Category Archives: Trusts

Claiming maintenance from a life partnership estate

B2

On 28 September 2020, the Cape Town High Court handed down judgment in favour of Ms Bwanya directing that section 1(1) of the Intestate Succession Act 81 of 1987 (“the ISA”) is unconstitutional and invalid insofar as it excludes Ms Bwanya, a surviving life partner in a permanent opposite-sex life partnership, from inheriting from her deceased fiancé’s estate.

 

The Facts

Ms Bwanya and Mr Ruch (“the deceased”) met in February of 2014 when she was waiting for a taxi in Camps Bay. The deceased reportedly “swept her off her feet” by taking her to the Cape Town train station in his car. Later that same evening, the deceased took her on their first date.

Ms Bwanya averred that, at the time of the deceased’s death, she and the deceased were partners in a permanent opposite-sex life partnership, with the same or similar characteristics as a marriage, in which they had undertaken reciprocal duties of support and had committed themselves to marrying each other.

Ms Bwanya sought an order that—

  1. Section 1(1) of the ISA be declared unconstitutional and invalid insofar as it excludes the surviving life partner in a permanent opposite-sex life partnership from inheriting in terms of this Act; and
  2. The definitions of “survivor”, “spouse” and “marriage” in section 1 of the Maintenance of Surviving Spouses Act 27 of 1990 (“the MSSA”) be declared unconstitutional and invalid insofar as they exclude partners in permanent opposite-sex life partnerships from claiming maintenance in terms of this Act.

Applicable Law

Section 1(1) of the ISA, as it currently stands, excludes life partners in a permanent opposite-sex life partnership from inheriting in terms of the ISA. Similarly, the definitions of “survivor”, “spouse” and “marriage” in section 1 of the Maintenance of Surviving Spouses Act 27 of 1990 (“the Surviving Spouses Act”) excludes partners in permanent opposite-sex life partnerships from claiming maintenance in terms of this Act.

Ms Bwanya submitted to the Court that the ISA and the Surviving Spouses Act, as they currently stand, infringe on her Constitutional rights to human dignity and equality. Ms Bwanya further argued that she is being discriminated against in terms of section 9(3) of the Constitution on the grounds of sex, gender, marital status, and sexual orientation.

Ms Bwanya argued that, on her facts, she should be permitted to inherit from the deceased’s estate in terms of the ISA, and that she should be entitled to claim maintenance from the deceased’s estate in terms of the Surviving Spouses Act.

For similar reasons, the Women’s Legal Centre and the Commission for Gender Equality argued that the ISA and the Surviving Spouses Act are unconstitutional.

The Court’s Finding

The Court held that it can be inferred that Ms Bwayna and the deceased tacitly agreed they were in a permanent life partnership akin to marriage. Accordingly, it was held that Ms Bwanya and the deceased were permanent life partners who had undertaken reciprocal duties of support to one another.

The Court further held that section 1(1) of the ISA in fact discriminates against Ms Bwanya unfairly on the grounds of marital status, sexual orientation and gender, and that this discrimination has gravely affected the rights of heterosexual permanent life partners where the parties depended on each other for support. It was also held that Ms Bwanya’s constitutional rights to equality and dignity were infringed upon.

The Court dismissed Ms Bwanya’s request to have the relevant definitions of the MSSA declared unconstitutional, on the ground that there must be a duty of support by operation of law, and not a mere contractual one. As there was no duty of support by operation of law between Ms Bwanya and the deceased, she did not succeed on this leg.

Reference List:

  • Bwanya v Master of the High Court, Cape Town and Others (20357/18) [2020] ZAWCHC 111.

This article is a general information sheet and should not be used or relied on 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Is it beneficial to create a trust?

A2A Trust can be described as a legal relationship which has been created by the founder, who places assets under the control of Trustees. This either happens during the founder’s lifetime (inter vivos trust) or at the death of the founder (testamentary trust). This article will focus on the advantages and disadvantages of an inter vivos trust.

The advantage of a trust is firstly, that inter vivos trusts can be used to minimise estate duty. No estate duty should be payable on assets owned by the Trust as a Trust does not terminate or come to an end, since it has perpetual succession. Estate duty is currently taxed at 20% of the gross estate value. This saving in estate duty can be substantially large, especially for high net worth individuals who are worth millions of rands. Secondly, as the Trust’s assets are not owned by the beneficiaries, the creditors of the beneficiaries do not have a claim regarding the assets of the Trust. This advantage is especially important for people who are exposed to potential liability. Companies as well as individuals are able to transfer assets to Trusts. Lastly, because Trusts have perpetual succession, beneficiaries will be able to continue enjoying the benefit of the Trust assets even if one of the Trustees were to pass away.

The disadvantages are firstly, the costs of setting up a Trust, which can be high. It may cost up to R 20 000 to set up a Trust. If immovable property is transferred to the Trust then transfer duty needs to be paid. The founders of the Trust may also be liable to pay Donations tax, which is taxable at 20% of the value of the assets transferred to the Trust. Transfer duty is taxed according to a sliding scale. Secondly, Trustees could find themselves personally liable for losses suffered by the Trust if it can be proven that they did not act with care, diligence and skill in terms of section 9 of the Trust Property Control Act. It is important to note that “skill” requires more than just acting in good faith. Trustees may be proven to be negligent not only if they invested in risky investments, but also if they invested capital too conservatively, causing the capital not to grow sufficiently. Trustees also need to be aware of the fact that they can still be held liable if only one Trustee has signing power on behalf of the Trust and he/she makes a poor decision that holds all the Trustees liable for his negligence.

