Helderberg Mediators

28/04/2021

The legal duty of a grandparent to maintain a grandchild
08 April 2021

By operation of law, the liability to maintain someone is based on three factors: firstly, the claimant’s inability to support himself or herself; secondly, his or her relationship to the person from whom he or she claims support; and thirdly, the latter’s ability to provide support.

The common law and the Children’s Act recognise that parents are the primary caregivers of their children by imposing on them a duty of support insofar as they are able to do so. There is a reciprocal duty of support between parents and children.

In terms of the common law, a parent has a legal duty to maintain a child and the deceased estate of a parent also has the legal duty to support the child. Furthermore, the common law recognises that the duty of support of a child will, if both the parents of the child are unable to maintain the child, fall upon the maternal and paternal grandparents of the child if they are able to provide support.

In terms of the common law, however, the duty to support a grandchild is not enforceable against the deceased estate of a grandparent.

In the case Phillipa van Zyl NO v Keith Getz NO, the Supreme Court of Appeal (“the SCA”) was asked to develop the common law by recognizing a duty of support on the part of the deceased estate of a grandparent.

The background to the case considered by the SCA is as follows: Father (F) and mother (M) had a daughter (D) before they were divorced. After the divorce, F left South Africa and went to live in the United States of America. M raised D on her own. D’s paternal grandfather (GF) and grandmother (GM) were both alive at the time of the divorce. GF supported D during his lifetime to the extent that F did not, and M could not. Upon the death of GF, a claim for maintenance was lodged with the executor (E) of the deceased estate of GF, on behalf of D. The claim was rejected by E on the basis that there is no obligation in law on a grandparent’s estate to maintain a grandchild.

The SCA found that the common law, as it currently exists, recognises the special role and responsibility that parents have in raising children, and that the role and responsibilities which attach first to the relationship between parents and their child may only be passed on to other family members where parents are unable to fulfil them.

The SCA ruled against the development of the common law to include a liability on the deceased estate of a grandparent to maintain a grandchild. The SCA held that the development of the common law would be inappropriate, given the effect it may have on the law of succession and other foundational values of the Constitution.

09/04/2021

Brownlee v Brownlee

A recent court case emphasised the importance of mediation in family law matters and may set a precedent for the divorce process. The judgement handed down by Acting Judge Brassey in the South Gauteng High Court (Brownlee v Brownlee: 2008/25274) emphasised the duty of parties to attempt to mediate a dispute and the obligation of the respective attorneys to encourage their clients to mediate the resolution of their dispute prior to embarking on litigation and facing the delays and expense of running a trial. The judgment emphasised and extolled the virtues of mediation and also capped the fees of the attorneys on both sides because they had failed to advise their clients to attempt mediation at an early stage. The judge expressed his disapproval of the parties’ conduct by making each party bear his or her own costs:
“How much richer would this solution have been had it emerged out of a consensus-seeking process rather than in adversarial proceedings in which positions were taken up that gave every appearance of callousness and cruelty. This is but an instance of what mediation might have achieved. In fact, the benefits go well beyond it. In the process of mediation, the parties would have had ample scope for an informed but informal debate on the levels of their estates, the amount of their incomes and the extent of their living costs. Nudged by a facilitative intermediary, I have little doubt that they would have been able to solve most of the monetary disputes that stood between them. The saving in time and legal costs would have been significant and, once a few breakthroughs had been made, I have every reason to believe that an overall solution would have been reached.”– (Brownlee v Brownlee August 2009: South Africa, South Gauteng High Court,)

07/10/2020

Mediate rather than litigate
22 September 2020 | Meerushini Govender

Mediation is not a foreign term in South African law. Mediation has been taking place in various types of disputes, albeit at a slow pace. But, recently mediation has taken on a more important role in the legal profession, and as more people see the benefits of mediation, litigation will become the last resolution.

