December 11, 2017
It’s Wedding Season! Here’s Why You Need an ANC (Whether You Marry Here or Overseas
“He was a dreamer, a thinker, a speculative philosopher… or, as his wife would have it, an idiot” (Douglas Adams)
Note: Although by way of example we explore below the “international wedding” scenario, even if you are South Africans marrying in South Africa you need an ANC. Read on…
The Rand’s weakness notwithstanding, many couples still plan their dream weddings overseas. Likewise, many couples living overseas come back to South Africa to marry. If you are one of them, ask your lawyer before you get married for advice on which country’s laws will apply to your marriage.
Why get advice?
In South Africa, our default marital regime is marriage “in community of property”, and for many couples that is the worst option. You may well be better off opting rather for the “out of community” option (with or without “accrual”). The point is to make an informed choice rather than drift blindly into the default regime.
Don’t assume that you will be married out of community of property if your marriage takes place in a country where “out of community” is the default. And don’t assume that it’s your nationality/citizenship that counts.
Not so! No matter where you tie the knot and no matter what your citizenship is, what counts is where the husband is domiciled at the time of the marriage.
The difficulty – determining domicile
So you must figure out where the husband is domiciled at the time of marriage – how do you do that?
“A domicile of choice”, says our law “shall be acquired by a person when he is lawfully present at a particular place and has the intention to settle there for an indefinite period.” In lay terms, that’s where he considers his “home” to be, where he lives and intends to remain permanently. Note that in law you must be domiciled somewhere (even if you think you aren’t), and you can only be domiciled in one country at a time. In other words, you can be stateless but not without a domicile, and you can hold dual citizenship but not dual domicile.
There are two main grey areas here –
- The “intention” bit. What if you have recently moved to South Africa? Or if you are a foreign national living in South Africa? A South African working overseas for a year or two? Or if you have plans to emigrate in the future?There’s a lot of potential for uncertainty and dispute there, and the problem is that in doubt it’s a court that will have to decide. It’s difficult enough at the best of times to decide what another person’s mental “intention” is, and remember that here we’re talking about intention at the time of the marriage. Years (in some cases decades) down the line, imagine the difficulty faced by the poor judge tasked with that one! There have been cases like that and they’ve been messy.
- The “husband” bit. Referring to only “the husband” is discriminatory and almost certainly unconstitutional, and in any event with same-sex unions which partner’s domicile are we looking at? Until parliament sorts that one out with new legislation, uncertainty will reign.
The remedy – avoid all doubt with an ANC
Fortunately, there’s an easy way to avoid all that doubt and potential for dispute, delay and cost.
Simply have your lawyer – before you marry – draw up an ante-nuptial contract (ANC) tailored to meet your particular needs. Then sign it. Then fly away and enjoy your wedding secure in the knowledge that all the annoying (but critical) little legalities have been put to bed!
© LawDotNews
October 18, 2017
Do You Need an “Advance Directive” or a “Living Will”?
If you don’t want to be kept artificially alive – without your consent and perhaps in pain and distress – long after your medical condition becomes hopeless, you need to communicate your decision now to the doctors, hospitals and loved ones who will be caring for you at the end.
Incapacitation can strike without warning and at any time, so prioritise this whilst you are still mentally and physically competent to express your wishes.
Living Will v Advance Directive: What’s the difference?
Both are “advance health care directives”, expressions of your wishes for future care. Both become effective only when you lose the ability to communicate for yourself. They are a gift to your loved ones and medical carers, helping them to make the hard decisions they will need to make in order to spare you the nightmare of suffering while your life is pointlessly prolonged.
An Advance Directive differs from a Living Will in that it enables you, in addition to giving detailed instructions on what medical treatment you do and do not consent to in various scenarios, to also appoint a ‘Medical Proxy” (normally a close family member) who will make medical decisions for you. Appoint both a Primary and an Alternate proxy in case your Primary choice is unable or unwilling to act at the critical time.
Ask your doctor for guidance if you are unsure about what to do here, and for advice on the implications of the specific advance directions you are giving. You might for example decide that you want aggressive intervention in some eventualities but not in others.
Are these advance health care directives recognised by law?
We need to draw a clear distinction here. Euthanasia and “assisted suicide” are still generally unlawful in South Africa, quite apart from conflicting with many people’s moral/cultural/religious beliefs.
But whereas euthanasia and assisted suicide are said to involve an active intervention to terminate life, typical advance health care directives merely express your wish that when the time comes you be allowed to die naturally and with dignity, in other words that nature be allowed to take its course. We must all decide for ourselves the extent to which we are comfortable with that.
