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Month: August 2016

DIFFERENT TYPES OF WILLS

DIFFERENT TYPES OF WILLS

A3_AWhere parties are married to each other in community of property, the legal effect of such a marriage is that all the assets and liabilities owned by each party prior to the marriage, or acquired by them during the course of the marriage, will form part of a communal or joint estate of the two spouses.  This means that all assets acquired during the course of the marriage, will be owned by them in equal, undivided shares.  In most instances spouses married in community of property to each other execute a joint Will, which is a single Will (a single legal document) prepared and signed by both the spouses in terms of which all their assets and property are bequeathed according to their wishes.

The fact that only one Will is executed does not necessarily mean that the Testator and the Testatrix are jointly deciding on how their assets should be divided upon their deaths, eventhough the parties are married to each other in community of property.  The law recognizes each Testator’s right to dispose of his/her assets as each party deems fit.  As such, each party will decide how his/her estate is to be divided upon their deaths separate from each other, although their wishes are contained in one single Will.

If parties are married out of community of property and also decide to execute a joint Will, the drafter of the Will needs to ensure that the Will reflects whether it is two separate Wills contained in one document, or whether the massing of the separate estates of the parties (as referred to below), will take place.  Said joint Will also needs to prescribe what will happen if the husband and wife should die simultaneously, or within a short period of time (ie. 30 days) from each other.

Each party retains the right to amend the joint Will without the consent of the other Testator.  Each party also has the right to draft a new Will at any given point in time, without having the obligation of informing the other Testator thereof.  Should the joint Will be the last Will of the deceased, said Will will be valid in respect of that deceased irrespective of the fact that the surviving spouse executed another Will subsequent to the signature of the joint Will.

Although a joint Will is a common phenomenon amongst married couples, caution must be taken when drafting same as the parties’ assets, liabilities and their separate needs for the division of their assets upon death needs to be taken into account when one considers whether a joint Will is the answer to the parties’ needs.   Lastmentioned is critical, especially in light of the fact that a joint Will might result in negative financial and tax implications for one or both of the parties.

Parties can also execute one Will in terms of which it is decided that the massing of their separate estates, or the massing of the joint estate needs to take place.  Massing of estates takes place when the estate of two persons is massed into one estate upon the death of the first of them, for the purpose of dealing with a communal asset of both the parties.  Even if massing took place, the surviving spouse has the right to either accept or to refuse the joint Will and the massing of the estate assets upon the death of the first of the Testators.  This leaves the door open for the surviving spouse to walk away from the joint Will if he/she refuses to accept the terms of the joint Will upon death of the first Testator.  Even the acceptance or refusal of a Will in which a massed estate is created, can have a variety of tax implications and as such, caution is advised when the execution of such a Will is being considered.

Nothing however prevents married couples to each execute a Will in their own names in terms of which their exact wishes as to the division of their respective estates are stipulated.

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)

TAX OMBUD – RECOURSE FOR AGGRIEVED TAXPAYERS

TAX OMBUD – RECOURSE FOR AGGRIEVED TAXPAYERS

A2_AThe Tax Administration Act that came into effect on 1 October 2012 is a valiant attempt to balance the rights of the tax man with those of the taxpayer. One of the ways of bolstering the taxpayer’s position on this not very level playing field is the creation of the office of the ombudsman or tax ombud. Exactly one year after the inception of the Act, Gauteng Judge President Ngoepe was appointed as the first encumbent of this office.

What is the role of the ombud?

The mandate of the ombud is set out in section 16(1) of the Act:

…to review and address any complaint by a taxpayer regarding a service matter or a procedural or administrative matter arising from the application of a tax Act.

The aim is to provide taxpayers with a low-cost mechanism to address administrative difficulties that cannot be resolved by SARS. However, the ombud’s powers are limited. They may not review legislation or policy unless it relates to a service, procedural or administrative matter. Although the Act is not clear on the issue, the decision as to whether a matter falls within the scope of his mandate probably lies with the ombud themselves.

If you have a complaint

A complainant is required to first exhaust the available complaints resolution mechanisms within SARS before approaching the office of the ombud, unless there are compelling circumstances for not doing so. This will for instance be the case where exhausting internal mechanisms will cause undue hardship to the taxpayer, or is not likely to produce a result within a reasonable period of time.

Complaints are to be made in writing on the prescribed form to the office of the ombud. A copy of the complaint form can be requested from the tax ombud’s office by telephone, fax or e-mail. The form must be completed and signed by the taxpayer. If a tax practitioner or other person completes and signs the form on behalf of the taxpayer it is advisable for the client to complete a power of attorney specifically for this purpose. All supporting documents must be attached to the form. A request for review of the complaint should include any correspondence received or sent relating to the complaint, call reference numbers, and the relevant contact details of the SARS officials with whom the taxpayer dealt. It is recommended that the complainant specifically indicates which internal actions were pursued and what SARS’ response was.