Wikipedia’s definition of mediation is “a structured, interactive process where an impartial third-party assists disputing parties in resolving conflict through the use of specialised communication and negotiation techniques”. Mediation, when utilised in law, is a form of alternative dispute resolution. Parties that are involved in a dispute may choose the mediation process to resolve the issues between them, either before commencing with legal action or just after legal action has been instituted but before Judgment has been handed down. It is a voluntary process that must be agreed upon by both parties.

The objection of mediation is to obtain a resolution that is mutually agreeable to both parties. The appointed mediator must remain impartial throughout the mediation process and cannot impose a decision on the parties. They cannot judge or arbitrate, but rather assist the parties by advising them, which may, ultimately, result in the parties achieving a settlement agreement. It does happen that mediation does not resolve the dispute, but as a consequence of the discussions, the parties can identify and limit the key issues in dispute, discuss options to resolve the disputes and investigate areas of compromise.

On the 9th of March 2020, South African courts entered in the new era of the civil justice system. An amendment to the Uniform Rules of the High Court, Rule 41A, was introduced, requiring parties to consider mediation before litigation in the High Court. The Court may also recommend mediation to the parties if it deems it appropriate in a specific case. The High Court is, at times, intolerant of legal practitioners, who ignore the potential benefits of using alternative dispute resolution to resolve, define, limit, or dispose of disputes that are pending before the courts. It is now mandatory that Form 27 is to be attached to new matters being instituted in the High Court.

On the 1st of December 2014, the Rules of Voluntary Court-Annexed Mediation (Chapter 2 of the Magistrates’ Courts Rules) were approved by the Minister and came into operation. The objective of this chapter is to give effect to Section 34 of the Constitution of the Republic of South Africa 1996: “everyone has the right to have any dispute that can be resolved by the application of law decided in a fair public hearing before a court or, where appropriate, another independent and impartial tribunal or forum”.

The question is, why would parties mediate to achieve a settlement rather than have a court determine a winner and loser? The following are just a few reasons.

1. Faster and cheaper: The mediation process can resolve the dispute more swiftly than litigation and without incurring exorbitant legal fees.
2. Flexibility: The mediation process allows the parties involved to tailor the proceedings to their specific needs, as well as control over the outcome.
3. Confidentiality: The mediation process is a confidential process, providing the parties with a sense of security, enabling them to negotiate in an open and honest environment.
4. Relationships: The mediation process provides a forum where parties can resolve their dispute, while still maintaining their relationship.

In recent months, during the world-wide pandemic, mediation has come to the fore in the courts in order to reduce the litigation case load that the court are burdened with.
Successful mediation lays the foundation for collaborative, non-confrontational problem solving, which preserves important relationships.

30/06/2020

A usufruct is the right to use and enjoy another person's property and to take all its fruits or produce.

In law a usufruct is a limited real right. This means that while you enjoy the benefits, you may not sell the property and your right of enjoyment is for a limited period or, at most, for your lifetime.

A simple example of a usufruct in a will would be "I bequeath my farm to my son Tom subject to the lifelong usufruct over such property in favour of my wife Mabel."

The person who enjoys a usufruct is known as a usufructuary. On the death of the usufructuary the right to use and enjoy ceases but the benefit will accrue to some other person, either a new usufructuary or the owner of the property, who will now enjoy it in the place of the deceased. The right of enjoyment which accrues to the other person has a value for estate duty purposes.

For estate planning purposes there are several applications for usufructs depending on the objectives of the planner.

Firstly, if spouses married out of community of property have separate estates then the spouse with more assets donates a right of usufruct to the other spouse.

The donation is not subject to donations tax because of the exemption applicable to donations between spouses.

Another application is to bequeath a usufruct to a surviving spouse either directly or by means of a will trust. In this case it is important that the right of enjoyment should vest in the spouse. The value of the right will be deductible for estate duty purposes in the estate of the predeceased spouse.

