Trust

Category: Trust (page 1 of 2)

Maintenance claims from life partner’s estate

August 12, 2022 / My Lawyer / Comments Off

“Should a person who has shared her home and life with her deceased partner, born and raised children with him, cared for him in health and in sickness, and dedicated her life to support the family they created together, be treated as a legal stranger to his estate, with no claim for subsistence because they were never married? Should marriage be the exclusive touchstone of a survivor’s legal entitlement as against the rights of legatees and heirs?” SACHS J Volks N.O. v Robinson [2005] ZACC 2; 2009 JDR 1018 (CC)

In 2016, statistics revealed that approximately 3.2 million South Africans live together as co-habitants outside the boundaries of marriage. South African common law has also significantly been developed to accommodate the rights of people who choose to cohabit outside of marriage. In light of this, it seems that South African Courts have accepted that cohabitation outside of marriage is now widely practised and accepted across the globe. This is evidenced in the Judgment handed down by the Constitutional Court in Bwanya v The Master of the High Court Cape Town (The Bwanya Case).

The Apex court was left with the task of deciding whether the definition of “Survivor” as defined in Section 1 of the Maintenance of Surviving Spouses Act was invalid and resultantly unconstitutional to the extent that it does not include the words “surviving partner of a permanent life partnership terminated by death”.

Ms Bwanya and the deceased Mr Anthony Ruch were involved in a relationship that consisted of all the characteristics of a marriage. In 2014, Ms Bwanya moved in with Mr Ruch on a permanent basis, they attended many social gatherings together, and Mr Ruch often introduced Ms Bwanya to his friends as his wife. In 2015, the couple even planned to conceive a child to solidify their relationship. In the same year, Mr Ruch also proposed to Ms Bwanya and they planned to get married in 2016, after the Labola negotiations. Mr Ruch, however, passed away in November 2016.

After Mr Ruch’s passing, Ms Bwanya lodged a claim for maintenance against Mr Ruch’s estate in terms of the Maintenance of Surviving Spouses Act. The basis for her claim was that the permanent life partnership shared between herself and Mr Ruch had most, if not all, the characteristics of a marriage. Her claim was rejected by the executor on the basis that she was not married to Mr Ruch. Ms Bwanya then challenged the constitutionality of sections 1 and 2 (1) of the Maintenance of Surviving Spouses Act.

Section 2(1) of the Maintenance of Surviving Spouses Act provides that a surviving spouse has the right to lodge a maintenance claim against his or her deceased spouse’s estate if they are unable to support themselves. Section 1 of the Act defines a “survivor” as the surviving spouse in a marriage dissolved by death. The Court in the Bwanya Case had to consider whether the exclusion was still merited.

The Apex Court took cognizance of the increasing popularity of permanent life partnerships and the creation of many families within this category. In the words of J. Madlanga, “We should be wary not to so emphasise the importance of the institution of marriage as to devalue, if not denigrate, other institutions that are also foundational to the creation of other categories of families. And this must be so especially because the other categories of families are not only a reality that cannot be wished away, but are on the rise.”

The court found that all categories of families deserve legal protection, including permanent life partnerships. The court also emphasised that permanent life partnerships are intimate relationships that are meant to last until the death of one or both partners and that it is a relationship that is often characterised by a reciprocal duty of support. In light of the above, the Constitutional Court ruled that the exclusion of permanent life partnerships in the definition of “survivor” as found in Section 1 of The Maintenance of Surviving Spouses Act was constitutionally invalid. In the same breath, the Court also found that Section 2(1) of the Maintenance of Surviving Spouses Act was constitutionally invalid to the extent that it only confers a maintenance benefit on a surviving spouse.

The order in the Bwanya Case brings about a significant change in South African Law. Prior to the judgment, a surviving partner of a permanent life partnership could not claim maintenance from their deceased partner’s estate. Now, both heterosexual and same sex life partners can now claim maintenance benefits from their deceased life partner’s estate. The Legislature has now been given 18 months to take steps to cure the constitutional defects in the Maintenance of Surviving Spouses Act.

Our family law experts are more than capable to provide sound legal advice to anyone seeking further advice on maintenance claims.