But will our courts recognise the legal enforceability of these directives? In 2016 the Supreme Court of Appeal, whilst finding that euthanasia and assisted suicide remain unlawful, made several comments that perhaps bode well for the acceptance of advance directives. So whilst their legal enforceability cannot be guaranteed until our courts rule specifically and definitively on the matter, the signs certainly seem more positive than negative.
In any event, in practice you will greatly increase the chances of your wishes being honoured at the end if you have confirmed beforehand with your loved ones and medical carers that they will do so.
You still need a “Will”!
Note that Living Wills and Advance Directives are very different to a “Last Will and Testament”, in which you provide for distribution of your assets to your heirs after you die. You need both.
In closing, and this is important …
- Make sure that everyone knows how to find your Advance Directive or Living Will in a hurry. Ideally lodge signed originals with all the role-players.
- Diarise to review your directions at least annually, and if you change your mind about anything, destroy all the old originals and replace them with new originals specifically revoking all previous directions.
© LawDotNews
July 7, 2017
Trusts: New Directive on Independent Trustees
If you plan to form a trust, you need to know about a new directive from the Chief Master of the High Court to all Master’s Offices in the country.
The directive applies to all new trusts (those “registered for the first time”) by the Master.
Following a series of court cases in which the “trust form” was held to have been abused by the trustees (often in the form of trustees treating trust assets as their own), and in particular a 2004 Supreme Court of Appeal decision suggesting the appointment of independent outsiders as trustees in certain family trusts, the Chief Master has directed that Masters “must consider appointing” an independent trustee where any new trust is a “family business trust”.
“Family business trust” is defined as having “the following combined characteristics:
- The trustees have the power to contract with independent third parties, thereby creating trust creditors; and
- The trustees are all beneficiaries; and
- The beneficiaries are all related to one another.”
Note: There appears to be no requirement that the trust actually trades as a “business”.
“Independent trustee” is described (in summary – the actual list is a long one), as follows –
- Must be “an independent outsider with proper realisation of the responsibilities of trusteeship” and “competent to scrutinise and check the conduct of the other appointed trustees”
- “Does not have to be a professional person such as an attorney or accountant” (bear in mind though the clear practical advantages of having a qualified professional as your independent trustee – also in practice Masters may well insist on professional qualifications and membership of a professional association)
- Cannot have any “family relation or connection, blood or other, to any of the existing or proposed trustees, beneficiaries or founder of the trust”
- Must be “knowledgeable about the law of trusts” and have “knowledge and experience of the business field in which the trust operates”
- Must have no interest in the trust property as a beneficiary.
The Master can elect not to appoint an independent trustee in certain circumstances, either on the basis of good cause shown, or subject to the lodging of security, or subject to appointment of an auditor to produce annual audited financial statements under an instruction “to inform the Master when potential harm to creditors is likely.”
© LawDotNews
June 13, 2017
Will Your ANC Protect Trust Assets on Divorce?
A recent Supreme Court of Appeal (SCA) decision illustrates once again how essential it is, before getting married, to have your lawyer structure your antenuptial contract (ANC) correctly, and with as much detail as is needed for certainty.
A multi-million Rand fight over trust assets
- A divorcing couple had married and divorced three times.
- They had in respect of the latest divorce been married out of community of property with the accrual system, so each was in principle entitled to 50% of all “accrual” (growth) in their estates after marriage, except as specifically excluded from accrual by their ANC.
- The husband had, on the advice of his accountant, created a new legal entity for each of his new timeshare business ventures, in order to ensure that if one business failed, the others would not be affected.
- In their ANC the couple had specified which of the husband’s assets (including interests in business entities such as trusts, CCs and companies) were excluded from the accrual.
- On divorce, the wife asked the High Court to declare the assets of three trusts to be assets of her husband for the purpose of accrual on two grounds –
- That on the facts and on interpretation of the ANC they were not excluded from the accrual, alternatively
- That the trusts were simply the husband’s “alter ego” so that the assets of the trusts were in reality her husband’s assets.
The outcome, the law, and the lessons to be learned
The SCA held that none of the trusts’ assets were to be taken into account in determining accrual in the husband’s estate –
- In respect of two of the trusts, on the particular facts of this case they weren’t covered by the exclusion clause which provided that exclusion was to extend to “any other asset acquired by such party by virtue of the possession or former possession of such asset”. The Court rejected the husband’s argument that this should be read widely to exclude “any asset acquired as a result of his activities in the timeshare industry” – it only covered “the particular asset, its proceeds, and assets which replace the excluded asset or are acquired with its proceeds”.Lesson 1 therefore is this – if you want a wide exclusion of a particular class of assets from the accrual process, say so clearly in your ANC.