A more intricate variation of the bequest of a usufruct can achieve a limitation of liability for estate duty on the death of the first dying spouse and also on the death of the survivor. In this case an inter vivos trust is interposed.

Here the father forms a family trust which will ultimately receive the assets from his estate. The income beneficiaries are the wife and children and the capital beneficiaries are the children.

In his will the father leaves his assets to the trust with a usufruct in favour of his wife for, say, 10 years with a provision that if she does not survive the 10-year period then his children are to enjoy the fruits of the usufruct for a fixed two-year period.

08/11/2019

Trustees’ duties and powers

All the powers of a trustee are ‘fiduciary’, which means that they must be exercised as follows:

in the best interests of all the beneficiaries;

only for the benefit of the beneficiaries and not for third parties;

not for the trustees’ benefit, unless specifically authorised; and

not to defeat the terms of the trust, but in compliance with them and in consideration of all other relevant circumstances.

DUTIES

A trustee owes a duty of honesty, integrity, loyalty and good faith to the beneficiaries of the trust. A trustee must at all times act exclusively in the best interests of the trust and be actively involved in any decisions. Prior to accepting the position of trustee, a potential trustee must ensure that:

there is no conflict of interest between his or her own personal circumstances and those of the beneficiaries;

they have read and understood the trust deed;

they understand the nature of the beneficial interests and as much about the beneficiary’s personal circumstances as will be necessary to administer the trust;

they are satisfied there are no outstanding breaches of trust by the existing trustees; and

they have determined the extent of the trust property and will ensure that, once appointed, it is vested in the names of the new trustees.

General Duties of a Trustee:

To always act in good faith and jointly – the common law rule is that the trustees must always act jointly in a transaction with third parties and contractual powers must be exercised by all the trustees acting together.

To observe the trust deed – trustees must inform themselves of the terms of the trust deed and comply strictly with the duties and directions set out in therein.

To take possession of the trust property – the trustee needs to take charge of the trust property and he must, as soon as possible, acquaint himself with the nature and extent of thereof and take possession of the property so that it comes under his/her control.

To act independently between the beneficiaries – trustees must not allow one beneficiary to suffer at the expense of another and must balance potentially competing interests for income and capital.

To provide information – trustees are under a duty to provide clear and accurate accounts and produce any information or other documents relating to the trust when required to do so by a beneficiary.

To act unanimously.

To exercise reasonable care and ensure the correct distribution of assets.

To provide an income for the beneficiaries and to preserve the value of the capital.

POWERS

The precise powers that a trustee has will be defined by the trust deed and by law. However, a trustee will normally be given the following powers:

investment;

dealing with land;

delegation to agents, nominees and custodians;

insurance;

remuneration for professional trustees;

advancement of capital;

maintenance of minor beneficiaries; and

to pay, transfer or lend funds to beneficiaries.

01/08/2019

‘n Direkteur, aandeelhouer en werknemer? Watter reëls geld vir watter posisie?

“Ek is ‘n direkteur van ‘n plaaslike ontwerpmaatskappy. Ek is ook ‘n aandeelhouer van die maatskappy, en ek het ook ‘n dienskontrak. Ek stamp die laaste tyd koppe met my mede-direkteure oor die rigting wat die besigheid moet inslaan. Ek voel net ons wil verskillende dinge hê. Ek het daarom besluit om eerder op my eie te gaan en my eie ontwerpmaatskappy te begin. Maar eers wil ek seker maak of ek dit kan doen?”

Eerstens moet ‘n mens verstaan dat hoewel dieselfde persoon die posisie van direkteur, aandeelhouer en werknemer kan beklee, is hierdie posisies nie dieselfde nie en het elkeen verskillende regsverpligtinge wat potensieel daarmee gepaard gaan.