If a taxpayer is unsure as to whether or not his complaint falls within the ombud’s mandate, or if a taxpayer is unable to write his/her complaint, they may call the ombud’s office where trained professional staff will attend to the call and advise what should be done.

What can the ombud do?

The ombud may review and address a complaint in a number of ways, including by way of mediation or conciliation. He/she may also facilitate a taxpayer’s access to complaint resolution mechanisms within SARS. Ultimately they must follow informal, fair and cost-effective procedures in resolving a complaint. The ombud’s recommendations regarding the resolution of a matter are not binding on SARS. In the interests of legitimacy and transparency it is however likely that SARS will follow the recommendations.

Reports by the ombud to the Minister of Finance must be submitted on an annual basis. In addition, they must also report to the Commissioner of SARS at quarterly intervals. This report must contain recommendations for any administrative action that may be appropriate to resolve the problems encountered by taxpayers.

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)

HOW TO REGISTER AN INTER-VIVOS TRUST

HOW TO REGISTER AN INTER-VIVOS TRUST

A1_AIn South Africa there are mainly two types of trusts that are registered. An inter-vivos trust can be created between living persons, and a testamentary trust is created in the will of a deceased.

An inter-vivos trust is registered at the office of the Master of the High Court in whose area of jurisdiction the main assets of the trust are or will be held.

The first step is to draw up a valid trust deed. A trust deed is a contract between the founder of the trust and the trustees, for the benefit of a third party or parties, known as the beneficiaries. In terms of the trust deed, the founder agrees to transfer certain assets to the trustees of the trust for the benefit of the beneficiaries. The trust deed must stipulate who the first trustees of the trust are going to be. In many instances the Master will insist on at least one independent trustee to be appointed. This means that the independent trustee will receive no benefit from the trust assets apart from the specified and reasonable trustee remuneration. The beneficiaries must be specified in the trust deed, as well as their entitlement to either the capital of the trust, the income of the trust assets, or both.

A trust deed is a valid contract and therefore subject to all applicable laws. Furthermore, there are significant tax, financial and other consequences of being involved in a trust, whether as trustee, founder or beneficiaries. Therefore it is imperative to seek professional advice when drawing up this deed.

The duly signed and witnessed trust deed must be submitted to the Master of the High Court, together with the completed and signed Acceptance of Trusteeship for all trustees and certified copies of their identity documents. This Acceptance of Trusteeship states the basic information of the trustees that the Master requires, as well as certain declarations made by the trustee. If the Master requires the trustees to furnish security, proof of the bond of security by those trustees must be provided to the Master when the trust is registered. Form JM21 sets out certain requirements and information that must be supplied to the Master together with the other documents set out in this paragraph. This information include details on the professions or business occupation of the trustees to be registered, any previous experience that these trustees might have in the administration of trusts, the name and branch of the bank where a bank account will be opened for the trust, and so forth. An original undertaking by an auditor or accounting officer must accompany form JM21. Lastly, proof of the payment of the prescribed fee of R100 must be submitted.

On receipt of the above documents in accordance with all the requirements, the Master will issue a Letter of Authority to the trustees. The trustees may then act on behalf of the trust.

Any amendments to the original trust deed must be placed on record with the Master of the High Court where the original trust deed is on record.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

WHAT HAPPENS IF I DIE WITHOUT A WILL?

WHAT HAPPENS IF I DIE WITHOUT A WILL?

A3Attorneys often emphasise the fact that you should have a will drawn up and revise it regularly in order to facilitate the administration of your possessions after your death. Many people still neglect to do this. The problem is that, should a person die without leaving a valid will, in other words intestate, his/her estate will be administered and distributed according to the stipulations of the Intestate Succession Act, 1987.

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

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

Scenario 1:

A and B are married out of community of property.

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

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

The spouse and children therefore inherit R600 000 each.

Scenario 2:

A and B are married in community of property.

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

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

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

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

How does a minor receive their inheritance?

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

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

When there’s no will

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

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

MANAGING DISPUTES OVER A DECEASED RELATIVE’S ESTATE

MANAGING DISPUTES OVER A DECEASED RELATIVE’S ESTATE


A2If someone leaves a sizeable estate behind, it may cause conflict among the possible heirs. The help of an attorney, when settling an estate after a death, can avoid unnecessary troubles.

The Administration of Estates Act, 1965, determines what must happen with an estate after a person’s death. There are certain steps that should be taken to ensure the process is legal. However, if the estate is worth a lot of money or the deceased has children, then it is a good idea to seek the assistance of an attorney, as family disputes and debts of the deceased can be confusing. In order to this an executor will be appointed to act on behalf of the estate.

