Estate – Jan L Jordaan

How does the Budget Speech affect you, your property transactions and your estate?

February 23, 2018 Jan L Jordaan Comments 0 Comment

On 21 February 2018, Finance Minister Malusi Gigaba delivered his 2018 Budget Speech.

Hereby a summary of the most significant proposals for the 2018/2019 Budget as tabled by the Minister of Finance:

2018/2019 Tax Proposals:

VAT: A one percentage point (1%) increase in VAT from 14% to 15%.
No adjustments to the top four income tax brackets. Below inflation adjustments to the bottom three income tax brackets proposed.
Fuel Levies: Overall increase of 52c/litre for fuel, consisting of a 22c/litre increase in the general fuel levy and 30c/litre increase in the Road Accident Fund levy, effective 4 April 2018.
Luxury Goods Tax: Increase in the ad-valorem excise duties rate on luxury goods from 7% to 9% effective 1 April 2018.
Estate Duty Tax: Increased estate duty, to be levied at 25% for estates above R30 million, effective 1 March 2018. This is a 5% increase.
Capital Gains and Dividend Tax: The capital gains tax rate for individuals remains unchanged at 18%, while the dividends tax rate remains unchanged at 20%.
Medical Tax Credits: The medical tax credits will increase from R303 to R310 per month for the first two beneficiaries (2.3% increase), and from R204 to R209 per month for the remaining beneficiaries (2.5% increase).
Sin Tax: Excise duties on tobacco products will increase by 8.5% and on alcohol by 6-10%.
Environmental & Health Tax: Increases in the plastic bag levy, the motor vehicle emissions tax and the levy on incandescent light bulbs to promote eco-friendly choices.

Transfer Duty Fees:

Transfer duty fees have remained unchanged. The following rates on transactions in respect of acquisition of property is payable (and not subject to VAT).

Value of Property (R)	Rate
0 – 900 000	0%
900 001 – 1 250 000	3% of the value above 900 000
1 250 001 – 1 750 000	10 500 + 6% of the value above 1 250 000
1 750 001 – 2 250 000	40 500 + 8% of the value above 1 750 000
2 250 001 – 10 000 000	80 500 + 11% of the value above 2 250 000
10 000 001 and above	933 000 + 13% of the value above 10 000 000

Estate Duty Tax:

The 2018 Budget proposes to increase estate duty from 20% to 25% for estates worth R30 million and more. This is in line with Davis Tax Committee recommendations, and in keeping with the progressive structure of the tax system. Any donations above R30 million in one tax year will be taxed at 25%, in order to limit the staggering of donations and avoid the higher estate duty rate. Both measures will be effective from 1 March 2018.

Estate duty is levied on property of residents and South African property of non-residents less allowable deductions. The duty is levied on the dutiable value of an estate at a rate of 20% on the first R30 million and at a rate of 25% above R30 million. A basic deduction of R3.5 million is allowed in the determination of an estate’s liability for estate duty as well as deductions for liabilities, bequests to public benefit organisations and property accruing to surviving spouses.

JLJ_BudgetInfograph

How is a deceased’s estate administered?

May 25, 2017 Jan L Jordaan Comments 0 Comment

The administering of a deceased estate is regulated by the Administration of Estates Act No 66 of 1965 (as amended) and divided according to a valid will or the Intestate Succession Act No 81 of 1987 (as amended) or a combination of both acts.

Various other acts and regulations may, however, also be applicable, like those applicable to income tax (with due allowance for VAT and CGT), Estate duty and Donations tax, and support of surviving spouse.

After a death

When someone dies, his/her estate must be reported to the Master of the High Court as soon as possible, and certain report documents, together with the original will, where applicable, should be delivered to the Master.

In the case of estates with a gross value of less than R250 000 the Master may dispense with an official appointment of an Executor to execute the required administering process. In all other cases, an Executor will be appointed by the Master, who will issue an Executor’s letter to the appointed Executor.

The Executor

As soon as the Executor’s letter has been issued the formal administering of the estate, which the Executor has to follow, will commence. One of the Executor’s first tasks would be to announce to the creditors, acquire details regarding estate assets and have it valued if necessary, and recover certain assets. Known and filed liabilities should be investigated and attention must be paid to income tax.

