Author Archives: Delport van den Berg Inc.

New owner not responsible for previous owner’s debt

The Application of Section 118(3) of the Municipal Systems Act by the municipalities had the implication that in some cases new owners had their electricity cut off, or have been unable to open a municipal account, because they have been held responsible for debts, sometimes adding up to hundreds of thousands of rands incurred by a previous or multiple previous owners.

Section 118(3) states that “An amount due for municipal service fees, surcharges on fees, property rates and other municipal taxes, levies and duties is a charge upon the property in connection with which the amount is owing and enjoys preference over any mortgage bond registered against the property”. Section 118(3) creates a charge over the property in favour of the municipality.

The days of uncertainty concerning the inheritance of historical debt from previous owners and the worry of municipal services being suspended are over following the Constitutional Court Judgement delivered on 29 August 2017 in Chantelle Jordaan and Others v City of Tshwane Metropolitan Municipality and Others.

In order to avoid unjustified arbitrariness in violation of Section 25(1) of the Bill of Rights which prohibits arbitrary deprivation of property which would happen if debts without historical limit are imposed on a new owner of municipal property, the Court held in an unanimous judgement that section 118(3) must be interpreted so that the charge it imposes does not survive transfer to a new owner.

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)

Can a divorce order be refused?

Many victims of a divorce will tell you that divorce is a traumatic experience and one which, litigants finding themselves in such a position, want to finalize as quick as the initial marriage ceremony passed. A question which regularly surfaces during divorce consultations is whether a divorce order can be refused, either by the court hearing the divorce alternatively by the other spouse?

Section 3 of the Divorce Act 70 of 1979 (hereinafter referred to as “the Act”) provides that a court may grant a divorce order on the ground of irretrievable breakdown of a marriage if it is satisfied that the marriage relationship between the parties to the marriage has reached such a state of disintegration that there is no reasonable prospect of the restoration of a normal marriage relationship between them. Section 4(3) of the Act, however, reads that if it appears to the court that there is a reasonable possibility that the parties may become reconciled by way of marriage counselling, the court may postpone the proceedings in order that the parties may attempt reconciliation.

It is the word “may” in section 3 of the Act which caused uncertainty to whether a divorce order may be refused by a court hearing the divorce. There have been conflicting judgements delivered by our courts in this regard. In the case of Schwartz v Schwartz the court a quo (the court hearing the divorce) refused a divorce order and found that the parties’ marriage has not irretrievably broken down and that the parties should ‘try again’. As one can expect, the husband was not satisfied with the order of the court a quo and the matter was taken on appeal. The Supreme Court of Appeal [Schwartz v Schwartz 1984 (4) SA 467 (AD)] found that a court does not have the discretion to refuse a divorce order, subsequent to finding that a marriage has irretrievably broken down. The Judge argued that if it was the intention of the legislature to impose such a discretion on a court hearing the divorce, the legislature would have made provision for certain circumstances under which a divorce may be refused. The aforesaid principle was confirmed in the Supreme Court of Appeal judgment of Levy v Levy 1991 (2) SA 614 (AD).

There is, however, one exclusion to the general rule set out supra, which is contained in section 5A of the Act. In terms of the aforesaid section a court may refuse a civil divorce if it becomes clear to the court that one party to the divorce may not be able to remarry as a result of their religion which provides that such a marriage must be dissolved in a certain manner. Under these circumstances a court may refuse the civil divorce until the court is satisfied that the person whom has the power to dissolve the religious marriage, has taken all necessary steps to have such a marriage dissolved.

Section 5A of the Act was specifically promulgated to come to the assistance of spouses (mostly the wife) whom are married in terms of Jewish or Muslim religion and in which only the husband can agree to a divorce.

Lastly, the question of whether your spouse can refuse a divorce. The case law in this regard read that if one party refuses to uphold the status quo (being married), it is prima facie proof of the fact that the marriage has irretrievably broken down and consequently a court cannot under such circumstances refuse a divorce order.

For any divorce queries, do not hesitate to contact our offices on (012) 361 5001.

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)

Increase in VAT: What rate should be charged in property transactions?

