Dear Colleague
October is around the corner! According to a poem by CF Louis Leipoldt, this is the most beautiful month of the year. And, rightfully so, as October is the month in which nature shows us her beautiful and colourful array of flowers. It is also the last month in which you can earn points in the EFBOE competition. Good luck to you!
INSTRUCTIONS TO CORRECTLY SIGN A WILL
Please take note of the following: When submitting a request for a Will to be drafted, the Wills drafter will add the ‘Signing Your Will – Instructions’ to the e-mail. If your client will not be signing the
Will in your presence, please add these signing instructions to the e-mail that you send to your client. This will prevent the incorrect witnessing of the Will, and ensure that a correctly signed and valid Will is placed in safekeeping sooner.
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DIVORCE: BE AWARE OF SUDDEN ASSET TRANSFERS TO A TRUST
‘A perfect marriage is just two imperfect people who refuse to give up on each other’ – Kate Stewart
This quote by Kate Stewart is the ideal but the stark reality is that there, unfortunately, does come a time when some people dó give up on each other. According to a column written by Johan Brandt, a member of the Fiduciary Institute of Southern Africa (FISA) and a consultant to Allegiance Consulting (Pty) Ltd, 18% of marriages in South Africa sadly end up in divorce*. The undeniable fact is that divorce can cause major complications for both parties involved.
*https://www.fisa.net.za/wp-content/uploads/2022/07/LBW-1.pdf
In practice, estate owners are sometimes advised to move personal assets to other people or institutions, specifically trusts, to avoid the financial implications that can be caused by a divorce. Under normal circumstances, the inclusion of assets in a trust, as part of long-term estate planning goals, would be acceptable. It goes without saying that assets should be moved in the correct and lawful manner, for example, either as a donation or as an arm’s length transaction. There are other methods to secure assets but these do not form part of this newsletter.
It is generally accepted that any reasonable person should operate in a manner that should not impair the rights of creditors or the other party to a divorce.
Court case PAF vs SCF
Such an incident took place in the court case of PAF vs. SCF (788/2020) [2022] ZASCA 101 [22 June 2022]:
An affluent businessman and his school love whom he married, decided to end their marriage. They were married out of community of property with the inclusion of the accrual system. Therefore, the asset value of both parties had to be considered in the divorce to calculate the accrual claim. The facts of the case are as follows:
INSTRUCTIONS TO CORRECTLY SIGN A WILL
Please take note of the following: When submitting a request for a Will to be drafted, the Wills drafter will add the ‘Signing Your Will – Instructions’ to the e-mail. If your client will not be signing the
Will in your presence, please add these signing instructions to the e-mail that you send to your client. This will prevent the incorrect witnessing of the Will, and ensure that a correctly signed and valid Will is placed in safekeeping sooner.
____________________________________________________________________________
DIVORCE: BE AWARE OF SUDDEN ASSET TRANSFERS TO A TRUST
‘A perfect marriage is just two imperfect people who refuse to give up on each other’ – Kate Stewart
This quote by Kate Stewart is the ideal but the stark reality is that there, unfortunately, does come a time when some people dó give up on each other. According to a column written by Johan Brandt, a member of the Fiduciary Institute of Southern Africa (FISA) and a consultant to Allegiance Consulting (Pty) Ltd, 18% of marriages in South Africa sadly end up in divorce*. The undeniable fact is that divorce can cause major complications for both parties involved.
*https://www.fisa.net.za/wp-content/uploads/2022/07/LBW-1.pdf
In practice, estate owners are sometimes advised to move personal assets to other people or institutions, specifically trusts, to avoid the financial implications that can be caused by a divorce. Under normal circumstances, the inclusion of assets in a trust, as part of long-term estate planning goals, would be acceptable. It goes without saying that assets should be moved in the correct and lawful manner, for example, either as a donation or as an arm’s length transaction. There are other methods to secure assets but these do not form part of this newsletter.