The Executor is now compelled to submit a liquidation and distribution account (statement of assets and liabilities) to the Master of the High Court within six months after being issued with the Executor’s letter, or ask for a formal postponement. This estate account will indicate all assets and liabilities, distribution of heirs and details of assets outside the estate which are directly payable to beneficiaries.

The Master will check the estate account and then issue a questionnaire to the Executor. As soon as the Master has granted approval the Executor may proceed to announce the account as being open for inspection for 21 days at the Master and the nearest Magistrate’s Office.

Should any written challenges be submitted, it should be dealt with according to the regulations in the Administration of Estates Act. Should there be no challenges, or when the Executor has disposed of all challenges, the Executor may proceed to make payments to heirs and carry over any other assets to the beneficiaries.

Administering obstacles

In most cases the administering process should not be complicated, therefore it would be possible to finalise within a fair period of time (approximately six to nine months). There are, however, many obstacles which may slow down this process and even bring the administering process to a virtual standstill. Some of the most well-known and general obstacles are poor service from government and private institutions, invalid and unpractical wills, shortage of cash, quarrels and disputes among family members and beneficiaries, lack of information, disorder in the tax and other affairs of the deceased, lawsuits before and after death, and legal post-mortems in case of an unnatural death, which may sometimes be required before policies can be paid out.

Conclusion

The administering of an estate is a specialised environment which should be left to capable people with knowledge of the Administration of Estates Act and years of experience. Ignorance regarding the run of events as well as errors of judgement may eventually cost you dearly if you don’t make use of the available expertise.

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)

Owning property without a Will

February 15, 2017 Jan L Jordaan Comments 0 Comment

If you die without a will, an administrator will have to be appointed to administer your estate which will be distributed according to the laws of intestate succession. As such, your assets may not be distributed as you would have wished. It also means that the process will be delayed and that there will be additional expense and frustration which most people would not want to inflict on their loved ones during a time of loss.

Marriage and property

When drafting your will, it’s important to consider the nature of your relationship with your ‘significant other’. If you are married in community of property, you only own half of all assets registered in your name and that of your spouse. Your spouse therefore still remains a one half share owner of any fixed property you may want to bequeath to a third party which could potentially present difficulties.

If you are married in terms of the accrual regime, the calculation to determine which spouse has a claim against the other to equalise the growth of the respective estates only occurs at death. Your spouse may therefore have a substantial claim against your estate necessitating the sale of assets you had not intended to be sold.

Alongside your will, you should also prepare the following in relation to any immovable property you may own:

State where your title deeds are kept and record any outstanding bonds and all insurance
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File up-to-date rates and taxes receipts
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Record details of the leases on any property you have
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State who collects your rent
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State who compiles your yearly accounts
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State where your water, lights and refuse deposit receipts are kept
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If you die without a will

According to the according to Intestate Succession Act, 1987, your estate will be distributed as follows:

Only spouse survives: Entire estate goes to spouse.
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Only descendants survive: Estate is divided between descendants.
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Spouse & descendants survive: The spouse gets R250 000 or a child’s share and the balance is divided equally between the spouse and descendants.
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Both parents survive: Total share is divided equally between both parents.
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One parent: Total Estate goes to the parent.
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One parent & descendants: Half the Estate goes to the parent; balance is divided equally amongst descendants.
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No spouse; No descendants; No parents; but descendants through mother & descendants through father: Estate divided into two parts: half to descendants through mother; half to descendants through father.
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No spouse; No descendants; No parents; No descendants through mother or father: Full Proceeds of the Estate has to be paid into the Guardians Fund in the event of no descendants whatsoever.
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References:

Pitfalls of appointing the surviving spouse as executor/trix:

January 10, 2017 Jan L Jordaan Comments 0 Comment

The appointment of the surviving spouse as executor seems to be the honourable and correct thing to do. This in particular where the deceased died without leaving a valid will, or failed to nominate an executor/trix in the last will and testament.

The fact that the surviving spouse normally doesn’t have to provide the Master with security and that it seems to be the next best thing can often become your worst nightmare.

This in particular the case where the spouse is the second or third wife and the deceased divorced wife and children are still around, alternatively where her/his own children will compete for inheritance in the intestate succession.