In the 2018 Budget Speech delivered by Finance Minister Malusi Gigaba on 21 February 2018, the standard rate of VAT was increased from 14% to 15%, effective from 1 April 2018.

However, tax is never that simple. Even after 1 April 2018, there are circumstances where the applicable VAT rate will still be 14%. The Value-Added Tax Act 89 of 1991 (“VAT Act”) contains certain specific rules with regard to a VAT rate change and the rate of VAT which will apply to goods or services supplied during the transitional period.

General fixed property transactions

The rate of VAT for fixed property transactions is the rate that applies on the date of registration of the transfer of the property in a Deeds Registry or the date that any payment of the purchase price is made to the seller (whichever occurs first).

Residential Property

Section 67A (4) of the VAT Act contains a rate specific rule that provides an exception applicable to residential property. In terms of this rule, liability for VAT will remain at 14% (the VAT rate before the increase) if the following three requirements are met:

  • the deed of sale was concluded before 1 April 2018; and
  • both the payment of the purchase price and the registration of the property will occur on / or after 1 April 2018; and
  • the VAT-inclusive purchase price was determined and stated as such in the deed of sale.

For purposes of this rule, “residential property” will include –

  • an existing dwelling together with the land on which it is erected;
  • any sectional title unit where such unit comprises a dwelling;
  • land bought together with a building package;
  • construction of a new dwelling by any vendor carrying on a construction business.

Commercial Property

There are no rate specific rules in relation to commercial property and therefor if the registration of the transfer of commercial property is effected in the Deeds Registry on/or after 1 April 2018 and payment is made to the Seller on/or after 1 April 2018, VAT at a rate of 15% will apply and be payable by the seller, irrespective of the date of conclusion of the agreement of sale.

We are currently in a transitional phase and the increase in VAT may cause uncertainty and practical difficulties, kindly contact us should you require assistance in this regard.

BUDGET 2018

BUDGET 2018 – INFLUENCE ON ESTATE PLANNING
SECTION 7C REVISITED – YET AGAIN

The purpose of this communication is to inform clients of certain tax increases and proposals that will have an effect on Estate and Financial Planning. Only those changes and proposals directly affecting Estate Planning will be dealt with.

At the end hereof we will briefly discuss Section 7C of the Act and the effect thereof on loans to companies where:

  • at least 20% of the shares are held by a trust or a beneficiary of a trust; or
  • at least 20% of the voting rights can be exercised by that trust or a beneficiary of that trust. (our emphasis)

1. Budget 2018

1.1General 

In general the 2018 Budget surprised most of us, if only in the sense that we expected an increase in Income Tax rates, as has been the norm in previous years. If this can be seen to indicate a realisation by Government that there is a limit to the amount of tax that can be collected from the so-called “rich”, it has to be welcomed.

1.2 Dividend Withholding Tax

The dividend withholding tax rate was increased by 5 percent to 20 percent in 2017 with effect from the 22nd of February 2017.

There were no subsequent changes to the dividend withholding tax rate.

1.3 Capital Gains Tax

The inclusion rates increased substantially in the 2016 Budget.

The rates remained unchanged for the 2018/2019 tax year.

1.3.1  Individuals/Special Trusts:

      • Inclusion rate:
        • 40%
      • Maximum effective rate:
        • 18%

1.3.2 Trusts:

      • Inclusion rate:
        • 80%
      • Effective rate:
        • 36%

1.3.3 Companies:

      • Inclusion rate:
        • 80%
      • Effective rate:
        • 22.4%

1.3.4 Annual exclusion and exclusion in the year of death:

      • Annual exclusion:
        • R 40 000
      • Exclusion in year of death:
        • R 300 000

1.4 Transfer Duty

No amendments to Transfer Duty rates.

1.5 Estate Duty

The Estate Duty rate was adjusted upwardly by 5% to 25% applicable to estates where the dutiable amount of the estate exceeds R 30 000 000.

The dutiable amount of an estate is determined by deducting the following from the assets and deemed assets in the estate:

      • Administration costs;
      • Liabilities;
      • All deductions allowed in the Estate Duty

The result of the amendment will be as follows:

  • Dutiable amount up to R 30 000 000:  Rate 20%;
  • Dutiable amount over and above R 30 000 000: Rate 20% on the first R 30 000 000 and 25% on the amount above R 30 000 000.

