Feb 26, 2021 | Article
The Health Professions Council (HPCSA) is opposing the latest bid to legalise euthanasia, claiming the applicants are exaggerating their illnesses. According to Rapport, the application by palliative care doctor Sue Walter (47) and her patient Dieter Harck (71) was set to be heard in the Gauteng High Court (Johannesburg) this week, but will now in all probability be heard next week.
As reported in Legalbrief Today, Walter was diagnosed in February 2017 with multiple myeloma and Harck was diagnosed in 2013 with motor neuron disease. Both say they are suffering from ‘torturing symptoms’ and want the law to be developed to allow for physician-assisted suicide (PAS) and physician-assisted euthanasia (PAE). According to Rapport, the HPCSA says in its opposing papers that multiple myeloma and motor neuron disease ‘may’ develop into a terminal phase, but neither of the applicants has reached that phase.
The HPCSA is also of the view that the terminal phase of an illness cannot be viewed as a burden or liability. ‘Suicide is not a right or benefit of the law within the meaning of section 9 of the Constitution,’ the HPCSA argues, and the ‘killing of a person is not a health service’. The statutory body says it will act against any doctor who assists a patient to end his or her life. A prohibition of PAS and PAE is necessary to protect the rights to equality, dignity, life and physical integrity of those who are old, terminally ill, or physically or mentally disabled, it argues.
Source: LegalBrief
Feb 26, 2021 | Article
An out-and-out disinheritance clause in a will executed more than 100 years ago that excluded female lineal descendants has been overruled by the Constitutional Court, says a Cape Times report. It held that the Equality Act was now the benchmark to evaluate the conduct of a private person which had an impact on another person’s right to equality.
In November 1902, Karel Johannes Cornelius de Jager and his wife, Catherine Dorothea de Jager, signed a will in which they gave certain farms to their children, subject to the condition that the farms would pass from their children to male descendants only until the third generation. In 1957 the properties were inherited subject to that condition. These heirs included Kalvyn de Jager and his two brothers, Cornelius and John. John later died without a male child and his share in the farms was divided equally between Kalvyn and Cornelius. When Cornelius died, his half share in the farms passed to his sons, Albertus, Frederick and Arnoldus. However, when Kalvyn died in 2015, he did not have male children – only five daughters. In terms of clause seven of the testator’s will, the half share of Kalvyn de Jager could not pass to his daughters although he had left it to them in his will.
The sisters initially approached the High Court, which dismissed their application and then the SCA, which did the same. The Cape Times report notes they took the matter to the Constitutional Court, which upheld their appeal and set aside the orders granted by the High Court and SCA. ‘The provisions of the preamble to the Equality Act make its nature and intended purpose clear. The consolidation of democracy requires the eradication of inequalities, especially those that are systemic in nature and which were generated in SA’s history by colonialism, apartheid and patriarchy,’
Acting Justice Margaret Victor said. ‘Inheritance laws sustain and legitimise the unequal distribution of wealth in societies thus enabling a handful of powerful families to remain economically privileged while the rest remain systematically deprived. In my view, this system entrenches inherited wealth along the male line. In applying this critique to the facts in this case our common law principle of freedom of testation is continuing to entrench a skewed gender bias in favour of men.’
Source: LegalBrief
Feb 15, 2021 | Article
Beneficiaries are those persons who are initially defined by the founder in the trust instrument and are subsequently selected by the trustees from time to time in terms of the trust instrument stipulations, set by the founder. The Trust Property Control Act does not define a beneficiary and is relatively silent as far as matters regarding the beneficiaries of a trust are concerned. The nature, number and rights of beneficiaries are accordingly determined by reference to the trust instrument and common law. If there is any conflict, the common law will prevail. An example is the Potgieter v Potgieter case of 2012 where despite the fact that the trust deed only required the consent of the trustees to amend the trust deed, the Court also required the consent of the beneficiaries who have received benefits from the trust.
The following are useful pointers when an estate planner sets up a trust:
· Without a clearly defined object, a trust does not come into existence. In a family trust, the object is the beneficiaries for whose benefit the trust was created. Ensure trust beneficiaries are either identified (such as name and identity number) or identifiable (a clearly defined class of beneficiaries) (Estate Richards v Nichol case of 1999).
