Dear Colleague
Is it not exciting to experience nature’s awakening all around us in anticipation of the arrival of another colourful Spring season? As Anita Krizzan says: “Spring will come and so will happiness. Hold on. Life will get warmer.” Spring is a reminder that, no matter how difficult things can get, there is always hope for positive change.
On 24 September we will be celebrating Heritage Day. This Year, this public holiday falls on a Saturday.
It is a day on which we as South Africans celebrate our roots, and our richly vibrant and diverse cultures. It is no wonder South Africa has been dubbed the “Rainbow Nation”! It is because of our diversity that Heritage Day exists, and aims to celebrate and embrace all aspects of South African culture, including all races and genders.
On 24 September we will be celebrating Heritage Day. This Year, this public holiday falls on a Saturday.
It is a day on which we as South Africans celebrate our roots, and our richly vibrant and diverse cultures. It is no wonder South Africa has been dubbed the “Rainbow Nation”! It is because of our diversity that Heritage Day exists, and aims to celebrate and embrace all aspects of South African culture, including all races and genders.
HAPPY HERITAGE DAY!
In recent times, we have been celebrating Heritage Day with a traditional “braai”. This is an opportunity for everyone to channel their own inner South African heritage and to celebrate with a feast of their own.
COMPETITION
We are nearing the end of this year’s EFBOE competition for Efficient Wealth advisors.
Keep those new Wills and power of attorney estates coming
to ensure your place in the top two spots!
The winners will be announced in November 2022.
Remember, it is not over until it is over – good luck!
We are nearing the end of this year’s EFBOE competition for Efficient Wealth advisors.
Keep those new Wills and power of attorney estates coming
to ensure your place in the top two spots!
The winners will be announced in November 2022.
Remember, it is not over until it is over – good luck!
____________________________________________________________________________
THE INTERPRETATION OF ‘LIMITED RIGHTS’ PROVISIONS IN A WILL
A Will forms an integral part of proper estate planning and can prevent additional heartache and trauma for your loved ones. Passing away without a Will can complicate matters even more at a time when loved ones need to come to terms with the loss of someone dear to them.
A Will – one of the most important documents that you will sign in your lifetime – must comply with specific requirements to make it a valid, executable document. It also contains terminology which is specific to estate administration. Even though it is easy to complete and to sign a commercial Will template, this is not always the best route to follow. It is by far a better choice to make use of the services of professionals in this field.
When a ‘limited right’ is created in a Will, but the specific right which was created is unclear, it can cause a conflict between the interpretation of the Will and the real intention of the testator. This month, we aim to provide more clarity on the different types of rights which could be included in a Will.
We will use the following as our example:
A testator bequeaths his farm to his son in his Will, provided that the testator’s wife must still be able to enjoy use of the farm. But what does ’use of the farm’ include?
THE INTERPRETATION OF ‘LIMITED RIGHTS’ PROVISIONS IN A WILL
A Will forms an integral part of proper estate planning and can prevent additional heartache and trauma for your loved ones. Passing away without a Will can complicate matters even more at a time when loved ones need to come to terms with the loss of someone dear to them.
A Will – one of the most important documents that you will sign in your lifetime – must comply with specific requirements to make it a valid, executable document. It also contains terminology which is specific to estate administration. Even though it is easy to complete and to sign a commercial Will template, this is not always the best route to follow. It is by far a better choice to make use of the services of professionals in this field.
When a ‘limited right’ is created in a Will, but the specific right which was created is unclear, it can cause a conflict between the interpretation of the Will and the real intention of the testator. This month, we aim to provide more clarity on the different types of rights which could be included in a Will.
We will use the following as our example:
A testator bequeaths his farm to his son in his Will, provided that the testator’s wife must still be able to enjoy use of the farm. But what does ’use of the farm’ include?
- Will the wife be allowed to sublet the farm, or must she continue farming herself?
- What happens if circumstances prevent her from remaining on the farm?
- Will she be allowed to continue farming with livestock, for example, a small flock of sheep or with some chickens?
- Which fruit would she be entitled to?
- What is the timespan of her limited right?
- What will she be responsible for and for what would the son be responsible?
As you can see, when it comes to these types of provisions, the list of questions can be endless.
There are different types of ‘limited rights’ that can play a role in this scenario. These are the personal servitudes of usufruct, usus, and habitation. The inclusion of limited rights could be considered as an estate planning tool used to reduce estate duty, but it could also place an enormous burden on another heir. Limited rights provisions can be a minefield and should preferably be handled by a qualified fiduciary consultant. Today, most of these rights can instead be dealt with in a testamentary trust, without the hassle of an old-fashioned vested right.
