02 - Estate

Question 1

What will be accepted as a will?

Answer 1

Reference to Wills Act

Section 2 (3) of the Wills Act

1. 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,
2. 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 No. 66 of 1965), as a will,
3. although it does not comply with all the formalities for the execution or amendment of wills referred to in subsection (1).

Question 2

What approaches are possible in terms of what gets accepted as a will?

Answer 2

There has been conflicting views on how to interpret the provisions of section 2(3). Our courts have adopted two different approaches.

• Strict approach
  
  • ​In these cases, the word “drafted” is considered to mean that the “testator” has actively participated in the drafting of his Will,
  • and does not include situations where the Will is drafted passively, through instructions to a third party, or situations where the Will is not subsequently executed.
• The liberal approach,
  
  • adopts a purposive interpretation of the word “draft” so that it is the intention of the alleged testator that is decisive.
  • In Ex parte De Swardt and Another NNO, the court stated that section 2(3) of the Act did not require that the Will be drafted personally by the deceased.
  • The real test was whether the court was satisfied that the deceased intended the document to be his Will.
    
    • This approach has been followed in a number of provincial division cases but can have no binding force following the decision of the Supreme Court of Appeal (SCA) in the case of Bekker v Naude.

Bekker vs. Naude

• In Bekker v Naude, the SCA adopted the strict approach, requiring that the word “draft” be associated with some personal action by the deceased.
• This would seem to include a handwritten document, a document typed on a computer by the deceased or dictated to a third party who then reproduces the document by hand or on a computer.
• However, this would not include instructions to an attorney. The extent to which personal drafting is required is still to be decided but the question remains one of the deceased’s intention.
• This decision has not yet been overturned, and as such remains decisive of the position in our law.

Question 3

What are the general principles in terms of the taxation of trust?

Answer 3

Summary - Sec 25 (B) (1)

• Received by or accrued to any person
• in capacity as trustee
• subject to provisions section 7
• for benefit of ascertained beneficiary with vested right
• is deemed to have accrued to the beneficiary
• if there is no beneficiary with a vested right
• it is deemed to be the income of the trust.

Reference to law - Sec 25 (B) (1)

• Any amount received by or accrued to or in favour of any person during any year of assessment in his or her capacity as the trustee of a trust,
• shall, subject to the provisions of section 7, to the extent to which that amount has been derived for the immediate or future benefit of any ascertained beneficiary who has a vested right to that amount during that year,
• be deemed to be an amount which has accrued to that beneficiary,
• and to the extent to which that amount is not so derived, be deemed to be an amount which has accrued to that trust.

Question 4

How does a vested right change how income will be taxed in a trust?

Answer 4

• If the right of the beneficiary is such that should he die before the income is distributed, his heirs have no legal entitlement to such income, then the beneficiary has no vested right.
• It is not necessary for the income to be actually distributed to the beneficiary; as long as he is unconditionally entitled to it, it vests in him even if held in trust on loan account for the beneficiary.

Example

• R100k to beneficiary per year with remainder being invested.
• The invested amount will still go to beneficiary.
• There all of it will be taxed in beneficiary’s hands, not just the first R100k

Question 5

What happens in the situation of a vested right in a discretionary trust?

Answer 5

In the case of a discretionary trust where the beneficiary gets a vested right on the exercise of the trustee’s discretion, the beneficiary is taxed.

Reference to the law - 25B(2)

• Where a beneficiary has acquired a vested right to any amount referred to in subsection (1) in consequence of the exercise by the trustee of a discretion vested in him or her in terms of the relevant deed of trust, agreement or will of a deceased person,
• that amount shall for the purposes of that subsection be deemed to have been derived for the benefit of that beneficiary.

Question 6

When can an income received by a child be deemed to be a parents?

Answer 6

Section 7(3)

Income shall be deemed to have been received by the parent of any minor child, if by reason of any donation, settlement or other disposition made by that parent of that child

• (a) it has been received by or has accrued to or in favour of that child or has been expended for the maintenance, education or benefit of that child; or
• (b) it has been accumulated for the benefit of that child.

Terms

• Term “donation, settlement or other disposition “ in section 7(3) excludes any disposal of property made for due consideration.
• “Disposition” means any disposal of property made wholly or to an appreciable extent gratuitously out of liberality or generosity of the disposer
• Where there is also an appreciable element of gratuity, the resulting income can be apportioned between these two elements.
• “Disposition” interpreted eiusdem generis rule.