- However, the wife also had to convince the Court that the trusts were the “alter ego” of the husband.She was able to convince the Court that he had “administered the trusts with very little regard for his fiduciary duties as a trustee and without proper regard for the essential dichotomy of control and enjoyment essential to the nature of a trust and … such conduct may have justified his removal as a trustee, or the appointment by the Master of an independent co-trustee…”What she had failed to prove was any “abuse of the trust form” nor that “the trust form [was] used in a dishonest or unconscionable manner to evade a liability, or avoid an obligation.”Firstly, the husband’s use of separate trusts for each new business venture was a “legitimate business activity” given his “overall business strategy”.Secondly, there was no proof that the husband “transferred personal assets to these trusts and dealt with them as if they were assets of these trusts, with the fraudulent or dishonest purpose of avoiding his obligation to properly account to the respondent for the accrual of his estate. In addition it was not established that the transfer of assets to these trusts by the appellant was simulated with the object of cloaking them with the form and appearance of assets of the trusts, whilst in reality retaining ownership.”
Lesson 2 therefore is that if you want to attack your spouse’s use of trusts to hold assets you will need to prove more than just misconduct in the administration of the trusts. You will also have to prove a fraudulent or dishonest attempt to avoid the consequences of accrual.
January 10, 2017
Signing Surety – The Sting’s in the Tail
“She just did not want to be liable if he defaulted, a common regret felt by those who stand surety for defaulting debtors” (extract from judgment below)
In the beginning …
But in the end …
The mother, the son and the suretyship
- A mother signed an unlimited suretyship as “co-principal debtor” for her son’s bank debts totaling almost R4.8m from a home loan, an overdraft, and a credit card account.
- After her son’s estate was sequestrated the bank sued her for the shortfalls.
- The mother tried everything she could to evade liability. Her main defence was an attack on the validity of the suretyship, and she supported this with a string of claims, often self-contradictory. The bank official had misled her into thinking that she was signing not a suretyship but simply a consent form for an account migration. She hadn’t read the document. She had read the heading. Blank spaces in the document were filled in later. It conflicted with an oral agreement. It was limited not unlimited. Her signatures on other documents had been forged.
Let the signer beware – “I signed by mistake” won’t cut it
© LawDotNews
December 8, 2016
Getting Married? Don’t Forget the Legal Consequences
“A good wife always forgives her husband when she’s wrong” (Rodney Dangerfield)
With Wedding Season in full swing, here’s a timely reminder – take legal advice on choosing one of the three “marital regimes” available to you in our law before you actually tie the knot.
That’s important because if you don’t specify otherwise in a pre-marriage ANC (antenuptial contract), you will automatically be married in community of property. Which, as we discuss below, may well be a poor choice for you. And although you can usually change your regime after marriage it’s a lot easier and cheaper to get it right up front.
Your 3 choices
- Marriage in community of property: This is the default regime that will apply if you don’t specify otherwise in your ANC. With only a few exceptions, everything you own, everything you owe, and everything you accrue while married fall into one “joint estate”. Your spouse must consent in writing to certain transactions. On divorce or death your joint estate will usually be split equally between you, regardless of what each of you contributed to the marriage. And if one of you runs up debts or gets into financial difficulties, it is the joint estate that must pay and may be sequestrated – you could lose everything.
- Marriage out of community of property without the accrual system: Your own assets and liabilities, both what you bring in and what you accrue during the marriage, remain yours, and yours alone, to do with as you wish. You aren’t liable for your spouse’s separate debts and if your spouse’s estate is sequestrated your separate assets will be released to you (against proof that they are indeed yours). This may be the right choice for you, but be aware that without accrual the poorer spouse (usually a spouse whose contribution to the marriage was more on the home-making side rather than financial) risks being left destitute after many years of marriage.
- Marriage out of community of property with the accrual system: As with the previous option, your own assets and liabilities remain yours and under your sole control, and you can protect your assets from your spouse’s creditors. On divorce or death however, with only a few exceptions you share equally in the “accrual” (growth) of your estate. Although this is a fair and popular option for modern marriages, it is not necessarily the best choice for your particular circumstances, and proper advice is essential.
