Tag Archives: Last Will

What are mutual wills?

B1The most general mutual will is that of a married couple. This does not mean, however, that the estates are joined and that the Testator and Testatrix have to make a joint decision about the distribution of their estates. Each party may still make independent decisions about the distribution of his/her estate within one will.

As a result, a mutual will is very popular among married couples, but the person who draws up the will, should take into consideration each party’s assets, liabilities and needs regarding inheritance to determine whether he/she should draw up separate wills or a mutual will, i.e. 2 separate wills within one document or one will which determines that merging of the respective or mutual wills should take place.

What mutual wills should contain

In the case of a mutual will there should be a description regarding the execution of the will should the spouses die simultaneously or within a short period, such as 30 days of each other. For argument’s sake, the Testator and Testatrix could be in a car accident. The testator dies and the Testatrix is in a critical condition, rendering her unable to draw up a new will; provision should be made in the will for such scenarios.

Legislation acknowledges the principle of freedom of bequeathment; each person therefore has the right to bequeath his/her assets according to his/her preference. Despite a Testator and Testatrix having a mutual will, one of the parties could decide, for whatever reason, to have another individual will drawn up which is dated later than the mutual will. The surviving spouse will not be able to insist that the mutual will be accepted as the last will and testament.

Amending a mutual will

One party does not need the other party’s permission to amend a mutual will. Each party has the right to draw up a new will at any time, without any obligation to inform the other party thereof. Should the mutual will turn out to be the last will of the deceased, it will become the valid will regarding the deceased, regardless of whether the surviving spouse had already drawn up another will.

Do the estates merge?

Merging of estates takes place when the estates of two people are joined into one upon the death of the first spouse, mainly with the aim of managing an asset in which both parties had an interest. Normally a limited right, such as a usufruct, should be created in terms of any of the assets in the estate to the benefit of the surviving spouse. Even with merging of estates the surviving party has the right to accept or reject the mutual will and the resulting merging of estate assets after the death of the first party. It boils down to the fact that, even where merging of estates is determined in the will, the mutual will does not have much value if the surviving party rejects the stipulations of the will after the death of the deceased party.

The way in which the creation of the merge is worded in a will is of extreme importance, as the wrong choice of words could have a major impact on the payment of policies outside the estate which should fall to the surviving party’s lot. The acceptance or rejection of a will in which a merge was created should also be considered carefully, as there are several implications, e.g. Transfer duty, Donations tax and Capital Gains Tax.

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).

Dealing with marriage and estate planning

A3_GTIt is important to understand the legal implications of the marital property regime, especially when drafting a Last Will and Testament and also when entering into a marriage, as the regime chosen by the estate planner is going to affect his/her assets.

The 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 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 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)