Finding the will of a deceased relative

If the deceased person left a will the first thing to do is find it. If they did not tell you beforehand where their will was, you can try calling the probate court in their district or the office of the master of the High Court to check if they have a copy of the will. Other places to call would be the deceased’s life insurance company, bank or lawyer. Otherwise, they might have left a copy of it somewhere secure in their home.

Who is the executor?

An executor is the person appointed to handle the process of settling the estate. The executor will either be mentioned in the will of the deceased or appointed by the master of the High Court. The master will ultimately decide who will take the role of executor. If the chosen executor doesn’t know how to handle the estate or is unfamiliar with the legal procedure, he or she can go to a lawyer for help. Once the executor has been chosen, the master will give them “Letters of Executorship”, which will give only them the authority to handle the estate.

What does the executor need to do?

The executor has several responsibilities such as arranging the valuation of the estate’s property and assets. They will also be responsible for contacting and dealing with all the beneficiaries.

Some other responsibilities of the executor include:

  1. Arranging provisional payments for the family’s immediate needs.
  2. Opening a bank account for the estate and depositing the estates money in it.
  3. Paying all the necessary estate duties.

It’s important that any person who wants to act on behalf of the deceased person’s estate have the Letters of Executorship. If not, their actions would be considered illegal. This also applies to the spouse of the deceased person. This eliminates the possibility of several different family members trying to influence the estate’s dealings. The executor will also decide how the assets will be divided between the heirs and if any or all assets need to be sold. If a will is in place the executor will base his/her decisions on it.

Eventually, the executor will prepare a liquidation and distribution account. This would include what will they intend to do with all the assets left after expenses. This account would be delivered to the master, who will check to see if the executor’s actions reflect the will of the deceased and that all legal requirements have been fulfilled.

Important things to keep in mind?

The master of the High Court should be notified of the deceased person’s estate not later than 14 days after the death. According to the Department of Justice a death of anyone who owned property in South Africa must be reported to the master, whether or not they died in the country.

All estates that exceed R50 000 should be reported to the master of the High Court directly because magistrate’s offices have limited jurisdiction. If reported to the magistrate’s office, estates would usually be referred to the master.

References

The Department of Justice and Constitutional Development. 2012. “Reporting the estate of the deceased”. Accessed from: http://www.justice.gov.za/services/report-estate.html/ on 11/05/2016.

Administration of Estates Act 66 of 1965. Accessed from: http://www.justice.gov.za/ on 11/05/2016.

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)

ALTERNATIVES TO LITIGATION – THE NATIONAL CONSUMER TRIBUNAL

ALTERNATIVES TO LITIGATION – THE NATIONAL CONSUMER TRIBUNAL

A1The advent of consumer protection in South Africa has brought with it various institutions that are working at full speed to ensure the rights of the consumer are protected. This new era of consumer protection has seen the birth of the National Consumer Commission and the National Credit Regulator. Amongst these institutions is the National Consumer Tribunal which was established in terms of Section 26 of the National Credit Act 34 of 2005 (the NCA).

The aim of the Tribunal is to achieve fairness and justice for everyone in the consumer and credit market through the adjudication of disputes about consumer credit and allegations of prohibited practice in terms of the NCA and the Consumer Protection Act.

All sides of an argument are heard before the Tribunal makes a decision. A decision made by the Tribunal carries the same weight as one made by a High Court of South Africa.

Section 137 of the NCA provides that the following parties can lodge a complaint with the Tribunal:

  1. The National Credit Regulator;
  2. A registrant (NCA requires certain entities and individuals to register with the National Credit Regulator for example debt counsellors);
  3. Credit Providers; and
  4. Consumers

A consumer can approach the Tribunal directly in the following circumstances (and on application for various orders including):

  1. To compel a credit provider to produce a statement of account;
  2. For a credit provider to compensate a consumer after the sale of surrendered goods;
  3. For a pawnbroker to compensate a consumer for goods left with a pawnbroker;
  4. To review the sale of goods; and
  5. To review the decision of a debt counsellor not to issue a clearance certificate.

It is vital to note that in terms of the NCA you as a consumer have the right to receive periodic statements of account and also have the right to request certain additional information such as your current balance of account.

Furthermore the NCA specifies in clinical detail the fees and interest which credit providers may charge. Any credit providers that charge in excess of that amount engage in prohibited conduct in terms of the Act.

In circumstances where a dispute regards a complaint about prohibited conduct, the National Credit Regulator, after referral of the complaint, will conduct an investigation. The Regulator can, amongst other avenues available to it, refer the matter to the Tribunal for adjudication thereof.

Consult the website of the National Consumer Tribunal at www.thenct.org.za for more information on the process to follow and to obtain links to all the relevant application forms to complete and submit.

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)