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)

Deceased’s will declared invalid, despite clear wishes

October 26, 2021 / My Lawyer / Comments Off

The Wills Act sets out the requirements for a valid Last Will and Testament. For a will to be valid, it must be signed and witnessed. What happens if the wishes of the deceased are clear, but the document does not meet the requirements of a valid will?

This was the heart of the matter in Estate Late Elaine Ilsia Williams and Others v Hendricks and Another, heard in the Western Cape High Court.

In this matter, the close relations of the deceased sought an order directing the Master of the High Court to accept as a will for the purposes of the Administration of Estates Act, a pro forma document signed by the deceased in which she gave instructions to a bank to draft her Last Will and Testament.

The nature of the bank document was consistent with its printed title, “Will Application/Aansoek om testament.” It is apparent from the terms of the document that the bank offers a service for the drafting of wills. The service is provided free of charge if the bank’s trustee company is nominated as the executor.

The deceased’s instructions to the bank in respect of the content of the will were framed as follows: “I would like to give my full estate to my son until he is of age as well as any other monetary payouts as a result of any claims.” It would appear that the deceased also wished her will to provide that the bequest to her son should be administered in a trust until the child attained the age of 21.

The will application form was completed by the deceased with the assistance of a representative of the bank on the day before she died. She was terminally ill with cancer at the time. The deceased passed away before her instructions for the drafting of a will were executed.

The applicants relied on Section 2(3) of the Wills Act: “If a court is satisfied that a document or the amendment of a document drafted or executed by a person who has died since the drafting or execution thereof, was intended to be his will or an amendment of his will, the court shall order the Master to accept that document, or that document as amended, for the purposes of the Administration of Estates Act, 1965 (Act 66 of 1965), as a will, although it does not comply with all the formalities for the execution or amendment of wills referred to in subsection (1).”

As is evident from the wording of Section 2(3) of the Wills Act, it is required of an applicant seeking an order of the sort contemplated by the provision to establish, amongst other things, that the document in question was intended by the deceased person to be his or her will. It is in that regard that the application runs into difficulty on the merits. Nothing specifically indicates that the deceased intended the document to be anything other than what it appears to be – an instruction to the bank to draft a will.

The court held that there was no evidence that the deceased intended the will application to be anything other than an application for a proper will to be drafted. Therefore, the applicants failed to prove the requirement that the deceased intended the document to be her last will and testament, as required by Section 2(3) of the Wills Act.

Courts are wary to declare documents that do not comply with the requirements of the Wills Act as valid wills. It is advisable to obtain professional assistance from an attorney or a fiduciary expert with the drafting of your Last Will and Testament.

Reference List:

Wills Act 7 of 1953
Estate Late Elaine Ilsia Williams and Others v Hendricks and Another [2021] ZAWCHC 66

Death during a divorce: Who takes care of the funeral?

October 26, 2021 / My Lawyer / Comments Off

“Family feuds, in relation to who has the right to bury a deceased person, has the potential of permanently dividing the family. These are sensitive disputes that are best suited to be mediated and resolved by family elders rather than being brought to court where there is no winner and a united family structure ends up divided and torn apart. It is a time where the family should be united more than ever, preparing to give the loved one a dignified burial, rather than airing their dirty linen in court”.

Polokwane High Court Judge Maake Kganyago stated the latter when handing down her judgment in the Mabulana v Mabulana and Others (LP) (unreported case no 5040/2021, 26-7-2021) matter.

The High Court dismissed Mrs Mabulana’s (the Applicant) application to interdict Gledies and Sophy Mabulana (the Respondents) from burying the Applicant’s estranged husband, Wilard Mabulana (the deceased). Gledies was the deceased’s sister-in-law and Sophy the deceased’s sister. Gledies took care of the deceased since 2013, especially while he was sick.

The Applicant and deceased were married on 3 July 1996 and three children were born from their marriage. However, as the years passed, the couple realised that their marriage was on rocky waters. The deceased decided to move out of their matrimonial home in 2018 and the couple effectively separated.