· Beneficiaries are usually defined as income and/or capital beneficiaries. This gives you the flexibility to treat each type of beneficiary differently. Income should be clearly distinguished from capital in the trust instrument, especially if different people are income and capital beneficiaries. Capital beneficiaries can benefit from the distribution of an actual trust asset or from a gain made on the disposal of trust assets. The treatment of unallocated income should also be defined to reflect the founder’s intention – whether it will form part of trust capital at the end of a financial year, if unallocated, or whether it will keep its nature as income. If the trust instrument is silent, it may be assumed that income and capital will always retain its nature. In the event that income and capital beneficiaries are different, it is good practice to provide in the trust instrument that in the event that income is insufficient for the maintenance of an income beneficiary, that capital can be used to make good any such shortfall. This will assist the trustees to optimise the trust’s investment returns, whilst taking into account the needs of all beneficiaries to prevent unintended hardship. Focusing at all cost on the short-term income production in a trust may have a detrimental effect on the long-term position and value of the trust’s assets, which in the long run may negatively impact both of the income and capital beneficiaries.
· If you want a specific beneficiary to be favoured over others in a discretionary trust, say so in the trust instrument, otherwise beneficiaries may put pressure on trustees to treat them equally. The trust instrument in the instance of a discretionary trust should also clearly state that beneficiaries need not be treated equally, if that is what the estate planner wishes for.
· It is acceptable for a trust instrument to provide that a beneficiary shall not receive a benefit until the happening of some event, such as reaching a certain age (Estate Dempers v SIR case of 1977).
· A trust instrument can also provide that a beneficiary will only receive a benefit from a trust for a limited period. The beneficiary may then have an unconditional vested right for that limited period only, and such right will during that time form part of his/her insolvent estate or his/her assets during a divorce.
· You cannot vest income and/or capital in a beneficiary, but cease the vested right in the event of the insolvency or divorce of that beneficiary. Once it is vested, it belongs to that beneficiary.
· A trust instrument cannot restrict a beneficiary, for example, by prohibiting a beneficiary from marrying.
· Provisions of our Constitution may affect the content of a trust instrument. If any provision, including the appointment of beneficiaries in a trust instrument, offends our Constitution, then it will be declared invalid. This seems to be going against the principle of freedom of testation or contractual freedom, but the law has never tolerated acts that are against good morals, and something that offends the provisions of our Constitution goes against good morals. So be mindful when you create a trust, especially a charitable or educational trust, that the terms you stipulate in the trust instrument not be contrary to public policy, as grounded in our Constitution. It cannot, for example, exclude recipients of trust benefits on the grounds of race, gender or religion. If such terms are illegal, immoral or contrary to public policy a court can strike out the offending clause/s in terms of the common law (Minister of Education v Syfrets Trust Ltd case of 2006).
· It is important to remember that a beneficiary can cede both a vested and discretionary right to another person or entity. One may very well want to prohibit such a cession expressly in terms of the trust instrument, if that is not in line with the wishes of the estate planner.
· As soon as a beneficiary receives any distributions from the trust (or accepts his/her benefits in writing to the trustees), removing him/her as a beneficiary of the trust without his/her consent is not a simple process. Be mindful that you will need his/her consent to do that.
· Be mindful that the addition or substitution of beneficiaries (in a discretionary trust) at a later date may trigger Transfer Duty if the trust holds residential property (Section 1 of the Transfer Duty Act).
· It is important to ensure that the meaning of the term “beneficiaries” corresponds with its intended meaning in clauses dealing with, for example, the appointment of trustees or the amendment of the deed. If, for example, the term “beneficiary” is used to include “all those persons related by blood or affinity to the founder” and, if the agreement of all beneficiaries is required for the appointment of a trustee or to make a change to the trust deed, it may become difficult to trace and involve said persons in such an appointment or change.
The estate planner should ensure that the definition of trust beneficiaries in the trust instrument meets his/her objectives for setting up a trust, which will not create unintended consequences later on.
~ Written by Phia van der Spuy ~
Feb 8, 2021 | Article
Trustees are the guardians of the trust assets and have a duty to manage these assets in the best interests of the beneficiaries. SARS and creditors frequently make attempts to attack trusts, but this can be mitigated through the appointment of an independent trustee.
Does a trust need an independent trustee?
