accrual claims fisa€¦ · 2017-03-21 2 matrimonial property act o reeder v softline o ‘a spouse...
TRANSCRIPT
2017-03-21
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ACCRUAL CLAIMS AGAINST DECEASED
ESTATESDISCUSSION WITH CARMEN VENTER
MATRIMONIAL PROPERTY ACT
O Chapter I : Accrual system
O S3(1) ‘Dissolution of a marriage –
acquires a claim against the other
spouse or his estate’
O S3(2) ‘A claim arises at the dissolution of
the marriage and the right of such
spouse to share in terms of this
act’
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MATRIMONIAL PROPERTY ACT
O Reeder v Softline
O ‘a spouse who claims half the estate of the
other – has a contingent right and not a
vested right.’
Has no right during the subsistence of the
marriage but only a future claim on the
dissolution of the marriage.
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ACCRUAL CLAIM BY SURVIVOR
O Where the entire estate is left to the survivor
– claim is academic
O But where there are other bequests – claim
ranks after creditors but before heirs and
legatees
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POLICY TO ESTATE
O Addresses liquidity problems
O Both estate dutiable and attracts executor
fees
O Shortfall R1 000 000/0.76808
Issue cover of R 1 301 948
Test: 1 301 948 – 3.99% = 1 250 000
1 250 000 - 20 % = 1 000 000
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POLICY TO ESTATE
O Elzette Muller : The treatment of life insurance policies in the deceased estates with a perspective on the calculation of estate duty .
O CIR v Estate Hersov – policy payable to the deceased estate who has proprietary rights in such policy which vested in the insured during his lifetime. Such policy is regarded has having belonged to the deceased at the time of his death and should thus be reflected as property of the deceased estate.’
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POLICY AND ACCRUAL
O QUOTE: ‘A policy payable to the estate of the
deceased life insured will, on the other
hand, fall into the deceased estate and may,
it is submitted, be used in the calculation of
any claim for accrual by the surviving
spouse.’
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CALCULATION
O Estate with fixed assets of R3 000 000.
O 3 000 000 / 2 = 1 500 000 accrual claim.
O Exec fees @3.99% = 119 700
O Claim 4lA =1 500 000
O Duty at 20% = 276 060
NEED: R 1 895 760 which now forms part of
the accrual calculation (and additional exec
fees and estate duty ; increased claim)
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CALCULATION
O Estate with fixed assets R 3 000 000
O With policy to estate R 3 750 000
O Accrual claim / 2 = R3 375 000
O Estate calculation: additional exec fees,
increased claim, and increased duty.
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Value of policy
O Original to cover liquidity before policy:
O R1 895 760 versus
O R5 976 150 to cater for accrual division as
well as added expenses such as executor
fees and estate duty.
AFFORDABILITY?
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OPTION 1
O Forfeit right / claim?
O Should one provide for forfeit of one’s claim
on death – if survivor has smaller accrual?
O Can have a succession clause for 3rd parties
–children for instance
.
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RENOUNCE RIGHT?
O ‘whether a spouse can renounce his or her
right to share in the accrual is uncertain,
particularly when the entitled spouse is
insolvent at the time of the purported
renunciation’
O Wille’s Principles of SA Law; Law of Husband
and Wife, Van Aswegan- De Rebus
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OPTION 2
O Survivor waives right to claim after death of
spouse?
O If so, would this not constitute a donation by
the survivor to the heirs/ legatees of the
deceased estate?
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SURVIVOR WAIVES RIGHT
O S55 and S56 of the Income Tax Act
O Definition of ‘donation’:
O ‘means any gratuitous disposal of property including any gratuitous waiver or renunciation of a right’
O Definition of ‘property’:
O any right in or to property,
O Movable or immovable,
O Whether corporeal or incorporeal….’
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SURVIVOR WAIVES RIGHTS
O Exemptions:
O (a) to or for the benefit of the spouse of the
donor under a duly registered anc or post nup
or notarial contract (s21 of the Matrimonial
Property Act)
O (b) to or for the benefit of the spouse who is not
separated from him under a judicial order or
notarial deed of separation
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OPTION: 3
O A contract between spouses that claim will
be funded by a life insurance policy?
