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Newsletter 46 (Jun 2020)
Newsletter 46 (Jun 2020)

Dear Colleague
Yet again we entered our winter season with its usual chilly air and dull, yellowish scenery here and there. We already experienced frost and the bite of a cold front because of snow in Ceres and Sutherland and more recently, beautiful icicles in Ladybrand. Under the circumstances this is a welcoming and comforting normal experience.
There are a few positive changes under level 3 of the coronavirus lockdown status. We are still far from the normal we knew before. Usual business activities are still hampered because of limited service deliveries which is a drawback to our normal day-to-day activities. Most personnel are still working remotely but are still rendering our usual excellent service.
Although social restrictions have changed our circumstances, there is always hope that things will ultimately get better. A lesson learned though, is to appreciate the little and big things in life that were taken for granted for so long.  A renewed realization that one should appreciate every gifted day and to dearly treasure relationships and loved ones.
In these uncertain times, it is important to stay hopeful for an overall positive curve and ignore all the negative noise that bombards us from the media daily.
Are your clients’ Wills in order?
Now, more than ever, your clients Wills need to be in order. Circumstances cannot always be controlled, but control can still be exercised in the response to it. It is imperative that they make provision for the future of their loved ones should anything unforeseen happen to them. Do not wait until it is too late.
Something that hasn’t changed at all, is the submission of Will applications for new Wills or the drafting of amendments.  Submit applications in the same manner as before the lockdown.
Courier services are fully operational again. Please send your signed Wills for safekeeping to your dedicated EFBOE offices.
Read more about this in the next edition.
In the previous newsletter we explained what it means to be married in community of property in South Africa. In this type of marriage, all assets/liabilities which belonged to both parties prior to getting married as well as all assets/liabilities accumulated during the marriage will fall into the joint or communal estate. They each own half a share (50%) and are equal concurrent managers of the joint estate. There are a few exceptions though. For instance, the “Protection of benefits”-clause in a Will which excludes an inheritance from a joint estate, or donations received by either of the parties. It is undoubtedly the cheapest way to get married because no antenuptial contract needs to be signed. But it has its drawbacks.
In this edition, we look at the issue of ownership of a life insurance policy in this type of marriage. Can this be considered an asset in the estate of the insured? Recent court cases determined that a life policy cannot be regarded as an insurance policy as it is a risk-only policy. One such court case is that of Naidoo vs Discovery Life in July 2019.
During the marriage, the deceased became the principal life insured and owner of a life insurance policy with Discovery Life. He initially nominated his spouse as the beneficiary of the proceeds upon his death. Unbeknown to his spouse, he changed the beneficiaries in 2011, replacing her with his parents and two siblings. When he committed suicide in March 2012, the change in beneficiaries left his spouse and two children with a heavy financial burden to carry. Discovery Life abided with the beneficiaries nominated in the policy and effected the pay-out to the third parties. The spouse turned to the courts, challenging the replacement of the beneficiaries without her written consent, and therefore held Discovery liable for the alleged unlawful payments.
The court a quo considered the following two questions:
  • Was the policy to be considered an asset during the lifetime of the deceased (policyholder)?
  • Was the nomination of another beneficiary an alienation that required the prior written consent of the spouse in terms of s15(2)(c) of the Matrimonial Property Act, No 88 of 1984?
 The court a quo as well as the Supreme Court of Appeal upheld the same verdict:
  • A life insurance policy is a stipulato alteri, which means a contract for the benefit of a third party. Therefore, the proceeds of the policy would not fall into the joint estate but pass to the nominated beneficiaries.
  • The beneficiary’s entitlement to the policy proceeds is a mere spes, expectation, until the actual death of the policyholder. Therefore, the policy is not an asset in the estate.
  • The aggregate rights and obligations following from the policy could not in any way be regarded as property in the sense of enhancing the value of the insured’s estate, or if married in community of property, the value of the joint estate.
  • The insured had a personal right to nominate or substitute beneficiaries which right could be exercised until his death.
  • The substitution would not constitute an alienation of property that required the spouse’s prior written consent in terms of the Act because it is not an asset in the estate.
  • 215(2)(c) of the Matrimonial Act does not apply to life policies.
 The Supreme Court added the following:
  • They made a clear distinction between a life policy which is a “risk-only policy” and an insurance policy with a current value like an endowment policy.
  • The proceeds of a “risk-only policy” cannot be paid to the policyholder or the beneficiary while the insured is still alive.
  • A “risk-only policy” does not constitute an “insurance policy”.
  • The only rights a policyholder has during his/her lifetime are those contractual rights to nominate or change beneficiaries, to cede or terminate the policy. In this case, the deceased never lost his right to change or cancel his nomination of beneficiaries up until his death.
 Discovery’s payment of the proceeds to the third parties was thus lawful.
Napoleon Bonaparte was one of the world’s greatest military leaders and the first emperor of France. Although he ruled by dictatorship with sole control of his empire, he was also revered as a great hero. He conquered much of Europe in the early 19th century. He was a meticulous planner and amongst others, revolutionised military organization and training. After his first defeat by Russia, Napoleon was exiled to Elba, and spent only 300 days on the island. He escaped back to France and was finally defeated at the battle of Waterloo in Belgium. His second exile was on the island of Saint Helena, where he died on 5 May 1821 at the relatively young age of 51.
In his last days, he spent a lot of time on the drafting and finalisation of his last Will and Testament. A lot of thought went into the planning of his last wishes and he named numerous people in his Will but unfortunately, he exaggerated quite a bit. Ultimately, he only possessed half of the Franc-value needed to satisfy all the giftings in his Will.
He also bequeathed property that he did not own and added seven more codicils to his Will. There were two remarkable lists, “A” and “B”, in which he listed all tangible personal property, including some interesting properties like his hair.
His Will stipulated that his hair had to be made into bracelets with a fine gold clasp for a few of his closest loved ones. Unfortunately, he lacked enough hair to make all the bracelets he described. Today his hair is on display at the museum of Fine Arts in Montreal.
However, the French court ruled that his Will was invalid because he was labelled a “rebel and traitor”, and therefore the millions he deposited with the Paris banker, Laffite, were not his property to give away. After arbitration, some of his unusual legacies were eventually paid out in part though.
Until next time!
The “Let’s Talk EFBOE Team

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