On 9 January 2018, the Applicant instituted divorce proceedings against the deceased on the grounds that she had no more love or affection towards the deceased. The deceased was apparently disgruntled by the pending divorce proceedings, but eventually agreed that a decree of divorce should be sought on an unopposed basis. The parties further agreed that their joint estate would be equally divided between them. During a court appearance on 30 June 2021, the parties agreed to postpone the hearing of the divorce to 28 July 2021. The reason for the postponement was that the Applicant had to obtain the assistance of an interpreter. The divorce would likely have been finalised on 30 June 2021, was it not for the postponement.

On 18 July 2021, the Applicant was informed by one of her children that the deceased had passed away. The Applicant, therefore, started preparing and making arrangements for the deceased’s burial. When the Applicant approached the burial services to claim the body, she was advised that the Respondents brought the deceased to them and that they accordingly cannot assist the Applicant. This led to the Applicant instituting an application to interdict the Respondents from burying the deceased.

The Applicant submitted that she had a clear right to bury the deceased as she had been married to the deceased, and the deceased’s will was silent on the issue of the person who had to prepare and arrange the deceased’s funeral.

The court held that it was evident from the facts of the matter that the Applicant had lost her love, affection, and respect towards the deceased. The Applicant failed to explain how the death of the deceased had restored the lost love, affection, and respect towards the deceased when she was on the verge of divorcing him.

The court pointed out that the deceased, in his will, did not give directions as to who would be responsible for arranging his burial. The deceased, however, made a separate will, despite being married in community of property with the Applicant, and in that will had disinherited the Applicant. According to the court, this was a sign that the deceased had made his position clear that he had severed ties with the Applicant.

The court referred to Trollip v Du Plessis and Another where the court held that it was within the bounds of reasonableness to respect the wishes of the deceased, whether expressed in a testament or not, and if no such preference was expressed, to resort to the wishes of the heirs.

During the deceased’s final days, he was in the care of the Gledies and expressed his wish that Gledies should bury him. The Applicant was not present when the deceased passed away and they have been separated from each other for a long time.

In turning down the wife’s application, the judge held the wishes of the deceased had to be respected.

Can you deregister or terminate a trust?

September 13, 2019 / My Lawyer / Comments Off

There is no provision in the Trust Property Control Act, 1988 that requires the deregistration of trusts.

However, this said, it does not mean that a trust can never be terminated, as there are a few events that can occur during the lifetime of the founder, the trustees or the beneficiaries.

When considering the termination of the trust, the first step will always be to turn to the provisions of the trust deed.

Some of the most common provisions are:

that the trust assets have been distributed to the beneficiaries;
it may terminate after a certain period of time or upon the happening of a specific event;
the discretion of the trustees or through a resolution passed by the beneficiaries;
once its primary objective has been achieved; and
when it becomes impossible to achieve its main objective.

For the termination of a trust, the following documents are required:

resolution by the trustees confirming that the trust was active or dormant and that the bank account in the name of the trust has been closed;
The original letter of authority;
Bank statements reflecting a nil balance or the final statement;
Proof that the beneficiaries have received their benefits; and
An affidavit by the trustees confirming that the trust has been divested of all its assets.

Upon receipt of the above documents, the Master will deregister the trust. Please note that the above documents must be lodged with the Master with whom the Trust has been registered.

TRUST LITIGATION – WHO CAN INSTITUTE A CLAIM AND WHICH COURT HAS JURISDICTION?

April 18, 2018 / My Lawyer / Comments Off

This article deals with the questions of who can institute litigation on behalf of a trust, as well as with the question of how jurisdiction is determined with regards to trusts.

Who can institute a claim?

A trust is not a legal person and cannot litigate in its own name. The trustees play a vital role in any litigation in which a trust might be involved. There are three overriding principles regarding trust administration:

The trustees are obliged to give effect to the provisions of the trust deed.
The trustees must perform their duties with the necessary “care, diligence and skill which can be expected of a person who manages the affairs of another”.
Any person acting as a trustee must exercise discretion, where allowed, with the necessary objectivity and independence.