The founder of the Trust needs to recognise that the assets in the Trust do not belong to him/her anymore. The assets belong to the Trust. Should this loss of control (from founder to Trust) not occur, the Trust may be seen as an alter ego of the founder, which could result in the assets being included in creditors’ claims as well as having estate duty consequences.

The earnings from the assets in the Trust are taxed at 40%, and interest exemptions do not apply to Trusts. Also, the inclusion rate for Capital Gains tax for an inter vivos trust is 66.6% whereas the inclusion rate for individuals is 33.3%. Lastly, as we can see from the above, a Trust is not for everyone.

It is important to weigh up the advantages and disadvantages before deciding whether to go ahead or not. The best decision would be to speak to a certified financial planner or attorney who can assist you in making the correct decision regarding your personal situation.

This article is a general information sheet and should not be used or relied on 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE).

Voor- en nadele van Trusts

A2Trusts hou verskeie voordele, maar ongelukkig ook nadele in. Alhoewel hierdie waarskynlik nie ‘n samevatting van alle voordele en nadele is nie, deel ons graag ons ondervinding van die vernaamste voor- en nadele by die oorweging van ‘n Trust met u.

Voordele:

  • Groei wat in die trustbates plaasvind, vestig in die Trust en nie in u persoonlike boedel nie.
  • Deur die bates aan die Trust te verkoop, sal die bedrag wat deur die Trust aan u verskuldig is, uitstaande op die leningsrekening bly en sal dit as ‘n bate in u boedel beskou word. Hierdie bedrag kan egter vir boedelbelastingdoeleindes verminder word deur die jaarlikse skenkingsbelastingvrystelling van R100 000 te benut.
  • ‘n Trust bied beskerming teen probleme indien u verstandelik onbevoeg raak. Dit kan dit ook onnodig maak om ‘n kurator aan te stel om u finansiële sake te hanteer.
  • ‘n Trust bly vertroulik, anders as dokumente soos testamente en rekords van bestorwe boedels wat openbare dokumente is en oop is aan die publiek ter insae.
  • ‘n Trust kan finansiële beskerming aan gestremde afhanklikes, spandabelrige kinders of begunstigdes met spesiale behoeftes bied.
  • ‘n Trust kan die koste van die administrasie van opeenvolgende boedels omseil deur voorsiening vir opeenvolgende begunstigdes te maak.
  • ‘n Trust kan die emosionele stres op u gesin verminder wanneer u sterf, aangesien die Trust sal voortgaan sonder enige van die formaliteite wat by ‘n bestorwe boedel vereis word.
  • Deur u Trustees verstandig te kies, kan u professionele bate- en beleggingsbestuur verseker.
  • Die Trust sal u in staat stel om, via die Trustees, na u dood ‘n mate van beheer oor die bates in die Trust te behou.
  • Na u dood en voordat u boedel afgehandel is, kan die Trust ‘n bron van inkomste aan u afhanklike(s) voorsien.
  • U sal verhoed dat u minderjarige kind se erfenis in die Voogdyfonds geplaas word.
  • U sal die probleme vermy om bates te moet verdeel ten einde ‘n gelyke uitkering aan die erfgename te doen.
  • Trustinkomste kan na die stigter se dood onder die begunstigdes met laer belastingkategorieë verdeel word wanneer individuele vrystellings aangewend kan word, maar alle belasbare inkomste wat in die Trust behou word, sal sonder enige vrystellingsvoordele teen 40% belas word.
  • Inkomstevlakke kan na goeddunke van die Trustees saam met die veranderende behoeftes van die begunstigdes gevarieer word.
  • Omdat die bates die eiendom van die Trust bly, en nie van die begunstigdes nie, hoef hulle ook nie die bates as deel van hulle boedels in te reken wanneer hulle sterf nie, wat ‘n besparing in boedelbelasting tot gevolg het.
  • Die trustbates sal om dieselfde rede teen krediteure beskerm wees.

Nadele:

  • U het nie meer algehele beheer oor u bates nie, aangesien die ander Trustees ook ‘n sê sal hê.
  • ‘n Trust word geregistreer en die owerhede kan toegang daartoe verkry.
  • U kan moontlik die verkeerde Trustees kies. Daar kan probleme ontstaan indien hulle wedywerende erfgename is. Dit is hoekom dit so belangrik is dat u minstens een onafhanklike Trustee moet hê.

Hierdie is ‘n algemene inligtingstuk en moet gevolglik nie as regs- of ander professionele advies benut word nie. Geen aanspreeklikheid kan aanvaar word vir enige foute of weglatings of enige skade of verlies wat volg uit die gebruik van enige inligting hierin vervat nie. Kontak altyd u regsadviseur vir spesifieke en toegepaste advies. (E&OE)