You have some important decisions to make. All three choices have their own advantages and disadvantages, what is set out above is of necessity just a general summary of your choices, and whichever regime you opt for you should ask your lawyer to tailor your ANC to suit your particular circumstances. So don’t leave it to the last minute!
September 7, 2016
Your Will And A Practical Plan For Your Loved Ones
“Where there’s a will, I want to be in it” (Anon)
Whether you are young or old, healthy or ill, single or attached, you should have a Will. Without one, you die “intestate”, which means you forfeit your right to decide who inherits what, who administers and distributes your estate, and who looks after your children and their money. You owe it to your loved ones to spare them the inevitable financial and personal risks.
So if you don’t yet have a Will get one drawn up immediately.
Here’s a practical guide to making sure that it will protect and provide for your loved ones properly.
Do it properly with a professional
Don’t be tempted to use a template Will or to copy a friend’s; there is just too much at stake here to take any chances. Apart from all the legal formalities involved, there are a multitude of practical considerations that all call for professional help.
Badly drawn Wills risk outright invalidity, reduced tax and estate planning efficiency, confusion, doubt and dispute – our law reports are replete with bitter and costly family feuds that would have been avoided with a properly drawn and executed Will.
Appoint the right executor/s
Your estate will be administered and distributed by an executor or executors. If you decide to nominate a non-professional such as your spouse, he/she will need professional assistance so consider appointing a specialist as joint executor. Choose someone you can trust to act with absolute integrity and professionalism – you will no longer be around to keep an eye on them!
A practical plan for your loved ones
Firstly, all your bank accounts and other assets will be frozen when the executors take control and deceased estates take a long time to wind up. So check that your dependents will have enough on hand to tide them over for at least several months’ worth of living expenses. Take advice on how best to do this – common solutions include separate bank accounts and investments, life assurance policies that will pay out directly to dependents on your death, and family trusts.
Secondly, when you die your family will be in shock. Help them through the stress and anxiety of bereavement by keeping a file with everything listed below –
- Right in front put a list of the names and contact details of everyone you can think of who your family can and should turn to for support and advice – your lawyer, accountant, tax adviser, insurance broker, medical aid specialist, doctor, financial adviser, investment manager, bank contact, employers, employees, business partners and so on
- Next, a copy of your Will and contact details for your executor (who should keep the original Will in safe custody)
- If you have particular wishes in regard to funeral arrangements, cremation etc, leave a signed directive giving details (or referring to any instructions in your Will)
- Medical aid details and details of any funeral policy
- Copies of ID documents – for you, your spouse, your children, other dependents or heirs, guardians etc
- Important family documents like marriage certificates, ANCs, cohabitation agreements, divorce orders and so on
- A full list of your assets (give detailed descriptions of any important assets, and don’t forget full details of any loans made to family members) and your liabilities
- Details of all bank and savings accounts, credit cards, investments, life policies, pension funds, retirement annuities and the like
- Information on entities like companies and trusts in which you or your family have any interest or involvement
- A list of all monthly recurring liabilities, debit orders etc
- Important documents relating to your assets and liabilities – title deeds, vehicle registration papers, rental agreements, loan agreements, insurance policies, tax returns, tax records – really anything your family or executor may need to access quickly and easily
- Notes on the location of things like safes, spare key boxes, security documents, firearm cabinets etc, and of the keys or codes needed to access them (see under “Passwords” below for ideas on doing this securely)
- A note on how to access passwords, PIN numbers and access codes, which are a big issue in our electronic age but often overlooked. Don’t make that mistake – your loved ones will need access to your computers, your cell phone, your online accounts, your email, your online payment portal, your Social Media pages and so on. For some ideas on how to do this securely read “Making Life Easier for Your Heirs in a Digital World” on Siller & Cohen’s website. If you use a password manager like LastPass www.lastpass.com look for functions like “Emergency Access” to share your passwords with your heirs, and “Secure Notes” to share information like PINs, safe and alarm codes, location of keys etc
- Anything and everything else your loved ones or advisers may need to know about – ask them if they can think of anything to add.
Where your file contains copies of documents rather than originals, say clearly where the originals are kept.
Put your file somewhere safe then tell everyone where to find it and how to access it (it’s no good telling them it’s in your safe if they don’t know where to find the safe key!).
Diarise regular reviews
All sorts of life events – marriage, divorce, deaths, births, adoptions, retirement, new family circumstances and the like – call for amendment of your Will. So diarise regular reviews and again take full professional advice on how to make any changes both validly and to best advantage.
© LawDotNews