Section 6(1) of the Trust Property Control Act (the Act) determines the following: “any person whose appointment as trustee in terms of a trust instrument, section 7 or a court order comes into force after the commencement of the Act, shall act in that capacity only if authorised in writing by the Master”. In Watt v Sea Plant Products Bpk, Judge Conradie interpreted this section to mean that a trustee may not, prior to authorisation, acquire rights for, or contractually incur liabilities on behalf of the trust”. Thus, a trustee can only contract and institute legal proceedings in his/her capacity as trustee once a letter of authority has been issued by the Master of the High Court.

In Nieuwoudt v Vrystaat Mielies (Edms) Bpk), an agreement was held to be invalid and unenforceable because the trustees had not acted jointly nor reached a unanimous decision. The conclusion to be drawn from this is that trustees must act jointly when entering into contracts or when instituting litigation.

A trustee has a duty to vindicate trust property and to collect due debts. This duty goes hand in hand with the duty to conserve trust property and ensures that the trustee is in control of the property which forms part of the trust fund. A trustee further has locus standi to defend actions instituted against the trustee to ensure that the trust property is conserved.

Should all the trustees be joined in an action to enforce a right of the trust?

Judge Cameron held in the Goolam Ally Family Trust case that all the trustees must be joined in suing and all must be sued. Therefore, all the trustees will be joined in their official capacity when instituting legal proceedings.

In Khabola NO v Ralithabo NO, the court quoted the general rule regarding locus standi as follows: Any person who has a direct or substantial interest in the matter has the required locus standi to institute legal proceedings. The learned judge found that the underlying contractual relationship between trustees could be equated to a partnership.

Jurisdiction:

For jurisdictional purposes, a partnership “resides” at the place where its principal place of business is situated, and if the principle set out in abovementioned case is followed – a trust also “resides” where its principal place of business is situated.

In Bonugli v The Standard Bank of South Africa Limited, the court referred to section 5 of the Act which determines that a person whose appointment as trustee comes into effect after the commencement of this act, shall furnish the Master with an address for the service upon him of notices and process and shall, in case of change of address, within 14 days notify the Master by registered post of the new address. The cause of action arose in Johannesburg, and one of the defendants (a trustee in his representative capacity) was resident in Australia. The address which was used in the summons was the address given to the Master in terms of section 5 of the Act. A special plea with regards to lack of jurisdiction was raised, but the Cape Town High Court found that it had the necessary jurisdiction to hear the matter.

There are considerable differences between a partnership and a trust, but with regards to jurisdiction the general principles applicable to a partnership can also be applied to a trust – namely considerations of convenience and common sense for its conclusion to entertain a claim. The Cape Town High Court had jurisdiction to hear the Bonugli matter because the first defendant was resident within its jurisdiction, and because the address listed in terms of section 5 of the Act was within the jurisdiction. Considerations of common sense and convenience also required that the court should adjudicate the issue between the plaintiff and all the defendants. It would have been impractical to institute a claim based on the same set of facts in two different courts, because the trustees were resident in different courts’ jurisdictions.

There remains some uncertainty regarding which court should have jurisdiction to hear a claim instituted by a trust or a claim against a trust. There appears to be three possibilities in this regard: Firstly, if the Bonugli judgment was followed, the residency of one trustee should be sufficient to establish jurisdiction. Secondly, the address provided in terms of Section 5 of the Act could be used to establish jurisdiction. Thirdly, the court where the trust’s principle place of business is situated could have jurisdiction. Hopefully the position regarding which court has jurisdiction to hear claims instituted by a trust or against a trust will be properly aired in the courts soon, to provide more certainty regarding this aspect.

References:

Books:

Lexisnexis Trust Law and Practice, P A Olivier, S Strydom, GPJ van den Berg, October 2017
Civil Procedure: A Practical Guide, Petè, Hulme, Du Plessis, Palmer, Sibanda, Oxford University Press.

Acts:

Trust Property Control Act 57 of 1988

Cases:

Watt v Sea Plant Products Bpk (1998) 4 All SA 109 (C)
Nieuwoudt v Vrystaat Mielies (Edms) Bpk)
Goolam Ally Family Trust t/a Textile, Curtaining and Trimming v Textile, Curtaining and Trimming (Pty) Ltd 1989 (4) SA 985 (C) at 988D-E
Khabola NO v Ralithabo NO (5512/2010) (2011) ZAFSHC 62 (24 March 2011)
Bonugli v The Standard Bank of South Africa Limited 266/2011) (2012) ZASCA 48 (30 March 2012)

THE BENEFITS OF CREATING A TRUST

October 16, 2017 / My Lawyer / Comments Off

Trusts are well-known to facilitate effective estate planning and continuity planning strategies. That said, setting up a trust – whether an inter vivos (between the living) or a testamentary (created in a will) − should be carefully considered and not just implemented blindly.