It is generally accepted that any reasonable person should operate in a manner that should not impair the rights of creditors or the other party to a divorce.
Court case PAF vs SCF
Such an incident took place in the court case of PAF vs. SCF (788/2020) [2022] ZASCA 101 [22 June 2022]:
An affluent businessman and his school love whom he married, decided to end their marriage. They were married out of community of property with the inclusion of the accrual system. Therefore, the asset value of both parties had to be considered in the divorce to calculate the accrual claim. The facts of the case are as follows:
- The couple married in 2001 out of community of property with the inclusion of the accrual system.
- The applicant (Mr PAF) sued the respondent (Mrs SCF) for a divorce in June 2013.
- The increase in the applicant’s estate was greater than that of the respondent, which resulted in her claiming half of the increased value of the estate.
- Twenty days before the commencement of the court case in March 2015, the applicant established a trust in the British Virgin Islands and then immediately donated the equivalent of R2.2 million to the trust. His minor daughter was the sole beneficiary.
- Simultaneously, the applicant transferred R3.3 million to his father’s account. This was the repayment of a loan that he took from his father 25 years ago.
- The respondent became aware of the donation and the repayment, which resulted in her claim being adapted to include these in the accrual claim calculation.
The question that immediately arose was whether these two transactions were premeditated on the part of the applicant, with the sole purpose of watering down the respondent’s claim.
The High Court in Pietermaritzburg issued the divorce decree in March 2016 but reserved judgement on the calculation of the accrual claim.
In November 2017, the court ruled that the transactions were, indeed, premeditated with fraudulent intentions, solely to prejudice the respondent’s interests and claim. The court determined that both amounts had to be taken into consideration with the accrual claim calculation.
The applicant applied to appeal but this appeal was eventually declined.
Trusts are not untouchable
The Court of Appeal said in its ruling that the actions of the applicant voided the general protection provided by a trust and can, therefore, be ignored in this case. The respondent argued that the applicant abused the general principles of a trust and the court agreed with her.
The lesson learnt from this and similar court cases, is that the protective benefits provided by a trust for estate planning purposes cannot be abused to dilute the value of assets by suddenly moving them into a trust in the case of a divorce. This will certainly have adverse consequences.
In contrast to the above scenario, the importance of timeous estate and structural planning in the initial stages of a person’s early economic activities cannot be overemphasised. Should assets be transferred to a trust with the co-operation of a spouse over time, for the right reasons and with noble intentions, the chances of the above happening would be extremely slim.
‘Right of veto’ in a trust
In practice, the ‘right of veto’ is still found in many trust deeds but it remains a thorn in the side of the court. If this right is exercised, it can result in assets in a well-intentioned trust being included when calculating estate values. The consequence of applying this right will mean that those who were supposed to benefit from the trust will never receive the assets.
Source: https://www.fisa.net.za/wp-content/uploads/2022/07/LBW-1.pdf
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‘DE BLOEDIGE HAND ERFT NIET’
The maxim ‘de bloedige hand erft niet’ (the bloody hand does not inherit), was revisited in the case Smit vs The Master, Western Cape (2022) 20960-2019 (WCC).
The applicant, the widow of the deceased, WS Smit, initially approached the court to have a later Will, dated 12 January 2019, be declared the Last and Final Will of the deceased. Among other evidence provided, the widow and two security personnel were charged for the deceased’s murder, fraud, illegal possession of firearms and defeating the ends of justice. Judge J Mantame took all of the evidence into consideration and declared the widow (the applicant, Mrs Zurenah Smit) to be unworthy (‘indignus’) of taking any benefit from the deceased’s estate. The Will in question was also declared null and void, and the previous Will, dated 7 December 2018, declared to be the Last and Final Will of the deceased. For the full details on this court case/judgement, visit
https://drive.google.com/file/d/1ze7jIaDYrwEHuJcAhbCo87BsjxRzWIdI/view
It is possible under South African law that a person can still inherit from a deceased even when they caused the death of the testator. That is, if that person was found to be mentally ill at the time of causing the person’s death, or justifiably caused the death of the testator. The mere criminal conviction of a person, if found guilty of murder, might be insufficient to disqualify them as an heir. Instead, it would have to be proven in a civil court that they murdered the deceased. At a minimum, the court would have to declare that their conduct was morally reprehensible and blameworthy in the death of the deceased. Conversely, even if a person is found not guilty of the murder of the deceased, they could find themselves declared ‘indignus’ and unable to inherit if their conduct towards the deceased is found to be morally reprehensible and blameworthy.