The problem comes when particularly maintenance claims are submitted against the estate of the deceased by the divorced spouse or children.

It leaves the Surviving spouse in the predicament of rejecting these claims, because it is almost always financially beneficial to do so.

This however is where the clash of interest manifests itself and where cool heads and caution is required.

The remedies available are limited and consist of the following:

• Enter into a suitable redistribution agreement if possible. (possible but difficult with minors)

• Negotiate a suitable solution to all parties.

• Resign as executor/trix and appoint an independent individual. This is the most common and used method, but often goes with a lot of emotion and costs.

• Bear in mind the newly appointed executor will almost always need to provide security, and finds himself in a hot seat to make the correct decision without favouring any party to this dilemma.

With the above in mind it is always good practice to foresee where possible, the potential of a clash of interest and to steer clear of this from the offset.

The living Will

November 23, 2016 Jan L Jordaan Comments 0 Comment

Most people are familiar with a will or testament and understand the importance of having this legal declaration drafted, by which the testator nominates an executor to manage his or her estate and provide for the distribution of his or her property to beneficiaries when he or she dies.

But how many people have considered drafting a living will?

A living will does not deal with assets, heirs and beneficiaries, but with the philosophy of death and dying, and should be considered carefully and drafted by a professional.

A living will is a legal document expressing a person’s wishes regarding life-prolonging medical treatment when that person can no longer voice his or her wishes. It is also referred to as an advance medical directive.

A typical clause in a living will would read as follows:

If the time comes when I can no longer take part in decisions for my own future, let this declaration stand as my directive.

If I suffer from physical illness or impairment expected to cause me severe distress, rendering me incapable of rational existence, from which there is no reasonable prospect of recovery, I withhold my consent to be kept alive by artificial means and do not give my consent to any form of tube-feeding when I am dying; and I request that I receive whatever quantity of drugs and intravenous fluids as may be required to keep me comfortable and free from pain even if the moment of death is hastened. I withhold my consent to any attempt at resuscitation, should my heart and breathing stop and my prognosis is hopeless.

The living will tells the doctor and family that the patient does not consent to being kept alive artificially. It speaks for the patient at a time when the patient may be unable to communicate.

South African law and most religions accepts the validity of the living will, but none of the main religions accept euthanasia.

Euthanasia is against the law. Sean Davison, the respected UWC professor who helped his 85-year-old terminally ill mother, Patricia Ferguson, die in New Zealand by preparing a lethal dose of morphine, was arrested in New Zealand in September 2010 on an attempted murder charge.

It is important to have a properly drafted, legal living will to avoid far reaching and traumatic consequences for the loved ones that stay behind.

Many lawyers who practice in the area of estate planning include a living will and a health care power of attorney in their package of estate planning documents.

The advantages of a living will

The directives respect the patient’s human rights, and in particular his or her right to reject medical treatment.

It encourages full discussion about end-of-life decisions.

It also means that the medical staff and caregivers are aware of the patient’s wishes, and knowing what the patient wants means that doctors are more likely to give appropriate treatment.

It will avoid the situation where the patient’s family and friends have to take the difficult decisions.

Disadvantages of a living will

Drafting this document can be very depressing.

The person may still be healthy and not in a position to actually imagine that he or she could ever be in the position where they would voluntarily give up living.

When the time comes to act on the living will the patient might have changed his or her mind and it is then often difficult to amend the document.

Important points to consider

The living will should not be incorporated or attached to the last will and testament, which is only acted upon after death.

A living will does not become effective unless the patient becomes incapacitated; until then the patient will be able to choose appropriate treatment.

A certificate by the patient’s doctor and another independent doctor certifying that the patient is either suffering from a terminal illness or permanently unconscious, is required before the living will becomes effective. In the case of a heart attack, the living will does not take effect. A living will is only executed when ultimate recovery is hopeless.

You have to notify your doctor and family of your living will and preferably have copies of the document available for the doctor, hospital and family.

Should I draft a will?

September 15, 2016 Jan L Jordaan Comments 0 Comment

A mother who has always wanted her daughter to inherit her diamond engagement ring may never get her wish granted if she dies without leaving a valid written will. The mother’s estate would then be distributed in terms of the Intestate Succession Act No. 81 of 1987.