The difference between testamentary and inter vivos trusts

A testamentary trust is established when a person (the founder) makes provision for establishing a trust in their will. The trust does not come into existence until the founder dies.
An inter vivos trust is set up between the living. In other words, property is transferred before death to the trust by its founder and managed by the trustees for the benefit of another person or persons.

The death benefits of creating an inter vivos trust exceeds the cost – both in time and money. According to The Estate Duty Act, upon death, a duty is levied against your estate known as estate duty. The nett value of any estate will be determined by deducting all liabilities from your assets of your estate, both real and deemed.

Should you create a testamentary trust, upon death the assets are in your name and will need to be transferred to the trust posthumously, meaning all assets are taken into account when assessing the duty payable.

Advantages

Taking the above into account, here are some benefits you could experience from creating a trust:

Reducing estate duty: Inter vivos trusts can be used to minimise estate duty. No estate duty should be payable on assets owned by the trust as a trust does not die.
Protection against creditors: As the trust’s assets are not owned by the beneficiaries, creditors do not have a claim on the assets. This advantage is especially important for people who could be exposed to potential liability. Companies as well as individuals are able to transfer assets into trusts.
Efficient succession: Since trusts never die, beneficiaries will be able to continue enjoying the assets if one beneficiary were to pass away.

Disadvantages

Despite the advantages, there are also some disadvantages of having a trust. They include the following:

Costs: The costs of setting up a trust can be high. If assets are transferred into the trust, then transfer duty needs to also be paid.
Duties of trustees: Trustees could find themselves personally liable for losses suffered by the trust if it can be proven that they did not act with care, diligence and skill according to Section 9 of the Trust Property Control Act.

References:

https://www.iprotect.co.za/articals-trust-info/article-arcives/why-an-intervivos-trust-as-opposed-to-a-testamentary-trust.html

http://www.entrepreneurmag.co.za/advice/starting-a-business/start-up-advice/should-i-set-up-a-trust/

https://www.findanattorney.co.za/content_inter-vivos-trust

WHAT IS THE JOB OF A TRUSTEE?

January 25, 2017 / My Lawyer / Comments Off

The Trust Property Control Act 57 of 1988 defines a trustee as “any person (including the founder of the trust) who acts as a trustee by virtue of an authorisation under Section 6.”

A trust that is established by a trust deed is not a legal person – it is a legal relationship of a special kind that is described by the authors of Honoré’s South African Law of Trusts[1] as “a legal institution in which a person, the trustee, subject to public supervision, holds or administers property separately from his/her own, for the benefit of another person or persons or for the furtherance of a charitable or other purpose.”

Although the trust property vests in each trustee individually they have to act jointly unless the deed of trust provides otherwise. Their individual interests do not waive the requirement that they have to act jointly.

The consequence of the validity of an act that has taken place in conflict with a statutory prohibition has been considered in numerous cases, and depends on a proper construction of the particular legislation and the intention of the legislature.

The whole scheme of the act is to provide a manner in which the Master can supervise trustees in the proper administration of trusts, and their knowledge of section 6(1) is essential to this purpose. By placing a bar on trustees from acting as such until authorised by the Master, the Act endeavours to ensure that trustees can only act as such if they comply with the Act.

What can the courts do?

In the Kropman NO vs Nysschen[2] it was held that a court has the discretion to retrospectively validate acts of a trustee that are performed without the requisite authority. This proposition was in later cases rejected persuasively.

“Locus standi in iudicio” on the other hand is something else and does not depend on the authority to act but depends on whether the litigant is regarded by the court as having a sufficiently close interest in the litigation.

Although section 6(1) suspends a trustee’s power to act in that capacity, he/she could have a sufficiently well-defined and close interest in the administration of the trust to have locus standi.