It must be noted that, when a limited right that is not a lifelong right is created in a Will, a term or a specific condition must be linked to the right. For example, until the beneficiary reaches a certain age or maybe remarries.
USUFRUCT
The most common right of use is usufruct. This right affords the usufructuary the use of another person’s property (in our example, the property of the mere owner (remainderman), the son) and to take the fruit thereof without reducing the value of the property.
Usufruct can be created on both moveable and immoveable property. Should it be on perishable assets or cash, it will be considered as quasi usufruct, where the asset passes over to the usufructuary, other than pure usufruct, where the property passes over to the remainderman. In the case of quasi usufruct, the remainderman can only lay claim to the assets at the termination of the quasi usufruct right.
Usufruct can be either for the lifetime of the usufructuary, or for a predetermined time. When a usufructuary passes away, the ‘value’ of the usufruct will be included in the estate, which could attract capital gains tax. The usufructuary can register for value-added tax (VAT), but not the owner.
The bottom line of usufruct is that the usufructuary may use the assets, administer, and enjoy natural and industrial fruits thereof. They can even lease or operate it themselves. But they cannot dispose of the assets, use up the property, or let it go to waste (except in the case of quasi usufruct), nor can they bequeath the usufruct in a Will. A usufruct affords limited rights to the remainderman while the usufruct is in existence.
For more on the rights and duties of the usufructuary and the remainderman, please visit https://dkvg.co.za/usufruct-usus-and-habitatio-what-is-the-difference/
USUS
A servitude of use, or usus, is related to usufruct, but the beneficiary’s rights are far more restricted. The difference is that the beneficiary of the asset or property may only use it for their own and their household’s daily needs. In the instance of our example, this would be to keep a few sheep and to plant vegetables for the wife and her household’s own needs only. The usage rights of a house include the right to occupy the house with family, guests and employees, even to let a portion of the house if it is too big, on the condition that the beneficiary still occupies a portion of the house. The beneficiary’s use must be without detriment to the substance of the property.
HABITATIO
The servitude of habitatio is related to usus. It confers on the holder the right to occupy the house together with family, guests and employees, without detriment to the substance of the property. In this instance, the beneficiary also has the right to lease or sublease space in the house to others.
FIDEICOMMISSUM
A fideicommissum is a type of bequest in which the beneficiary (fiduciary) is encumbered by the testator to convey parts of the decedent’s estate to a fideicommissary after a specific time or the fulfilment of a condition. The example here would be of a farm that has been bequeathed to a son, subject to the condition that the farm must be bequeathed to the fiduciary’s eldest son when he, in turn, passes away. The word is derived from the Latin words ‘fides’ (trust) and ‘committere’ (to commit) which denotes that something is entrusted to someone’s care.
Unlike in the case of usufruct, where the asset is registered in the name of the remainderman and the usufruct is registered as a servitude against the property, the property is registered in the fiduciary’s name with the fideicommissary provision as one of the title conditions. However, the fiduciary’s property rights are subject to certain restrictions. The fiduciary is entitled to the ‘fruits’ of the property, but cannot alienate the property or encumber it with a mortgage. The fiduciary may own, use and enjoy the property, without diminishing the value of the property. Upon termination of the fiduciary’s interest, full ownership shall pass to the fideicommissary.
FIDEICOMMISSUM RESIDUAL
In contrast to a pure fideicommissum, a fideicommissum residual, grants alienation powers to the fiduciary. Whatever is left upon the death of the fiduciary must pass to the fideicommissary. Common law states that at least 25% must pass.
This newsletter constitutes general information and should not be used or relied upon 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 financial/legal advisor for specific and detailed advice.
Sources:
https://en.wikipedia.org/wiki/Fideicommissum
https://www.fisa.net.za/wp-content/uploads/2022/07/Veeplaas.pdf
https://dkvg.co.za/usufruct-usus-and-habitatio-what-is-the-difference/
_____________________________________________________________________________
A FINAL BLOW OR A JOKE?
Leaving your assets to your loved ones after your death is quite a serious matter, but for some, it is also an irresistible opportunity to deliver a final blow for old times’ sake, to cause some mischief, or to raise a smile from beyond the grave.
Although it might seem entertaining to write jokes or to award final blows in a Will, it is not without risk. It is advisable to take a Will seriously, rather than to perhaps invalidate it. It is probably better to err on the side of caution and to record outlandish requests and stipulations in a non-legally binding letter of wishes instead of putting your whole estate at risk.
There are different types of ‘limited rights’ that can play a role in this scenario. These are the personal servitudes of usufruct, usus, and habitation. The inclusion of limited rights could be considered as an estate planning tool used to reduce estate duty, but it could also place an enormous burden on another heir. Limited rights provisions can be a minefield and should preferably be handled by a qualified fiduciary consultant. Today, most of these rights can instead be dealt with in a testamentary trust, without the hassle of an old-fashioned vested right.