Eiusdem generis rule

• Latin for “of the same kind,” used to interpret loosely written statutes.
• Where a law lists specific classes of persons or things and then refers to them in general, the general statements only apply to the same kind of persons or things specifically listed.
• Example: if a law refers to automobiles, trucks, tractors, motorcycles and other motor-powered vehicles, “vehicles” would not include airplanes, since the list was of land-based transportation.

Question 7

Section 7(5)

Answer 7

• If any person has made any donation, settlement or other disposition which is subject to a stipulation or condition,
• whether made or imposed by such person or anybody else, to the effect that the beneficiaries thereof or some of them shall not receive the income or some portion of the income thereunder until the happening of some event, whether fixed or contingent,
• so much of any income as would, but for such stipulation or condition, in consequence of the donation, settlement or other disposition be received by or accrue to or in favour of the beneficiaries,
• shall, until the happening of that event or the death of that person, whichever first takes place, be deemed to be the income of that person.

Question 8

What is the effect of a divorce on a will?

Answer 8

Section 2B

• 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.

Question 9

What happens when a descendent of a testator renounces their right to receive the due benefit or dies? (Substitution)

Answer 9

Section 2C(1) of the Wills Act

• If any descendants of a testator, excluding a minor or a mentally ill descendant, who, together with the surviving spouse of the testator,
• is entitled to a benefit in terms of a will renounces his right to receive such benefit,
• such benefit shall vest in the surviving spouse.

Section 2C(2) of the Wills Act

• If a descendant of the testator, whether as a member of a class or otherwise,
• would have been entitled to a benefit in terms of the provisions of a will if he had been alive at the time of death of the testator, or had not been disqualified from inheriting, or had not after the testator’s death renounced his right to receive such a benefit,
• the descendants of that descendant shall, subject to the provisions of subsection (1), per stirpes be entitled to the benefit, unless the context of the will otherwise indicates.

Question 10

How does accrual in the context of substitution?

Answer 10

• The right of a beneficiary to succeed proportionately to a benefit that another beneficiary cannot or will not take.
• Accrual does not operate where testator has nominated substitutes.
• If accrual does not operate then the share that does not accrue will devolve intestate.

Question 11

How does on derive the intent of the testator?

Answer 11

• If intention not clear certain indication (conjectures) are used to ascertain his intention.
• Not rigid rules and should give way to a contrary intention that emerges from the will.
• Method of joinder.

Jonder

• In law, a joinder is the joining of two or more legal issues together.
• Procedurally, a joinder allows multiple issues to be heard in one hearing or trial and is done when the issues or parties involved overlap sufficiently to make the process more efficient or more fair.
• It helps courts avoid hearing the same facts multiple times or seeing the same parties return to court separately for each of their legal disputes.
• The term is also used in the realm of contracts to describe the joining of new parties to an existing agreement.

Question 12

What is Joiner re tantum?

Answer 12

• Re tantum – through thing alone.
• Joinder is re tantum if the same thing has been bequeathed to different beneficiaries in different sentences or clauses.

Example

• I bequeath my farm Greenmeadows to John. Then in a later clause - I bequeath my farm Greenmeadows to Allan.
• No specific shares have been allocated to any one of them.
• If beneficiaries are joined in thus way the presumption is that accrual must operate (unless contrary intention in will).

Question 13

What is Joiner re et verbis?

Answer 13

• Re et verbis – through the thing and the words.
• Same thing is bequeathed to different beneficiaries in same sentence or clause without specific share being allocated tom specific beneficiaries.

Example

• I bequeath my farm Rooiwynfontein to John and Allan.
• If beneficiaries are joined in this way the presumption is that accrual must operate (unless contrary intention in will).

Question 14

What is Joiner verbis tantum?

Answer 14

• Verbis tantum – through words alone.
• Same thing is bequeathed to different beneficiaries in the same sentence or clause with the allocation of specific shares to specific beneficiaries.

Example

• I bequeath my farm Witwynfontein to John and Allan, one- third to John and two-thirds to Allan.
• In a case like this there is a presumption against accrual.

Question 15

Special trust taxation

Answer 15

Income vs. Capital gains

Children - only income tax will be done as per the natural person tax table

Disabled - both income and capital gains will be treated according the tax table for natural persons.