‘n Direkteur van ‘n maatskappy word deur die aandeelhouers van die maatskappy toevertrou met die verantwoordelikheid vir die funksionering en bestuur van die maatskappy. Die Maatskappywet, 71 van 2008 (“Maatskappywet”), verleen aan direkteure die bevoegdheid om al die funksies te verrig en al die magte van die maatskappy uit te oefen. Die Maatskappywet sit ook die minimum gedragstandaard wat van direkteure vereis word, uiteen, en maak voorsiening vir aanspreeklikheid indien ‘n direkteur nié aan hierdie standaard voldoen nie.

‘n Aandeelhouer van ‘n maatskappy is op sy b***t die houer van aandele wat die maatskappy uitgereik het, en die uiteindelike beheer oor ‘n maatskappy berus by die aandeelhouers as die eienaars van die maatskappy. Terwyl die direkteure van ‘n maatskappy die sake van die maatskappy mag lei en bestuur, word die aandeelhouers in terme van die Maatskappywet bemagtig om betrokke te wees by die aanstelling en verwydering van direkteure uit hul poste.

‘n Werknemer het weer ‘n diensverhouding met die maatskappy en is onderhewig aan ‘n dienskontrak met die maatskappy wat die aard en omvang van die werknemer se verhouding met die besigheid tydens, en selfs ná indiensneming, uiteensit. Uitvoerende en senior werknemers, soos direkteure, mag ook werknemers van ‘n maatskappy wees en dienskontrakte met die maatskappy hê.

‘n Direkteur beklee ‘n vertrouensposisie binne die maatskappy, en moet derhalwe optree as versorgers van hul maatskappye, hierdie entiteite bestuur en as hul agente optree. Sodra ‘n persoon ‘n aanstelling as direkteur aanvaar, word hy of sy ‘n trustee (‘n persoon in ‘n regs- of etiese vertrouensverhouding) van die maatskappy, en is hy/sy verplig om die hoogste goeie trou teenoor die maatskappy te toon in sy of haar handelinge namens die maatskappy.

Direkteure en senior werknemers van ‘n maatskappy mag nie met die besigheid van ‘n maatskappy meeding terwyl sodanige persoon ‘n direkteur of werknemer van die besigheid is nie. Dié posisie kan wel verander indien sodanige persoon hul posisie as werknemer en direkteur, verlaat.

Direkteure het ‘n plig teenoor ‘n maatskappy, selfs nadat hulle hul posisie as direkteur verlaat het, en mag hul nie enige geheime of vertroulike maatskappyinligting wat hy of sy in hul posisie as direkteur verkry het, aan derde partye onthul nie.

Werknemers moet die bepalings van hul dienskontrakte oorweeg, en let op enige vertroulikheids-, nie-mededinging- of handelsbeperkingsklousules wat hul vermoë om by kommersiële- of werknemersaktiwiteite betrokke te wees ná hul die maatskappy verlaat het, mag beperk.

Soortgelyk, wanneer sodanige persoon die maatskappy as aandeelhouer verlaat, behoort ag geslaan te word op die bepalings van enige aandeelhouersooreenkoms wat tussen die maatskappy se aandeelhouers gesluit is om hul verhouding te reël, aangesien sodanige ooreenkoms ook sekere vertroulikheids-, nie-mededinging- en handelsbeperkingsklousules kan bevat.

Derhalwe, terwyl ‘n mens oor die algemeen vry is om die vaardighede, ervaring en kundigheid wat by ‘n maatskappy verkry is, in die ope mark te gebruik, mag jy verhoed word om (op die heel minste) enige geheime of vertroulike inligting van die maatskappy wat verkry is tydens jou betrokkenheid by die maatskappy, met derde partye te deel, of om sodanige inligting of kennis te gebruik om te kompeteer met die besigheid van die maatskappy. Dié posisie kan selfs ingewikkelder word indien daar beperkende voorwaardes in jou dienskontrak of aandeelhouersooreenkoms is.

