30 days after entering into the loan agreement.

Sellers, be careful when you enter into these types of agreements, as non-compliance with the Act could be a costly exercise.

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.

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Die deliktuele aksie vir owerspel

A3 - MadeleynDie deliktuele aksie vir owerspel teen ’n derde party met wie ’n eggenoot owerspel gepleeg het, vind nie meer aanwending in die Suid-Afrikaanse reg nie. Die 70 jaar oue aksie, wat gegrond is op die actio iniuriarum en handel oor ’n individu se persoonlike eer en gevoelslewe, is op 25 September 2014 deur die Hoogste Hof van Appél se Hoofregter, Regter Brand, geskrap.

Die Hof het onder andere na die aanwending van soortgelyke aksies in lande soos Engeland, Australië, Nieu-Seeland, Duitsland, Kanada en Skotland gekyk en bevind dat Suid-Afrika die engiste land is wat hierdie aksie nog gebruik. Dit het die vraag genoop of ons unieke behoeftes het met betrekking tot die huweliksinstelling. Met verwysing na regspraak en die samelewing se morele waardes, sowel as die agting van die huwelik, het die Hof uiteindelik bevind dat ons behoeftes nie uniek is nie en dat hierdie aksie oudmodies en argaïes is.

Regter Brand het egter nie die geldigheid van die oorblywende deliktuele aksies naamlik abduksie, afrokkeling en herberging of die lex Aquilliese aksie vir owerspel, wat beteken dat daar ’n daadwerklike finansiële verlies moes wees, geskrap nie.

Geskryf deur Ernest Van Staden.

Ernest is die jongste Direkteur by Madeleyn Inc. en die hoof van die litigasie departement by die Durbanville kantore. Hy het sy Baccalaureus Legum in 2006 by die Noordwes-Universiteit te Potchefstroom voltooi en is toegelaat as prokureur in die Hoë Hof van Suid-Afrika in 2009. Hy het ook verskyningsbevoegdheid in die Hoë Hof. Ernest kan gekontak word in verband met enige egskeidigings en/of litigasie aangeleenthede by of 021 975 2587.

Hierdie is ‘n algemene inligtingstuk en moet gevolglik nie as regs- of ander professionele advies benut word nie. Geen aanspreeklikheid kan aanvaar word vir enige foute of weglatings of enige skade of verlies wat volg uit die gebruik van enige inligting hierin vervat nie. Kontak altyd u regsadviseur vir spesifieke en toegepaste advies

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Road Accident Fund

A2 - MadeleynIn most cases, the shock of a motor vehicle accident has not even worn off when cold hard reality comes knocking at your door. The trauma and both physical and emotional injuries needs to be set aside so you can tend to the financial and sometimes legal consequences of an accident. This is where the Road Accident Fund (RAF) could be of financial assistance to you, even if you have insurance.

The RAF is government body and is funded by a tax levy on fuel, so in effect all motorists on South African roads fund it. It aids the victims of hit and runs as well as victims where motor vehicle accidents were caused due to negligence, therefore, anyone can institute a claim against the RAF, except if you were the only driver and the sole cause of the accident.  It is important to lodge your claim before it prescribes which is generally three years, except in the cases of minors (the prescription time only starts running once the minor has turned 18)  a and a hit and run, when it will prescribe after two years of the accident taking place.

The RAF follows a “fault-based” system, in other words if you were in an accident where a court finds that you were, for example, 20% contributory negligent you will still have a claim, only 20% will be deducted from the amount you could ultimately be awarded. This is because the “fault-based” system works on a scale of proportionality, thus you would only receive R80 000 where a R100 000 claim was awarded to you.

You can institute this claim yourself or you can get legal assistance in the matter. The question usually asked is: “Will an attorney’s assistance speed up my claim?” This consideration is, however, not necessarily the one you should base your decision on. Let’s consider a scenario in order to explain this situation: You are in an accident and you sustain minor injuries but will not be able to continue in your profession due to the nature of the injury. You go ahead and institute a claim for your medical expenses, general damages and future loss of income that amounts to hundreds and thousands of Rands. Since you had no contribution in the cause of the accident you are more than confident that your claim will be settled. You also plan to institute a claim against the driver of the vehicle.

What you might not be aware of, however, is that the Road Accident Fund Act has been significantly altered in 2008. One of the most fundamental changes has been that the common law right to sue the wrongdoer in motor vehicle accidents has been abolished. Even passengers in an unroadworthy taxi or bus have no claim against the owner or operator of the vehicle. You can claim against the RAF only, and it is therefore important to know what cover you have from the RAF.

Claims for future loss of income has been limited by the Act to a maximum of R160 000 a year, subject to annual raises in line with inflation, bringing the 2015 maximum amount to a total of R227 810 (published in the Government Gazette on 30 January 2015). Also general damages, which are claims for disability and pain and suffering, have been limited to serious injuries only by the 2008 amendments.

Furthermore the Act is set to undergo further fundamental changes in the near future by means of the Road Accident Benefit Scheme Bill which is to be based on a “no-fault benefit system.”