Know where you want your possessions to go

Taking the time to draft a will can leave you with the peace of mind that your assets will be distributed according to your wishes as far as possible. Your will should reflect exactly how you want your assets to be dealt with after your death and should not be contra bonos mores (against good morals). It should also not amount to “ruling from the grave”.

What makes a valid will?

There are a number of legal requirements that have to be complied with for a will to be valid. If it does not comply with all of these requirements it could be found to be invalid. Your estate would then also be dealt with in terms of the Intestate Succession Act of 1987. It is therefore very importance that you obtain the assistance of a lawyer to help you raft a will.

A will should also regularly be revised and updated to adapt to your changing circumstances, for example after getting married, and when there is a child in the mix. Section 2B of the Wills Act No. 7 of 1953 (as amended by the Law of Succession Act No. 43 of 1992) deals specifically with a change in marital status by way of divorce, and reads as follows:

“If any person dies within three months after his marriage was dissolved by a divorce or annulment by a competent court and that person executed a will before the date of such dissolution, that will shall be implemented in the same manner as it would have been implemented if his previous spouse had died before the date of the dissolution concerned, unless it appears from the will that the testator intended to benefit his previous spouse notwithstanding the dissolution of his marriage.”

An example

A and B get divorced and B dies within three months of the date of the divorce. B’s will was executed before they got divorced. Unless B’s will specifically indicated that A must benefit from B’s estate despite the divorce, B’s estate will then be distributed as if A died before they got divorced. A will therefore not inherit from B’s estate in this scenario. However, should B die more than 3 months after the divorce and B’s will, which benefits A, was not changed, then it will be seen as if B intended A to inherit, despite the divorce.

A person who was previously married and who remarries, should ensure that the necessary changes are made to his/her will. If not, this could have profound consequences for the “new” spouse, especially if the will still benefits the spouse from the previous marriage.

When there are minor children in the picture, it is advisable to make adequate provision for their living costs and education in your will. This can be done by creating a testamentary trust of which the minor children can be beneficiaries.

Conclusion

Thinking and talking about one’s passing is not a pleasant subject. Having a valid, clear and unambiguous will can prevent unpleasant family feuds caused by them having to make decisions about the distribution of your estate. It is certainly worth the time and effort to have a valid written will in place.

References:

Drafting of Wills 2013 – LEAD

Intestate Succession Act 81/1987

Wills Act 7/1953

Validity of Antenuptial Contracts

July 4, 2016 Jan L Jordaan Comments 0 Comment

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

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

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

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

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

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

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

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

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

[3] 88 of 1984.

Should I draft a will?

July 4, 2016 Jan L Jordaan Comments 0 Comment

A mother who has always wanted her daughter to inherit her diamond engagement ring may never get her wish if she dies without leaving a valid written will. The mother’s estate would then be distributed in terms of the Intestate Succession Act No. 81 of 1987.

There are a number of legal requirements that have to be complied with for a will to be valid. If it does not comply with all of these requirements it could be found to be invalid. Your estate would then also be dealt with in terms of the Intestate Succession Act of 1987. It is therefore of the utmost importance that you obtain the assistance of someone with the necessary specialised skill and knowledge to assist you with the drafting of your will.

A will should also regularly be revised and updated to adapt to your changing circumstances, for example after getting married, and when there is a child on the way. Section 2B of the Wills Act No. 7 of 1953 (as amended by the Law of Succession Act No. 43 of 1992) deals specifically with a change in marital status by way of divorce, and reads as follows:

This can be explained by way of the following example: A and B get divorced and B dies within three months of the date of the divorce. B’s will was executed before they got divorced. Unless B’s will specifically indicated that A must benefit from B’s estate despite the divorce, B’s estate will then be distributed as if A died before they got divorced. A will therefore not inherit from B’s estate in this scenario. However, should B die more than 3 months after the divorce and B’s will, which benefits A, was not changed, then it will be seen as if B intended A to inherit, despite the divorce.

References:

Drafting of Wills 2013 – LEAD

Intestate Succession Act 81/1987

Wills Act 7/1953