Nwanda Internal news (Aug)

1. We have two new additions to our staff!
Welcome Fatima Wadia (Tax Compliance Officer) and Erika van Eck ( Audit Senior).
Untitled-12. Good Luck to all those writing their CTA Exams!

3. We wish to congratulate Jean Pierre Oosthuizen on the successful completion of his Degree and Completion of his Training Contract with SAICA.

How to register an inter vivos trust

02_BAn inter vivos trust is registered at the office of the Master of the High Court in whose area of jurisdiction the main assets of the trust are or will be held.

The first step is to draw up a valid trust deed. A trust deed is a contract between the founder of the trust and the trustees, for the benefit of a third party or parties, known as the beneficiaries. In terms of the trust deed, the founder agrees to transfer certain assets to the trustees of the trust for the benefit of the beneficiaries. The trust deed must stipulate who the first trustees of the trust are going to be. In many instances the Master will insist on at least one independent trustee to be appointed. This means that the independent trustee will receive no benefit from the trust assets apart from the specified and reasonable trustee remuneration. The beneficiaries must be specified in the trust deed, as well as their entitlement to either the capital of the trust, the income of the trust assets, or both.

A trust deed is a valid contract and therefore subject to all applicable laws. Furthermore, there are significant tax, financial and other consequences of being involved in a trust, whether as trustee, founder or beneficiaries. Therefore it is imperative to seek professional advice when drawing up this deed.

The duly signed and witnessed trust deed must be submitted to the Master of the High Court, together with the completed and signed Acceptance of Trusteeship for all trustees as well as certified copies of their identity documents. This Acceptance of Trusteeship states the basic information about the trustees that the Master requires, as well as certain declarations made by the trustees. If the Master requires the trustees to furnish security, proof of the bond of security by those trustees must be provided to the Master when the trust is registered. Form JM21 sets out certain requirements and information that must be supplied to the Master together with the other documents set out in this paragraph. This information includes details of the professions or business occupations of the trustees to be registered, any previous experience that these trustees might have in the administration of trusts, the name and branch of the bank where a bank account will be opened for the trust, and so forth. An original undertaking by an auditor or accounting officer must accompany form JM21. Lastly, proof of the payment of the prescribed fee of R100 must be submitted.

On receipt of the above documents in accordance with all the requirements, the Master will issue a Letter of Authority to the trustees. The trustees may then act on behalf of the trust.

Any amendments to the original trust deed must be placed on record with the Master of the High Court where the original trust deed is on record.

This article is a general information sheet and should not be used or relied on as 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 adviser for specific and detailed advice.

Types of marriage and estate planning

01_BThe most important forms of marriage are: marriage in community of property, marriage out of community of property (without accrual), and marriage out of community of property (with accrual).
Marriage in community of property

  1. There is no prior contractual arrangement, apart from getting married;
  2. Spouses do not have two distinct estates;
  3. There is a joint estate, with each spouse having a 50% share in each and every asset in the estate (no matter in whose name it is registered);
  4. Applies to assets acquired before the marriage and during the marriage;
  5. Should one spouse incur debts in his own name it will automatically bind his/her spouse, who will also become liable for the debt; 
  6. If a sequestration takes place (in the case of insolvency), the joint estate is sequestrated.

Marriage out of community of property without the accrual system

  1. An antenuptial contract (ANC) is drawn up by an attorney (who is registered as a notary), before the marriage;
  2. Where there is no contract, the marriage is automatically in community of property;
  3. The values of each spouse’s estate on going into the marriage are stipulated in the contract;
  4. A marriage by ANC means that all property owned by spouses before the date of the marriage will remain the sole property of each spouse;
  5. Each spouse controls his/her own estate exclusively without interference from the other spouse, although each has a duty to contribute to the household expenses according to his/her means; 
  6. To allow for assets acquired by spouses during the marriage to remain the sole property of each spouse, the accrual system must be specifically excluded in the ANC.

Marriage out of community of property with the accrual system

  1. The accrual system automatically applies unless expressly excluded in the antenuptial contract;
  2. The accrual system addresses the question of the growth of each spouse’s estate after the date of marriage.

ESTATE PLANNING
Donations between spouses are exempt from donations tax and estate duty.

Marriage in community of property

  1. In the event of the death of one spouse, the surviving spouse will have a claim for 50% of the value of the combined estate, thus reducing the actual value of the estate by 50%. The estate is divided after all the debts have been settled in a deceased estate (not including burial costs and estate duty, as these are the sole obligations of the deceased and not the joint estate).
  2. When drafting a Last Will and Testament, spouses married in community of property need to be aware that it is only half of any asset that he or she is able to bequeath.
  3. Upon the death of one spouse, all banking accounts are frozen (even if they are in the name of one of the spouses), which could affect liquidity.
  4. Donations or bequests to someone married in community of property can be made to exclude the community of property; in other words, if the donor stipulates that the donation must not fall into the joint estate, then the donee can build up a separate estate. However, returns on such separate assets will go back to the joint estate.

Marriage out of community of property without the accrual system

Each estate planner (spouse) retains possession of assets owned prior to and after the marriage.

Marriage out of community of property with the accrual system
A donation from one spouse to the other spouse is excluded from the calculation of each spouse’s accrual; in other words, the recipient does not include it in his growth and the donor’s accrual is automatically reduced by the donation amount.

DIVORCE
In the event of divorce, the marriage will be dissolved by court decree, which will address such aspects as child maintenance, access, guardianship and custody, spousal maintenance, the division of assets, division of pension interests and so on.

COHABITATION AND DEFINITION OF ‘SPOUSE’
Cohabitation is defined as a stable, monogamous relationship where a couple who do not wish to or cannot get married, live together as spouses. The Taxation Laws Amendment Act has extended the definition of ‘spouses’ to include “a same sex or heterosexual union which the Commissioner is satisfied is intended to be permanent”.

Many pieces of legislation, including the Pension Funds Amendment Act and the Taxation Laws Amendment Act, now define spouse to include a partner in a cohabitative relationship, the effects of which are that cohabitees will benefit from the Section 4(q) estate duty deduction in the Estate Duty Act, and the donations tax exemptions of the Income Tax Act.

This article is a general information sheet and should not be used or relied on as 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 adviser for specific and detailed advice.