So while some people could argue that they save the legal expenses when instituting a claim against the RAF they risk losing much more money due to their own lack in knowledge of the Act. Most firms also work on a contingency basis, meaning they only take a percentage of the claim awarded to the victim, should the claim be successfully awarded. Thus you are not liable for the full legal fee. Not only will your attorney assist you in all the technical legal aspects and help you to maximize your claim, your attorney also has access to private medical experts that can examine you and support your claim.

The question should therefore not be “How fast will my claim will be settled with an attorney’s assistance” since all claims follow a fixed procedure, but rather “Do I have enough knowledge of the Act and procedure, without the assistance of an attorney, to ensure a maximum successful claim?”

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.

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A finger in the pie: Prevention of Illegal Eviction from Unlawful Occupation of Land Act

A1You have property and have rented it out. The tenant has decided that he can no longer afford the rent, and no letters or threats seem to make any difference to this cause. The tenant not only refuses to pay the rent, but he also fails to vacate the property.

To put icing on the cake, the law provides more protection to the tenant than ever before. It comes as no surprise that landlords feel that the current legislation enables the tenant to avoid paying rent and also offers much more protection to tenants’ interests and rights than to those of the landlord.

Times have changed, and to simply replace the locks of the premises will offer no quick solution. In reality it is very difficult to evict unlawful tenants rightfully from the property, and therefore it is very important for landlords to use the prescribed procedures as contained in the PIE Act.

In short, the Prevention of Illegal Eviction from Unlawful Occupation of Land Act (PIE) is described as legislation that aims to protect both the tenant’s and the landlord’s interests and rights simultaneously. This legislation prohibits not only unlawful eviction, but also allows for legitimate expulsion of unlawful tenants.

Procedures as prescribed by PIE

Firstly, it is important to cancel the lease due to non-payment, as per the notice period prescribed by the lease agreement, or with one calendar month’s notice in accordance with the common law.

An ex parte application (an application without notice to any party) must be brought at the appropriate court in order to obtain the necessary permission from the court to initiate PIE procedures. This application is brought by way of two notices supported by a sworn affidavit.

The affidavit must allege the following:

Unlawful occupation;

  1. Reasons for the requested eviction; and
  2. Why it is just and equitable to evict the unlawful occupant.

Once the application has been issued, the sheriff of the court serves notices, advising of intention to institute action, on the local municipality, the unlawful occupier and on all those holding title under him. The local municipality as well as the unlawful occupant has to be given 14 days’ notice of this hearing.

On the day of the hearing, the unlawful occupier will be given the opportunity to show good cause as to why an eviction order should not be granted. The court will only grant an eviction order after considering the relevant circumstances as well as what is deemed as just and equitable. The unlawful occupier may rely on special circumstances to avoid immediate eviction.

In practice, courts have regard for the following:

the rights of elderly persons;

  1. children;
  2. disabled; and
  3. households headed by a woman.

However, the court has wide discretion to grant an appropriate date on which the unlawful occupant has to vacate the property, and a date when the actual eviction order is to be effected.

In general, the PIE procedures are described as lengthy, and depending on the circumstances it often takes a long time before the unlawful occupier actually vacates the property. During this time the property owner does not receive an income from his property whilst still being required to pay the bond.

Landlords … Instead of allowing the unlawful occupier to frustrate you to the point where you want to break someone’s legs, rather take a piece of the PIE, and make it your first priority to evict the tenant from your 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.

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Pay your levies, or else…

A2Dear Mr Lawyer

I am the owner of a sectional title, and I have paid my levies every month as required, until the water started seeping through the ceiling of my enclosed balcony into my section when it rains. The leak was clearly emanating from a defect in the common property. I asked the body corporate on numerous occasions to repair the defect, yet after four months of writing letters and sending emails the body corporate still has not done anything to honour this simple request. As a frustrated owner I resorted to desperate measures and employed a contractor to repair the property defect. I settled the bill myself.May I withhold my levies for a period to set off the money that is owed to me by the body corporate?

Dear Mr Owner

Although this action may sound reasonable, the right to stop paying or to set off a debt against levies is not legally justified and owners are not, under any circumstances, entitled to simply withhold levies.

There is no provision in the Sectional Titles Act 95 of 1986 or the rules that gives an owner the right to withhold levy payments. Even if an owner incurs expense in performing an emergency repair to the common property, and believes that the body corporate owes him money, the owner may only set off the debt against the levies once it becomes liquid.

An amount can only be liquid once it has been agreed upon. An owner cannot set off the amount he believes he is entitled to deduct. The trustees, judge or arbitrator must have confirmed the amount.

If Mr Owner does withhold his levies without the amount being liquid, he is subject to the following sanctions in terms of the prescribed rules:

  • Firstly, the trustees are entitled to charge interest on arrear amounts at a rate determined by them, and so the defaulting owner may receive a larger account, due to the interest on his arrears, than if he had paid his levies.
  • What is more, The Sectional Titles Act imposes a positive obligation on trustees to recover levies from defaulting owners. Not only does the Act empower them to charge interest, the scheme attorneys will most likely issue summons against the defaulter for all costs that the Body Corporate may incur in recovering any arrears.
  • Secondly, the prescribed management rules provide that, except in the case of special and unanimous resolutions, an owner is not entitled to vote if any contributions payable by him in respect of his section have not been duly paid. Therefore, an owner who withholds his levies is unable to vote for ordinary resolutions in respect of the section that he is withholding levies on.