Vir hulp om vas te stel watter beperkings daar is vir jou om ‘n nuwe maatskappy op te rig, sal dit raadsaam wees om regsadvies in te win om enige kontraktuele en fidusiêre beperkings wat mag bestaan, te hersien voor jy jou nuwe besigheid oprig.

01/08/2019

Wat jou te doen staan indien ‘n besigheid langs jou huis oopmaak:

“Ons huis is in wat voorheen ‘n stil woongebied was, geleë. Deesdae begin meer-en-meer besighede egter rondom ons oopmaak, met huise wat in besigheidskantore omskep word. Dit verwoes ons stil buurt en lei tot meer verkeer, asook ander probleme, in die omgewing. Besighede kan sekerlik nie net sommer hul kantore in residensiële areas oopmaak nie? Is daar iets wat ons kan doen?”

Uit die staanspoor moet dit duidelik gemaak word dat nie alle besighede wat vanaf ‘n residensiële eiendom bedryf word, onwettig en onregmatig is nie. Daar is ‘n aantal aspekte wat oorweeg moet word om te bepaal of die besigheid vanaf ‘n residensiële eiendom bedryf mag word, of nie.

Die eerste aspek is die titelakte van die eiendom wat bestudeer moet word om te bepaal of daar enige beperkende voorwaardes teen die eiendom geregistreer is, wat mag verhoed dat die eiendom vir besigheidsdoeleindes gebruik word. ‘n Verdere aspek om te oorweeg is die sonering van die eiendom, en of sodanige eiendom gesoneer is vir residensiële gebruik of ook vir besigheidsgebruik – en dan verder, watter tipe besigheidsgebruik. Jy kan by die Aktekantoor of met die hulp van ‘n prokureur vasstel wat ‘n eiendom se titelvoorwaardes is, en die sonering van ‘n eiendom vasstel deur navraag te doen by jou plaaslike munisipaliteit.

Sou daar ‘n beperkende voorwaarde wees of die eiendom slegs vir residensiële doeleindes gesoneer wees wat dit onwettig maak vir ‘n besigheid om vanaf die eiendom bedryf te word, sal jy jou prokureur moet raadpleeg om te oorweeg of ‘n interdik verkry moet word om te verhoed dat die eiendom vir besigheidsdoeleindes gebruik word. In ‘n situasie waar ‘n finale interdik verlang word, sal jy die volgende moet bewys: 1) dat jy as eienaar ‘n duidelike reg het; 2) dat die optrede om die besigheid vanaf die eiendom te bedryf, jou benadeel of jou regte skend (skade) en; 3) die afwesigheid van ‘n alternatiewe remedie.

Ons howe het beslis dat indien ‘n eiendom in stryd met die soneringsregte gebruik word, die gebruik daarvan onwettig is en die skade/nadeel juis daarin lê. Wanneer ‘n alternatiewe remedie oorweeg word, moet dit voldoende wees onder omstandighede, en moet dit redelikerwys soortgelyke beskerming as ‘n interdik bied. Indien die oortreding van die eiendomsgebruik, as skending van die soneringsbeperkings, deurlopend en ook ‘n wetsoortreding is, word ‘n interdik in sekere omstandighede as die enigste doeltreffende beskikbare remedie beskou. Bygesê, moet elke situasie op die meriete daarvan beoordeel word.

‘n Laaste punt wat in gedagte gehou moet word, is gevalle waar toestemming van die plaaslike owerhede verkry is om die eiendom te gebruik vir ander doeleindes as waarvoor dit gesoneer is. Selfs indien sodanige toestemming verkry is maar die beperkende voorwaarde is steeds in die titelakte, sal die gebruik van die eiendom steeds onregmatig wees indien dit nie in lyn met die beperkende voorwaarde van die titelakte is nie, minstens totdat sodanige voorwaarde op die titelakte gewysig, of verwyder is.