Until recently, it was not a requirement to appoint an independent trustee. In 2005, in the landmark Land and Agricultural Bank of South Africa v Parker case, the Court suggested that each family trust should appoint an independent trustee. However, in March 2017, the Chief Master issued a directive which sets the requirement for the appointment of an independent trustee for all trusts which are defined as “family business trusts”. This is typically a trust set up for the protection of family assets, where the trustees are all beneficiaries, and they are all related. These trustees are also empowered in terms of the trust instrument to enter into transactions which create debt in the trust. If no independent trustee is appointed for such a family business trust, the Master of the High Court will refuse the registration of the trust. The Master may, in certain circumstances, dispense with the appointment of an independent trustee.
Do you qualify to act as independent trustee?
An independent trustee must be an independent outsider who accepts office in order to ensure that the trust functions properly and that the provisions of the trust instrument are observed. The independent trustee could be a person or an entity who has no family relation or connection, blood or otherwise, to the trustees, beneficiaries or founder of the trust, and who is also not a beneficiary of the trust. You can, therefore, not appoint your son-in-law as the independent trustee. Take note that the Master also has issue with any connection (family or otherwise) to the trustees, beneficiaries or founder of the trust. It will, therefore, be difficult for a person who is the accountant, attorney, business partner – or even a friend – of the trustee(s), beneficiary(ies) or founder(s) of the trust to accept appointment as an independent trustee and comfortably sign the Sworn Affidavit (see below) that each independent trustee is required to sign upon their appointment with the Master.
It is in the best interests of the trust that the independent trustee has sufficient knowledge of the impact of statutory requirements on the trust, including an understanding around compliance with relevant tax law, and the effect of changes in legislation on the trust. Take note of the declaration (see below) that you are “knowledgeable in the law of trusts”.
Does an independent trustee have a higher responsibility or accountability when compared to other trustees?
The Master requires the independent trustee to sign a Sworn Affidavit upon their appointment. Any person considering an appointment as independent trustee needs to (especially) carefully consider the following points on the Sworn Affidavit before accepting such appointment:
“As independent trustee I declare and undertake the following:…
4. That I have no family relation or connection, blood or other, to any of the existing or proposed Trustees, beneficiaries or founder of the trust.
5. That I am competent to scrutinize and check the conduct of the other appointed trustees who lack a sufficiently independent interest in the observance of substantive and procedural requirements arising from the Trust instrument.
6. I have no reason to conclude or approve transactions that may prove to be invalid, because I am knowledgeable in the law of trusts.”
Are you the minority?
Even if an independent trustee is appointed, there is no assurance that the trustees will act independently to achieve a separation between control and enjoyment of trust assets.
Some people prefer having an uneven number of trustees. This presents a risk, as there is a good chance that – in the case of three trustees – two trustees can side against and even outvote the other trustee. In typical family trusts, where the husband and wife are trustees, together with the independent trustee (as required by the Master), it may be easy for the husband and wife team to out-vote the independent trustee if the independent trustee does not agree with the husband and wife team (Merwe NO and Others v Hydraberg Hydraulics CC and Others, van der Merwe NO and Others v Bosman and Others case of 2010). This may create a risk for the independent trustee if two family members do not act for the benefit of all beneficiaries of the trust, but rather for their own. It may also expose the trust if the Court can prove that the independent trustee’s appointment was just “window dressing” and that their vote does not “really” count. The Courts frown upon this practice and expect an independent trustee to be involved in decisions relating to the trust.
~ Written by Phia van der Spuy ~
Feb 1, 2021 | Article
High Court case 21 January 2021: RS NO and Others v CMS and Others; In re: CMS v RS and Others (6837/2020) [2021] ZAWCHC 6.
In this case, which is linked to a divorce mediation process, the wife obtained a subpoena against Investec Bank to provide information in its possession, which the Bank was willing to provide – unless the subpoena is set aside by way of an order of court. That is what the trustees of the Trust were hoping to do by bringing an application to court for the subpoena to be set aside.
The wife was seeking, inter alia, the following relief; a decree of divorce; maintenance for herself and the minor children born of her marriage to her husband; an order declaring that the assets acquired by the trustees of the trust (which they ostensibly hold in their capacities as trustees of the trust) are in effect owned by the husband; an order that when calculating the joint estate (alternatively, any accrual that has taken place in the first husband’s estate), the net value of the assets referred to above (at the time of the dissolution of the marriage), must be taken into account as forming part of the joint estate (alternatively, the husband’s estate).
Alternatively, an order was sought for damages against the husband, inasmuch as it was alleged, that he breached the terms of the ante-nuptial contract, by acquiring assets in the name of the trust (so as to place these beyond any claim that the wife may have in regard to the joint estate and/or any accrual) and, an order that should the husband hold insufficient assets to satisfy the order made against him, that sufficient assets be transferred from the trust, to satisfy such order.