The essence of the prohibitory phrase in section 6(1), “… shall act in that capacity only if authorised thereto …”, must be interpreted to mean that a trustee may not, prior to the Masters authorisation, acquire rights for, or contractually incur liabilities on behalf of, the trust and is not intended to regulate questions of locus standi in iudicio.’

Reference:

[1] 5^th ed (2002) by Edwin Cameron with Marius de Waal, Basil Wunsh and Peter Solomon para 1.

[2] 1999 (2) SA 567 (T) at 576F.

HOW DO I REGISTER A TRUST?

August 18, 2016 / My Lawyer / Comments Off

A 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.

Original trust deed or notarial certified copy thereof.
Proof of payment of R100 fee, for registration of a new Trust.
Completed Acceptance of Trusteeship (J417) and Acceptance of Auditor Application (J405) forms.
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:

by statute
fulfilment of the object of the trust
failure of the beneficiary
renunciation or repudiation by the beneficiary
destruction of the trust property
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.

Reference:

Justice.gov.za. The Department of Justice and Constitutional Development, Administration of Trusts. [online] Available at: http://www.justice.gov.za/master/trust/ [Accessed 19/05/2016].

Sanlam.co.za. Sanlam Trusts. [online] Available at: https://www.sanlam.co.za/personal/financialplanning/willstrustsestates/Pages/trusts/ [Accessed 20/05/2016].

WHAT YOU NEED TO KNOW ABOUT ESTATE PLANNING

July 19, 2016 / My Lawyer / Comments Off

The main aim of planning your estate is to ensure that as much of the accumulated wealth is utilised for your own benefit and for the benefit of your dependents on your death.

What is estate planning?

“Estate planning” has been defined as the process of creating and managing a programme that is designed to:

Preserve, increase and protect your assets during your lifetime;

Ensure the most effective and beneficial distribution thereof to succeeding generations.

It is a common misconception that it revolves solely around the making of a Last Will and Testament, or the structuring of affairs so as to reduce estate duty. Each person’s estate is unique and should be structured according to his/her own unique set of circumstances, goals and objectives.

What is liquidity?

The lack of liquidity on the date of death may cause for the deceased’s family members and dependents to suffer hardship, as certain assets might be sold by the executor to generate the cash needed.

Liquidity means that there should be enough cash funds to provide for:

Paying estate duty;

Settling estate liabilities and administration costs;

Providing for other taxation liabilities that may arise at death, such as capital gains tax.

Technically the estate is frozen until such time as the Master of the High Court has issued Letters of Executorship.

Having no will…

If you die without executing a valid Last Will and Testament, your estate will be dealt with as an intestate estate, and the laws relating to intestate succession will apply. The Intestate Succession Act determines that the surviving spouse will inherit the greater of R250 000 or a child’s share. A child’s share is determined by dividing the total value of the estate by the number of the children and the surviving spouse. If the spouses were married in community of property, one half of the estate goes to the surviving spouse as a consequence of the marriage, and the other half devolves according to the rules of intestate succession. If there is no surviving spouse or dependents, the estate is divided between the parents and/or siblings. In the absence of parents or siblings, the estate is divided between the nearest blood relatives.

The executor remuneration

Executor’s remuneration is subject to VAT where the executor is registered as a vendor.

Where the value of the estate exceeds R3.5 million, estate duty will become payable on the balance in excess of R3.5 million, with the exception of the property bequeathed to a surviving spouse, which is exempt from estate duty and/or capital gains tax.

Land

Section 3 of the Subdivision of Agricultural Land Act prevents the subdivision of agricultural land, and such land being registered in undivided shares in more than one person’s name is subject to Ministerial approval.

Minor children

A minor child is a person under the age of 18 years of age. Any funds bequeathed to a minor child will be held by the Guardian’s Fund, which falls under the administration of the Master of the High Court. These funds are not freely accessible, and are usually invested at below market interest rates. It is thus advisable to provide for minors by means of a trust.

Member’s interest

The Close Corporations Act provides that, subject to the association agreement, where an heir is to inherit a member’s interest (in terms of the deceased’s Will), the consent of the remaining members (if any) must be obtained. If no consent is given within 28 days after it was requested by the executor, then the executor is forced to sell the member’s interest.