The High Court in Pietermaritzburg issued the divorce decree in March 2016 but reserved judgement on the calculation of the accrual claim.
In November 2017, the court ruled that the transactions were, indeed, premeditated with fraudulent intentions, solely to prejudice the respondent’s interests and claim. The court determined that both amounts had to be taken into consideration with the accrual claim calculation.
The applicant applied to appeal but this appeal was eventually declined.
Trusts are not untouchable
The Court of Appeal said in its ruling that the actions of the applicant voided the general protection provided by a trust and can, therefore, be ignored in this case. The respondent argued that the applicant abused the general principles of a trust and the court agreed with her.
The lesson learnt from this and similar court cases, is that the protective benefits provided by a trust for estate planning purposes cannot be abused to dilute the value of assets by suddenly moving them into a trust in the case of a divorce. This will certainly have adverse consequences.
In contrast to the above scenario, the importance of timeous estate and structural planning in the initial stages of a person’s early economic activities cannot be overemphasised. Should assets be transferred to a trust with the co-operation of a spouse over time, for the right reasons and with noble intentions, the chances of the above happening would be extremely slim.
‘Right of veto’ in a trust
In practice, the ‘right of veto’ is still found in many trust deeds but it remains a thorn in the side of the court. If this right is exercised, it can result in assets in a well-intentioned trust being included when calculating estate values. The consequence of applying this right will mean that those who were supposed to benefit from the trust will never receive the assets.
Source: https://www.fisa.net.za/wp-content/uploads/2022/07/LBW-1.pdf
_____________________________________________________________________________
‘DE BLOEDIGE HAND ERFT NIET’
The maxim ‘de bloedige hand erft niet’ (the bloody hand does not inherit), was revisited in the case Smit vs The Master, Western Cape (2022) 20960-2019 (WCC).
The applicant, the widow of the deceased, WS Smit, initially approached the court to have a later Will, dated 12 January 2019, be declared the Last and Final Will of the deceased. Among other evidence provided, the widow and two security personnel were charged for the deceased’s murder, fraud, illegal possession of firearms and defeating the ends of justice. Judge J Mantame took all of the evidence into consideration and declared the widow (the applicant, Mrs Zurenah Smit) to be unworthy (‘indignus’) of taking any benefit from the deceased’s estate. The Will in question was also declared null and void, and the previous Will, dated 7 December 2018, declared to be the Last and Final Will of the deceased. For the full details on this court case/judgement, visit
https://drive.google.com/file/d/1ze7jIaDYrwEHuJcAhbCo87BsjxRzWIdI/view
It is possible under South African law that a person can still inherit from a deceased even when they caused the death of the testator. That is, if that person was found to be mentally ill at the time of causing the person’s death, or justifiably caused the death of the testator. The mere criminal conviction of a person, if found guilty of murder, might be insufficient to disqualify them as an heir. Instead, it would have to be proven in a civil court that they murdered the deceased. At a minimum, the court would have to declare that their conduct was morally reprehensible and blameworthy in the death of the deceased. Conversely, even if a person is found not guilty of the murder of the deceased, they could find themselves declared ‘indignus’ and unable to inherit if their conduct towards the deceased is found to be morally reprehensible and blameworthy.
Source:
https://sentinelinternational.co.za/2021/03/murder-and-succession/
Until next month!
The Let’s Talk EFBOE Team