03 - Estate

Question 1

Why is the definition of spouse important?

Answer 1

• bequsts to a spouse are free from estate duty in terms of section 4 (q) of the Estate Duty Act
• transfers to a spouse are the base cost for the purposes of capital gains tax in terms of paragraph 67 of the 8th Schedule. Transfers between spouses are free of CGT.
• donations to a spouse are free from donations tax in terms of section 56 of the Income Tax Act.

Question 2

What are the different matrionial property regimes that the Matrimonial Property Act 88 of 1984 allows for?

Answer 2

• marriages without an ANC (therefore marriage in community of property)
• marriages with an ANC including the accrual system
• marriages with an ANC excluding the accrual system

Question 3

What are the characteristics of marriage in community of property?

(Matriominal property regimes)

Answer 3

• Marriages are in community of property unless ANC is entered into
• All assets of the spouses, as they exist on the date of marriage, are joined into one community estate with each spouse having an equal 50% claim thereon.
• Any assets acquired by either spouse during the marriage will become part of the community, and wll be shared equally between the spouses
• If the parties intend that any property should be excluded from the commuity, then this must be done by means of a separate ANC entered into before the marriage.
• The two spouses do not have two distinct estates. There is a joint estate with each spouse having 50% share in each asset of the estate.
• On the death of a spouse who is marrried in communicty of property, only half of the joint estate will be subject to estate duty.
• Termination of marriage - joint estate is shared equally between the spouses, irrespective of the amount of their respective contributions.
• Joint administration
  
  • In respect of any community asset, spouses may not, without the other’s written consent, alienate, mortgage or confer any other real right in any immoveable property.
  • As well as shares, debentures, insurance policies, fixed deposits or similar assets.
• Assets excluded from joint estate
  
  • Gits and inheritances to a spouse received from third parties on the condition that they are excluded from the community of property and community of profit and loss
    
    • In other words, they are automatically included until they are excluded.
  • Other property excluded community is property excluded by a separate ANC.

Question 4

What are the characteristics of marriage out of community of property?

(Matriominal property regimes)

Answer 4

• For Marriages out of community of property post 1 Nov 1984, the accural system will automatically apply.
• Can be excluded or varied by the spouses but must explicitly and espressly provided for in an ANC.
• A financial planner must take into account the possibility that the deceased or surviving spouse may have an accrual claim in terms of the Matrimonial Property Act 88 of 1984, which will have an effect on th estate plan prepared for a client.
• Certain insurance policies are excluded from the property of a deceased estate (any policy that has been ceded to the surviving spouse or a child of the deceased under a duly registered ANC or postnuptial contract is excluded from the dutiable estate of the deceased person.
• Each spouse will continue to conduct their own estate independlty of one another, but on dissolution of marriage (divorce or death), the spouse showing the smaller accrual since the inception of the marraige, acquires a claim agianst the other spouse (or the deceased estate) for an amount equal to half the difference between the accrual of the respectives estates of the spouses.
  
  • Net effect of the accrual system is that the wealth acquired by the two spouses during the subsistence of their marriage is equally shared at dissolution.
• Accrual in an estate is the amount by which the net value of the estate at dissolution of the marriage exceeds the net value at commentcement of the marriage.
  
  • Not commencement value declared in ANC ornotarial statemetn, the presumption is that the commencement value is nil.
  • Commencement value cannot be less than nil.
• The accural results in a personal cliam which only arises upon dissolution.
  
  • The claim has preference over the claims of heirs and legatees.
  • Claims of creditors are not affected because only the net assets are taken into account.
  • Accrual claim is a deduction in arriving at the dutiable amount of the estate and will not be subject to estate duty
• Certain assets do not form part of the accrual claim
  
  • non-patrimonial damages received by a spouse during the marriage.
  • assets which are excluded in the ANC, including the proceeds and replacement of such assets.
  • any inheritance, legacy or donation received by a spouse are automatically exclued from the accrual unless included in the will or deed of donation.
  • donations between spouses.

Question 5

The Maintenance of Surviving Spouses Act 27 of 1990?

Answer 5

• In certain circumstances, the surviving spouse might have the right to claim maintenance from the deceased estate in terms of the provisions of the Maintenance of Surviving Spouses Act 27 of 1990.
• Surviving spouse will have a claim against the estate of the deceased spouse for the provision of their reasonable maintenance needs until death or remarriage in so far as they are not able to provide for such maintenance from their own means and earnings:
  
  • Reasonable maintenance - Standard of living and age of survivor.
• Common law - minor child could also have a claim against the esate.

Question 6

Insolvency of spouses (Marriage in community of property)

Answer 6

When one of the spouses is sequestrated, the other is as well and both spouses will acquire the status of an insolvent.

Question 7

Insolvency of spouses (Marriage out of community of property)

Answer 7

• Common scheme for insolvent spouse to indicate all of their property is the property of the solvent spouse.
• Section 21 of the Insolvency Act prevents this by vesting in the Master or trustee all the property of the solvent sopuse whose estae has not been sequestrated as if it were property of the sequestrated estae.
• The burden of proof is then on the solvent spouse to prove which assets are their property.
• Claim of immediately release
  
  • property of spouse before their marriage to the insolvent
  • acquired by spouse under a marriage settlement
  • acquired by spouse during the marriage with the insolvent by a title valid as against creditors of the insolvent.
  • to have been acquired with any such property as aforesaid or with the income or proceeds thereof.
• When property acquired during the existence of the marriage, the solvent sopuse must prove that these assets were acquired by a title valid against the creditors of the insolvent spouse.
• However, where a property is registered in the name of the solvent spouse, but the insolvent spouse paid for it, the asset may fall in the insolvent sopuse’s estae.