Mr Lawyer, how does an owner deal with a situation where he believes the body corporate is liable for payment?

A dispute must be declared with the Body Corporate by written notice of the dispute or query to the trustees. The trustees or Body Corporate then have 14 days from receipt to resolve the dispute. During this period, the parties should meet to try and resolve the dispute. If there is no resolution after the 14-day period, either party may demand that the dispute be referred to arbitration. The arbitrator must make his/her recommendations in settlement of the dispute within 7 days from the date of commencement of the dispute. The decision of the arbitrator shall be final and binding and may be made an order of the High Court.

It is clear that prescribed processes are in place according to which disputes and related issues can be settled. Not only will this ensure that you act within the legal guidelines, but it will also eliminate unnecessary frustration.

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.

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Measuring Marketing Effectiveness in a Law Firm

Tobie_150x225Compiled by Tobie van der Merwe

Management guru and author Peter Drucker said, “If you can’t measure it, you can’t manage it.” This principle is also relevant with regards to law firm marketing.  Even though we know the importance of this principle, very few law firms actually measure their marketing efforts. The value of measuring marketing effectiveness is easily overlooked and often stems from the perception that it is too hard, too costly or too time consuming. The reality is that measuring marketing effectiveness is crucial to determine whether or not your marketing strategy is working. Law firms that measure their marketing effectiveness will gain a competitive advantage by constantly adjusting their marketing tactics in order to develop the perfect marketing mix that produces the maximum marketing results.

How should law firm go about measuring marketing effectiveness?

1. Start with a marketing budget that allows for measuring marketing results

John Wanamaker once said, “Half the money I spend on advertising is wasted, the trouble is I don’t know which half”. To measure the effective of your marketing results, you need to allocate time and money for this purpose. Allocating both these resources to your marketing budget adds structure to your efforts. This budget should make provision for click reports on email or newsletter marketing and in-depth website analytics.

2. Set up the required measurable

There are three metrics that law firms should use to measure marketing effectiveness:

  • Growing client revenue – Are clients spending more money with our firm?
  • Moving the phases of a sale through a pipeline – Did the firm close the deal?
  • Listening to the client – Did the firm listen to the client and was the client satisfied?

These metrics are clearly identified, unequivocally objective and obvious. If you are unable to measure your marketing efforts by one of these thee ways, you should not pursue that specific marketing effort. The metrics are therefore fact based and non-negotiable.

3. Set clearly defined goals

The next step in measuring marketing effectiveness is to set clear marketing goals and to measure these marketing goals against the metrics set out in point 2 above. Let us briefly look at 5 goals that a firm can set in order to measure marketing effectiveness.

  • Define and identify the most strategically important clients or prospects. The firm should build and maintain an accurate database in order to segment and target the right clients, and prioritise which client or prospects to pursue or avoid.
  • Acquire the most strategically important prospects and clients. The firm can endeavor to position its unique attractiveness, credibility and thought leadership through various digital marketing channels or successfully with new clients through face-to-face network engagement.
  • Retain the most strategically important prospects and clients. Foster increasingly significant prospect and client relationships and successfully keeping current engagements with targeted clients.
  • Increase the firms’ revenue with the most strategically important current clients. Also known as cross-selling, this means increasing each current client’s use of the firms’ entire service portfolio and increase the penetration into that client’s available “share of wallet”.
  • Increase the perceived value of the firm to all audiences. This includes targeted prospects or clients, as well as other influences, suppliers, current and potential employees. By increasing the perceived value, the value of the firm’s overall brand and thought leadership equity is strengthened. A favorable reputation is therefore established

4. Get practical

In order to measure Growth in client revenue, it is crucial that the firm builds and maintains a client database. The more segmented the database, the easier it will be to track the average spend per client and to identify revenue growth per client.

Moving the phases of a sale through a pipeline, can be done by tracking the sales process up until the point a client does business with the firm for the first time. Leads may be generated through website visits, online submission forms, inbound phone calls, networking or referrals. It is critical that every lead is tracked during the sales process in order to determine of the firm is closing deals.

Lead tracking doesn’t have to be fancy. Assign your receptionist to record telephone or web inquiries. Create a new-client information sheet for word-of-mouth referrals. Just keep it consistent by capturing the same information from prospects no matter how they reach your firm. Capturing new client information should also be sustainable enough to incorporate, long-term, into your practice management.

Lastly, the manner in which the firm is Listening to clients can be measured by performing client satisfaction studies amongst the client base. These studies often highlight key trends amongst clients – where the revenues come from, why clients buy, what affects the buying decision, loyalty levels, etc. The value of client feedback cannot be underestimated.

Measure your marketing and measure it well. Your firm will be glad that you did.

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

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