In jou geval blyk dit dat indien die besighede vanaf residensiële eiendomme bedryf word, daar gronde kan wees om ‘n interdik te kry om sodanige besighede stop te sit, sou dit strydig wees met of hulle titelvoorwaardes en/of sonering. My raad is om jou prokureur te kontak en te bepaal of daar gronde is om ‘n aansoek teen hierdie besighede te bring. Jy mag selfs oorweeg om van jou bure wat ook besorg is oor die besighede in jul buurt, daarby te betrek

27/07/2019

The sad reality is that some lawyers make a living from destroying families and expect society to laugh about it.

Some lawyers who are trained mediators become peacemakers and will do their best to assist parties to settle as soon as possible to save costs and relationships. Some even depart from litigation permanently, because of the devastating effects of the legal process on families.

Unfortunately, some lawyers who are trained mediators use mediation as a smokescreen and continue to manipulate cases for their own interests.

08/07/2019

Property Transfers and Trust Account Theft: A R720,000 Warning

“The issue of whether a conveyancing attorney receives the money as the agent of the seller, or of the purchaser, or of both, or as trustee for both to await the event, is a somewhat vexed question … and each case must be considered in the light of its own facts and the particular contractual terms under which the conveyancer received payment” (Extract from judgment below)

Buying a property, whether to live in, work in or just as an investment, invariably involves a substantial amount of money changing hands.

Whether you are the seller or the buyer, the last thing you want is for the money to be stolen by a dishonest transferring attorney. If it happens, who carries the loss? Must transfer still be passed to the buyer? Who must lodge a claim with the Legal Practitioners Fidelity Fund and hope that it pays out without delay?

A recent High Court case involving the theft of over R720,000 from a trust account is a timely warning of the risks to both parties and of the uncertainties involved in deciding who suffers what loss. We’ll end off with some practical tips for both sellers and buyers.

A lot of money changes hands in property sales, and for many of us buying or selling a house is the largest single financial transaction of our lives.

A recent High Court judgment involving a theft of R720,000 by a dishonest conveyancer (transferring attorney) provides a timely warning to both buyers and sellers to proceed with extreme caution. And as always, the core message to both is this: Sign nothing without your lawyer’s advice!

The conveyancer who stole from her trust account

A seller sold a sectional title unit to a buyer for R720,000. The sale agreement provided for payment in full by the buyer to the conveyancer, the funds to be held in trust in an interest-bearing account until transfer, interest to accrue for the buyer’s benefit.
The conveyancer had, as is usual unless otherwise negotiated, been nominated by the seller. In this case the buyer asked to use her own attorneys but the seller “vehemently” insisted on nominating his attorney.
On request from the conveyancer, the buyer paid the R720,000 (plus R16,700 towards the transfer costs payable by her) into the conveyancer’s trust account.
When later it became clear that the conveyancer had stolen these funds, the buyer demanded transfer from the seller. The seller refused – the money was gone and he wasn’t prepared to lose both his property and the purchase price.
At the same time however he (the seller) lodged a claim with the Legal Practitioners Fidelity Fund, which was at that time still called the Attorneys Fidelity Fund and is referred to below as “the Fund”. In the event of such a theft, the Fund will in its own words “assist you with the reimbursement of your monies if your claim is valid.”
However, the Fund refused to pay the seller’s claim because of its view that the loss was sustained by the buyer, not by the seller.
The buyer disagreed. It wasn’t, she said, her loss, it was the seller’s. She wasn’t going to now pay the purchase price over again and then have to claim from the Fund. So she asked the High Court to order the seller to pass transfer to her.
What the Court had to decide is whether or not the conveyancer was the seller’s agent to receive payment of the purchase price from the buyer. If so, the buyer had paid and was entitled to transfer. If not, the buyer had not paid and had no right to transfer.
The danger for both seller and buyer here is that as the Court put it “the issue of whether a conveyancing attorney receives the money as the agent of the seller, or of the purchaser, or of both, or as trustee for both to await the event, is a somewhat vexed question … and each case must be considered in the light of its own facts and the particular contractual terms under which the conveyancer received payment.”
So whose agent was the conveyancer?