This amendment is according to one of the recommendations of the Davis Tax Committee (DTC) on Estate Duty. Notwithstanding the statement in the 2017 Budget, that the report of the DTC on Estate Duty will receive attention in the 2018 Budget, this is the only amendment which can be traced back to the DTC report on Estate Duty. This does not mean that other recommendations of the DTC will not be implemented at a later stage.

We seriously doubt whether this amendment will have much impact on the amount collected in respect of Estate Duty, as statistics, relied upon by the DTC, reflected that a minute percentage (4%) of estates exceed R 30 000 000.

The introduction of a 5% increase in the rate applicable to these estates will most definitely result in more aggressive tax and estate planning by taxpayers who can afford the best advisors. We will not be surprised to see a decrease in the 4% mentioned above.

1.6 Donations Tax

In order to bring the rate in line with the Estate Duty rate, the Donations Tax rate has been amended as follows:

  • Donations up to R 30 000 000:              Rate 20%;
  • Donations exceeding R 30 000 000:     Rate 25% on the amount above R 30 000 000.

It is hard to imagine why anybody would want to make donations exceeding R 30 000 000.

1.7 VAT

Effective as from the 1st of April 2018 the VAT rate has been increased by 1 percentage point to 15%.

For information on the effect of the increase and how to deal with the transition, we enclose, for your convenience, a link to the SARS website: http://bit.ly/2oqe09e

1.8 Official rate of interest

The so-called “official rate of interest” is used by SARS to quantify the fringe benefits of low-interest loans provided by employers to employees as well as the amount of a deemed donation in terms of Section 7C of the Act.

At present the rate is calculated by increasing the official repurchase (repo) rate by a 100 basis points (currently 7.75%). The prime rate is, on average, 2.5% above the official rate of interest. It is proposed to increase the “official rate of interest” to a level closer to the prime rate.

This might mean an increase of approximately 2% – 2.5%, which will have an effect on the deemed Donations Tax payable on interest free or low-interest loans in terms of Section 7C of the Act.

SECTION 7C REVISITED – YET AGAIN

Section 7C was amended on the 18th of December 2017 to include a loan, advance or credit that:

(a) a natural person; or

(b) at the instance of that person, a company in relation to which that person is a connected person in terms of paragraph (d)(iv) of the definition of connected person,

 directly or indirectly provides to—

(i) a trust in relation to which—

(aa) that person or company; or

(bb) any person that is a connected person in relation to the person or company referred to in item (aa),

is a connected person; or

(ii) a company, if at least 20 per cent of—

(aa) the equity shares in that company are held, directly or indirectly; or 

(bb) the voting rights in that company can be exercised,

by the trust referred to in subparagraph (i) or by a beneficiary of that trust. (our emphasis)

This amendment was the result of avoidance measures implemented by taxpayers to circumvent the provisions of section 7C by lending money to a company of which a trust held the shares.

Certain further technical amendments were introduced to provide for a loan to a company as envisaged in Section 7C(a)(ii) above. The provisions of this subsection are deemed to have come into operation on the 19th of July 2017.

It is important for clients and their advisors to take cognisance of the new amendments where loans are made to companies as envisaged in the subsection accentuated in red.

Future of trusts

We maintain that trusts still have a place in the Estate Planning environment. Choose your advisor carefully on the basis of:

      • Expertise and experience in the field;
      • Trustworthiness;
      • Ability to stay abreast of new developments affecting your estate

We will keep you up to date on further developments and the effect thereof on your estate plan.

GPJ van den Berg                                                         WC van der Merwe
B Civ Iuris, LLB                                                            BCom LLB, LLM
Head: Estate & Trust Division                                Associate
Delport van den Berg Inc.                                       Delport van den Berg Inc.
gert@delberg.co.za                                                     callie@delberg.co.za
T: +27 (12) 361 5001                                                    T: +27 (12) 361 5001

 

Wedding bells?