It must be noted that, when a limited right that is not a lifelong right is created in a Will, a term or a specific condition must be linked to the right. For example, until the beneficiary reaches a certain age or maybe remarries.
USUFRUCT
The most common right of use is usufruct. This right affords the usufructuary the use of another person’s property (in our example, the property of the mere owner (remainderman), the son) and to take the fruit thereof without reducing the value of the property.
Usufruct can be created on both moveable and immoveable property. Should it be on perishable assets or cash, it will be considered as quasi usufruct, where the asset passes over to the usufructuary, other than pure usufruct, where the property passes over to the remainderman. In the case of quasi usufruct, the remainderman can only lay claim to the assets at the termination of the quasi usufruct right.
Usufruct can be either for the lifetime of the usufructuary, or for a predetermined time. When a usufructuary passes away, the ‘value’ of the usufruct will be included in the estate, which could attract capital gains tax. The usufructuary can register for value-added tax (VAT), but not the owner.
The bottom line of usufruct is that the usufructuary may use the assets, administer, and enjoy natural and industrial fruits thereof. They can even lease or operate it themselves. But they cannot dispose of the assets, use up the property, or let it go to waste (except in the case of quasi usufruct), nor can they bequeath the usufruct in a Will. A usufruct affords limited rights to the remainderman while the usufruct is in existence.
For more on the rights and duties of the usufructuary and the remainderman, please visit https://dkvg.co.za/usufruct-usus-and-habitatio-what-is-the-difference/
USUS
A servitude of use, or usus, is related to usufruct, but the beneficiary’s rights are far more restricted. The difference is that the beneficiary of the asset or property may only use it for their own and their household’s daily needs. In the instance of our example, this would be to keep a few sheep and to plant vegetables for the wife and her household’s own needs only. The usage rights of a house include the right to occupy the house with family, guests and employees, even to let a portion of the house if it is too big, on the condition that the beneficiary still occupies a portion of the house. The beneficiary’s use must be without detriment to the substance of the property.
HABITATIO
The servitude of habitatio is related to usus. It confers on the holder the right to occupy the house together with family, guests and employees, without detriment to the substance of the property. In this instance, the beneficiary also has the right to lease or sublease space in the house to others.
FIDEICOMMISSUM
A fideicommissum is a type of bequest in which the beneficiary (fiduciary) is encumbered by the testator to convey parts of the decedent’s estate to a fideicommissary after a specific time or the fulfilment of a condition. The example here would be of a farm that has been bequeathed to a son, subject to the condition that the farm must be bequeathed to the fiduciary’s eldest son when he, in turn, passes away. The word is derived from the Latin words ‘fides’ (trust) and ‘committere’ (to commit) which denotes that something is entrusted to someone’s care.
Unlike in the case of usufruct, where the asset is registered in the name of the remainderman and the usufruct is registered as a servitude against the property, the property is registered in the fiduciary’s name with the fideicommissary provision as one of the title conditions. However, the fiduciary’s property rights are subject to certain restrictions. The fiduciary is entitled to the ‘fruits’ of the property, but cannot alienate the property or encumber it with a mortgage. The fiduciary may own, use and enjoy the property, without diminishing the value of the property. Upon termination of the fiduciary’s interest, full ownership shall pass to the fideicommissary.
FIDEICOMMISSUM RESIDUAL
In contrast to a pure fideicommissum, a fideicommissum residual, grants alienation powers to the fiduciary. Whatever is left upon the death of the fiduciary must pass to the fideicommissary. Common law states that at least 25% must pass.
This newsletter constitutes general information and should not be used or relied upon 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 financial/legal advisor for specific and detailed advice.
Sources:
https://en.wikipedia.org/wiki/Fideicommissum
https://www.fisa.net.za/wp-content/uploads/2022/07/Veeplaas.pdf
https://dkvg.co.za/usufruct-usus-and-habitatio-what-is-the-difference/
_____________________________________________________________________________
A FINAL BLOW OR A JOKE?
Leaving your assets to your loved ones after your death is quite a serious matter, but for some, it is also an irresistible opportunity to deliver a final blow for old times’ sake, to cause some mischief, or to raise a smile from beyond the grave.
Although it might seem entertaining to write jokes or to award final blows in a Will, it is not without risk. It is advisable to take a Will seriously, rather than to perhaps invalidate it. It is probably better to err on the side of caution and to record outlandish requests and stipulations in a non-legally binding letter of wishes instead of putting your whole estate at risk.
Until next month!
The Let’s Talk EFBOE Team