In the end the Court ordered the seller to pass transfer to the buyer, finding on the facts and on the Court’s interpretation of this particular payment clause that –

The conveyancer in this matter had acted as agent for both the buyer and the seller – as agent for the buyer in investing the funds pending transfer, but as agent for the seller in receiving payment of the purchase price.
Accordingly the buyer “complied with her obligation in terms of the deed of sale by making payment of the purchase price to the [conveyancer] who was nominated by the [seller] to receive payment of the purchase price on the latter’s behalf”.
“In addition, the Deed of Sale provided for the mode of actual payment of the purchase price and once this was done, the [buyer] had discharged her obligations. She did what was required contractually in respect of the purchase price and had no control of the process thereafter.”
The seller is therefore down R720,000 plus costs, and will be hoping that the Fund will now pay out his claim without further ado.

Sellers

Choose a competent and trustworthy conveyancer. Don’t ever be railroaded by anyone into appointing someone else! And if your attorney isn’t also an admitted conveyancer, ask him/her for a referral to a trusted colleague who is.

Buyers

As we saw above, the wording of the sale agreement is central to the level of risk you run – it should be clear that in paying the purchase price to the conveyancer you are paying the seller in complete discharge of your obligations under the sale agreement.

22/04/2019

Buying property in a trust might not be a good idea anymore
12 Nov 2018
In previous years it certainly made good estate planning sense when buying fixed property, either a residence, a holiday home or business premises, to register this property in an ‘inter vivos’ trust. This form of registration ensured that the growth of value of the property was ring-fenced within the trust and did not affect the value of the individual’s estate and provided for continuity through generations.

“In the case of a second holiday home or business premise, one needs to interrogate circumstances around such buying, the length of time that asset is to be held, the growth prospects of that asset and how it is to be utilised," says Knott.
This is according to David Knott, a fiduciary specialist from Private Client Trust who advises that some even recommended that you should register in a trust so as to enable the trust and not the property to be ‘sold’ later, thereby bypassing the payment of transfer duties.

“This was clearly not what government had intended, and the legislation was amended accordingly only once the practice had become popular. Many of our trust law specialists had always argued that such a ‘sale’ was voidable as the ‘selling’ of a trust conflicted with established trust law. Buyers continued to risk the consequences of a voidable ‘buying’ of a trust as both parties wished the transaction to succeed,” says Knott.

However, Knott advises that this practice has ceased since the introduction of Capital Gains Tax, with effect from 1 October 2001.

“This introduction has brought about many unintended consequences of past good planning. Capital Gains Tax now makes it onerous to hold fixed property in a trust, and one should carefully consider the financial implications before deciding how the property should be held. In the case of one’s primary residence, it is almost always most cost efficient to register in the individual’s name. This is because an individual is entitled to a rebate of R2 million off the gain when his or her domestic primary property is sold - this rebate is not granted to a trust or a company,” says Knott.

In other words, a trust or company is liable for Capital Gains Tax from the first rand of gain from date of buying to date of sale, without benefit of the first R2 million gain. In addition, an individual is also taxed at a lower rate to that of a trust or company.

“In the case of a second holiday home or business premise, one needs to interrogate circumstances around such buying, the length of time that asset is to be held, the growth prospects of that asset and how it is to be utilised. Before such registration takes place one should also seek professional advice regarding Capital Gains Tax,” says Knott.

In the 2018 and current 2019 tax periods, the inclusion rate and effective rates were:

Individual: inclusion rate 40% and maximum effective rate 18%

Trusts: inclusion rate 80% and maximum effective rate 22.4%

Companies: inclusion rate 80% and maximum effective rate 36%.

While trusts were once used to protect wealth, Capital Gains Tax now makes it onerous to hold fixed property in one. Here are the financial implications…