Wille J indicated that to him it did not appear how the rights of the Trust may in any manner be affected or violated, should the subpoena be complied with, and the application was dismissed.
Jan 29, 2021 | Article
People, generally speaking, do not pay sufficient attention to what they want to happen with their assets upon their deaths. This can be ascribed to estate planning not being given priority at a given time, or to people shying away from dealing with thoughts around death, or even ignorance. As the saying goes, ‘nothing is certain, except death and taxes’.
Many people believe that estate planning is having a will, but having a will is just one part of the plan. Where people also have trusts and letters of wishes, those documents will have often been drafted by different service providers, who may not have considered, or even been aware of other relevant documents, and who may not even specialise in providing such services. This may cause a conflict between the various documents, leaving the testator/testatrix having not achieved his/her objectives upon death, which may even be abused.
The Court expressed its concerns around the bad quality of wills in the Raubenheiner v Raubenheimer case of 2012, but the same can be said about the drafting of trust deeds and letters of wishes. The Court concluded that estate planning, wills, succession and the administration of deceased estates are inextricably linked to the proper drafting of a will. The following was said in this case:
“It is a never-ending source of amazement that so many people rely on untrained advisors when preparing their wills, one of the most important documents they are ever likely to sign. This is by no means a recent phenomenon. Some 60 years ago, in Ex Parte Kock NO, a high court decried the number of instances in which wills had to be rejected as invalid due to a lack of compliance with prescribed formalities and the regularity with which the courts were being approached to construe badly drafted wills, before urging intending testators ‘in their own interests as well as in the interests of those whom they intend to benefit when they die . . . to consult only persons who are suitably trained in the drafting and execution of wills and other deeds containing testamentary dispositions’. Despite this, the courts continue all too often to be called on to deal with disputed wills which are the product of shoddy drafting or incompetent advice.”
Will
In South Africa there is freedom of testation, where an individual has the right to determine the heir(s) to his/her property upon his/her death as he/she wishes. This is done in a will. Since 1 January 1954 all wills must be in writing. A will is a formal, signed, written (written by hand, typed or printed) document, in which a testator voluntarily sets out his/her instructions in unambiguous terms as to how his/her assets are to devolve following his/her death. Your will is a living document and should always be up to date and reflect your current wishes in terms of how you would like your assets to be distributed upon your death.
Trust
In the context of estate planning, a trust can be described as a legal relationship which has been created by a person (known as the founder, donor, or settlor) through placing assets under the control of another person (known as the trustee) for the benefit of third persons (the beneficiaries). The legal principles applicable to inter vivos trusts are to be found in the Law of Contracts. This means that the principles that apply to the execution of a valid contract also apply to the execution of a valid trust deed. A trust is either a contract (Crookes v Watson case of 1956) that is brought about by a person (the founder) when he/she is alive (an inter vivos trust) or it is a testamentary disposition (a testamentary trust) that is brought about on the death of a person. A trust can also be created in terms of a court order (court order trust), such as divorce order.
Because a trust is regarded as a contract, the Courts will look at the substance of the arrangement rather than simply looking at the trust deed – the constitutional document of the trust.
Letter of Wishes
A letter of wishes is a way for you to inform others of matters to be taken into account after your death. It may, for example, contain guidance to the guardians of minor children detailing how you might want your children brought up in terms of education, religion or residence. A letter of wishes is a separate document to your will, but it accompanies your will. It is not legally binding but can guide your executors and trustees to ensure that your personal wishes are carried out. You should take care that a letter of wishes does not contain anything that could conflict with your will.
A letter of wishes should be written in plain English, signed and dated, but not witnessed, so as to avoid any claim that it has become a legal will or codicil (an addition or supplement that explains, modifies, or revokes a will or part of one).
Conclusion
There is an ongoing debate as to the role of a letter of wishes and whether a letter of wishes should be seen as part of the trust deed. A letter of wishes is not legally binding on the trustees, but could be taken into account by them. Where trustees have been given wide discretion in a trust deed, it is important for them to have an understanding of what the founder had in mind when he/she created the trust, and exercise their discretion accordingly. The trustees should certainly be influenced, but never dictated to, by a letter of wishes. If the trustees only follow the letter of wishes and do not apply their discretion, they risk being attacked by beneficiaries and creditors.
~ Written by Phia van der Spuy ~
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