Estate duty

Section 3(3)(d) of Estate Duty Act determines that where an asset is transferred to a trust during an estate planner’s lifetime, yet the estate planner, as trustee of the trust retains such power as would allow him to dispose of the trust asset(s) unilaterally for his own or his beneficiaries’ benefit during his lifetime, then such asset(s) may be deemed to be property of the estate planner and included in his estate for estate duty purposes.

In community of property

Where the parties are married in community of property, the surviving spouse will have a claim for 50 percent of the value of the combined estate, thus reducing the actual value of the estate by 50 percent. The estate is divided after all the debts have been settled in a deceased estate (not including burial costs and estate duty, as these are the sole obligations of the deceased and not the joint estate). Only half of any assets can be bequeathed.

Life insurance

The proceeds from life insurance policies can be used to:

Generate income to maintain dependents while the estate is dealt with;

Pay estate expenses: funeral, income tax, estate administration, estate duty.

All proceeds of South African “domestic” policies taken out on the estate planner’s life, where there is no beneficiary nominated on the policy, will fall into his estate on his death.

Where a beneficiary is nominated on the policy, the proceeds will be deemed property for estate duty purposes, even though they are paid directly to the beneficiary (subject to partial exemptions based on policy premiums).

Policies which are exempted from inclusion for estate duty purposes are buy and sell, key man policies, and those policies ceded to a spouse or child in terms of an antenuptial contract.

Freedom of testation and maintenance claims

September 9, 2014 / My Lawyer / Comments Off

Is a testator entitled to disinherit a child and if so, will the child have a claim for maintenance against the estate?

Freedom of testation is the liberty of a testator to choose how to bequeath his/her estate, and govern how his/her property is transmitted after his/her death. The law of succession then, is at least in part concerned with the preservation of a testator’s wishes, even if it additionally serves a social function related to the family and economic structures of society. In principle South Africa propagates total freedom of testation.

The general approach in South African law is that agreements or clauses which attempt to limit freedom of testation are not enforceable. Further, once the testator’s wishes have been ascertained, a court is ordinarily bound to give effect to these wishes. Our baseline is allowing for much liberty and autonomy in the law of succession.

However, freedom of testation has never been unfettered. Both the common law and statutes, such as the Maintenance of Surviving Spouses Act 27 of 1990, impose restrictions on the testator. Bequests which are manifestly illegal or contra bonos mores (against good morals) will be regarded as invalid. Further, spouses and children may be disinherited in terms of the will but they may still have a legitimate claim for maintenance against a testator’s estate which cannot be disregarded.

There is furthermore a presumption against disinheritance, and courts will usually prefer a softer construction of a testator’s will in this respect. This is based on an assumption that a parent is not likely to disinherit a child. However, it is important to note that if it is explicit or clear in a testator’s will that a child is disinherited, then this will not constitute an impermissible exercise of freedom of testation; rather, a testator is given the liberty to lawfully do so.

South Africa gives fairly broad freedom to testators. Testators can generally dispose of their estates as they desire, subject only to certain restrictions mentioned above. Further, testators are not required to give reasons for their decisions in this regard, and are not accountable to their families for testamentary choices.

Nonetheless, the parental duty to maintain children will pass to the estate upon death, as confirmed in Carelse v Estate De Vries (1906) 23 SC 532. The minor child’s claim for maintenance is endorsed as settled law and a common law restriction on freedom of testation.

It should be noted that the child’s claim for maintenance and education is not to be confused with a legitimate portion as it does not entitle a minor to a set portion of the estate or, put differently, does not presumptively limit the testator’s ability to divide her estate as she or he desires. As such a testator could potentially disinherit a child without this impacting the common law claim the child will have against the estate.

Currently, South African law also provides for the surviving spouse to exercise a claim for maintenance against the deceased’s estate. The parental (and spousal) duty then does not merely extinguish upon death. The provision of maintenance for children gives effect to children’s rights as provided for by the Constitution, and affording this maintenance claim to protect dependants is wholly justifiable. This does not however entail that children should be entitled to a legitimate portion or forced heirship generally, as this would constitute an overly extensive constriction on freedom of testation.