O Policy has beneficiary: spouse
O Warricker NNO vs Liberty Life
O Pieterse and Shrosbree NO
O Shrosbree NO vs Love
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CONTRACT BETWEEN SPOUSES
O ‘the courts affirmed the approach that
policy benefits payable to a nominated
beneficiary, who has duly accepted such
benefits, shall not pass to the beneficiary
through the estate of the owner of the
policy, but will vest in the beneficiary
directly. The approach was based on the
application of the principles of the ‘stipulatio
alteri’
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CONTRACT BETWEEN SPOUSES
O Elzette Muller : The treatment of life insurance
policies in the deceased estates with a
perspective on the calculation of estate duty .
O ‘should the beneficiary duly accept the
benefits under the policy, the proceeds will
not form part of the deceased estate of the
insured and will consequently not be
available to meet the claims of creditors
against such deceased estate.’
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CONTRACT BETWEEN SPOUSES
O Elzette goes further to say:
O ‘…the surviving spouse will, in the premises,
not be entitled to take such proceeds into
account in the calculation of an accrual
claim’
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CONTRACT BETWEEN SPOUSES
O Estate with fixed assets
O R 3 000 000 / 2 = R 1 500 000 claim
O Policy issued for R 1 500 000 payable to
spouse
No additional costs – and S4q… yes.. For now
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CONTRACT BETWEEN SPOUSES
O If the claim is being settled by policy funds –
would this still be considered a deduction
under S4lA of the Estate Duty Act?
S4 ‘the net value of any estate shall be
determined by making the following
deductions from the total value of all
property included therein in accordance
with S3, that is to say
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CONTRACT BETWEEN SPOUSES
O Estate duty deduction?
O S4(lA) the amount of claim against the
estate acquired under S3 of the
Matrimonial Property Act, by the
surviving spouse of the deceased
or by the estate of his deceased
spouse, in respect of an accrual
contemplated in that section.
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CONTRACT BETWEEN SPOUSES
O Concern:
O Will the Matrimonial Property Regime
override the contract?
O Can the survivor – even though there is a
contract which does not form part of a post
nuptial or ante nuptial agreement – disregard
the contract and still claim against the
estate?
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CONTRACT BETWEEN SPOUSES
O Honey v Honey,
O Minister of Finance v Larkan
O Parties are generally not free to amend or
cancel the ante-nuptial contract by a mere
agreement between themselves
O Wille’s Principle of SA Law
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OPTION 4
O Post -nup to include a provision that
settlement will be from a policy of
insurance?
O Very expensive and may be difficult to get
through the courts – but if one manages this
– then would have the same benefits as if
provision had originally been incorporated in
the ante-nup.
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OPTION 5
O Ante-nuptial contract provision
O Provision where spouses do not forfeit their rights to claim – but will settle the claim via policies of insurances – ie – cannot claim the amount from the deceased estate as it will be settled by the proceeds of a life insurance policy.
(Law of Husbands and Wife; Wille’s principle of SA Law)
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ANTE-NUPTIAL CONTRACT
O Structure of policy:
O On the life of oneself payable to the other
O If on the life of the other – accrual calculation
problems due to ‘ownership’
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ANTE-NUPTIAL CONTRACT
O Estate duty exemption?
O Proviso to S3(3)(a)(i)
O The amount due under such a policy is
recoverable by the surviving spouse or child of
the deceased under a duly registered ante-
nuptial or post-nuptial contract;
O No reliance on S4q
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ANTENUPTIAL CONTRACT
O 4lA deduction for estate duty – as per
previous discussion
O And – no claims against the estate – less
liquidity needed.
O Lower policy value required R2 226 150
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ANTE-NUPTIAL CONTRACT
O If no policy ever effected?
O Claim against the deceased estate?
O Make a provision for this event – or would it
not be valid?
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OPTION 6
O Donation from spouse with greater accrual
to spouse with smaller accrual during the
subsistence of the marriage.
O Recommendation to remove spouse
exemption?
O Other costs if not a donation in cash
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SURVIVOR HAS GREATER ACCRUAL
O Deceased estate has a claim against the
survivor = deemed property
O This impoverishes the survivor
O Provision forfeiting claim against survivor
makes sense… academic if equal
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Thank you!
O I appreciate your time and input.
O Other sources:
O SA Family Law
O Insurance and Tax: M Botha
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