Every girl dreams of a fairy tale wedding.  The perfect husband, dress, venue and let us not forget, the ever popular “happily ever after.”  Unfortunately, the rising divorce rate provides a clear indication that married couples are far more likely to opt for divorce before reaching the “… until death do us part” bit of their marriage vows. Every year an inordinate amount of money is spent towards creating the perfect ceremony and reception. Ironically, almost no consideration is given to the consequences of the marriage.

Marriage is not a social event.  It is a legal action taken by individuals that affects, inter alia: (1) their personal status, (2) their contractual capacity, (3) their estates, (4) creates legal obligations between the spouses and (5) governs their external legal relationship with third parties.

The default marital dispensation is Married In Community of Property.  The estates (existing and future) of the spouses are joined into one estate.  Each spouse acquires an undivided half share in the now joint assets and the spouses are jointly responsible for all debts (existing and future), even if the debts are incurred by only one of the spouses.  The contractual capacity of the spouses are limited and insolvency or death of one of the spouses affects both the legal status and capacity of the other spouse as well as the joint estate.

Should the parties wish to change the default position, they may enter into an antenuptial contract and provide for a marriage dispensation being either: (1) Out of Community of Property without the Accrual System or (2) Out of Community of Property with inclusion of the Accrual System.

Out of Community of Property without the Accrual System is the polar opposite of a marriage in community of property. The estates (existing and future) of the spouses remain separate and the contractual capacity of the spouses remain unaffected.  Insolvency of one spouse does not affect the status, capacity or estate of the other spouse.  However, this dispensation creates the potential for severe disparity to develop in the estates of the spouses that may give rise to social injustice and financial hardship.  Also, the surviving spouse does not automatically share in the estate of a deceased spouse, unless specifically provided for in a valid will.

The inclusion of the Accrual System to the Out of Community of Property dispensation is an attempt to address the social injustice and hardship by combining elements of both dispensations.  The same considerations as set out for a marriage Out of Community of Property without the Accrual System will apply, right up to the dissolution of the marriage by either death or divorce.  On dissolution of the marriage, the accrual system activates and provides that the estate of the spouse with the least accrual is entitled to half of the value of the difference in the accrual of the respective estates.  In theory, this should create parity and place both estates on an equal financial footing.

A word of caution: For the antenuptial contract to apply, the contract must be: (1) executed in writing, (2) before a Notary Public, (3) before date of marriage and (4) registered with the Registrar of Deeds within three months of the date of execution.

For any of your antenuptial contract needs do not hesitate to contact Delport van den Berg Inc. on (012) 361 5001 as we have no less than 3 notaries to assist you.

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)

Drinking and driving – These are your rights

Each year during the festive season, South Africans are confronted with more stringent road blocks and possible arrests for driving under the influence of alcohol. The current legal limit for Blood Alcohol Content is:

  • LESS THAN 0,05g/100ml of blood sampled if you are an ordinary driving licence holder; or
  • LESS THAN 0,02g/100ml of blood sampled if you are the holder of a Professional Driving Permit (PrDP), for example a taxi driver or a bus driver.

Whilst the legal limit in respect of Breath Alcohol Content is:

  • LESS THAN 0,24mg/1000ml of breath sampled if you are an ordinary driving licence holder; or
  • LESS THAN 0,10mg/1000ml of breath sampled if you are the holder of a Professional Driving Permit (PrDP), for example a taxi driver or a bus driver.

Although it is always better to refrain from drinking alcohol if you have to drive, it is important to know what your rights are when pulled over by a police officer for driving under the influence:

  1. You may request that the officer provide identification irrespective of whether or not they are in uniform. If the officer is unable to provide an appointment certificate on demand he or she is in violation of the Criminal Procedure Act and any actions taken by him or her will be unlawful;
  2. If the officer requests you to take a breath or blood alcohol test, you may not refuse. If you refuse, you are in contravention of the National Road Traffic Act and necessary force may be inflicted upon you by the officer to take the required samples;
  3. Samples for your blood alcohol content or breath alcohol content must be taken within 2 hours of the alleged transgression (being pulled over by the officer);
  4. You may only be legally arrested after it has been established by the officer that your blood or breath alcohol level exceeds the legal limit. In other words, you may not be arrested merely because your breath smells of alcohol;
  5. You have the right to remain silent and not to make self-incriminating statements. In other words, you do not have to disclose to the officer how many drinks you had;
  6. You have the right to know who the registered medical practitioner is that takes your samples. You may also request for access to your own medical practitioner if he or she is available, the costs of which will be for your personal account;
  7. If you have been arrested, you may use a telephone to contact a relative or an attorney;
  8. If you are on chronic medication, you have the right to take your medication whilst in police custody if a doctor so prescribes;
  9. You have the right to apply for bail once you have been charged and an Investigating Officer has been assigned to your case. If bail is refused for whatever reason, you have to appear in court within 48 hours of your arrest, or during the first court day after the expiry of the 48 hours if the period expires outside ordinary court hours or on a day which is not an ordinary court day. The latter applies when you have for example been arrested on a Friday night and you will then only appear in court during the upcoming Monday;
  10. You have the right to being treated fairly and with respect by all the officers involved and the station where you are being held must provide you with food and water;

It is always better to give your co-operation and to be friendly with the officers.

Remember that it is a criminal offence to bribe police officers. If you are requested to pay a bribe by an officer, immediately report the offence to the relevant authorities.

We wish you a safe and memorable festive season!

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)

Unopposed and opposed divorce: What’s the difference?

My spouse said that he/she won’t ‘give me a divorce’. What can I do? Your spouse can oppose the divorce, but it is the Court that grants a divorce, not your spouse. If the Court is convinced that the marital relationship has irretrievably broken down, the Court can grant a decree of divorce even if your spouse does not want to get divorced.

There is a process, called a ‘rule 43’ application, whereby you can ask the Court to grant an order regarding the interim contact to the minor children and maintenance pending the finalisation of the divorce. You can also seek an order for a contribution towards your legal costs, pending the finalisation of the divorce.

What costs are involved?

In the case of an unopposed divorce (i.e. there is no dispute between yourself and your spouse about the divorce or what should happen), your fees will include the drafting of a summons, a settlement agreement, attending Court, consultations and counsel fees. Other expenses incurred may include Sheriff’s fees, traveling costs and admin such as photocopies. Where a divorce is opposed, the costs become unpredictable and entirely dependent on the specifics of the case, the disputes, and the amount of time dedicated to the matter.

How long does it take?

Where a divorce is unopposed and there are no complications or children involved, it can sometimes be finalised in as little as two to three months.

Where a divorce is opposed, it can easily take two to three years, or more. In most cases, however, divorces get settled before the parties have to go to Court – even where the divorce started out as an opposed divorce. As soon as the parties in an opposed divorce reach a settlement agreement and the divorce becomes unopposed, it can again be possible to finalise the divorce in as little as two months.

What you need to do

Before you approach the Court to start divorce proceedings, you should get certified copies of as many of the following documents as you can:

  • Your identity document
  • Your Ante-Nuptial Agreement, if any
  • The children’s births certificates, if any, and
  • Your marriage certificate (the original)

Also make sure you have the following information handy:

  • Your full name(s), surname, identity number, occupation and place of residence
  • Your spouse’s full name(s), surname, identity number, occupation and place of residence
  • Date when you got married and where the marriage took place
  • Children’s full names, surnames, identity numbers
  • Comprehensive details of any funds (such as pension funds, retirement annuities and provident funds) which you or your spouse belongs to, and
  • A list of your assets and liabilities.

You may institute divorce proceedings in either a High Court or Magistrates’ Court (Regional Court), but where the parties are representing themselves in a simple divorce, they should approach the Regional Court.

Reference:

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)

What does the Deeds Office do?

The Deeds Office is responsible for the registration, management and maintenance of the property registry of South Africa. If you are planning on buying a house, it can be useful knowing about the Deeds Office. However, you would use the services of a conveyancer when buying or selling a house. It is recommended that the services of a competent conveyancing firm is utilised in order to minimise the pitfalls that can be associated with property transactions.

What is conveyancing?

Conveyancing is the legal term for the process whereby a person, company, close corporation or trust becomes the registered and legal owner of immovable property and ensures that this ownership cannot be challenged. It also covers the process of the registration of mortgages.

Steps taken by the conveyancer:

  1. The conveyancer lodges your title deed and other documents in the Deeds Office for registration. These documents will be individually captured on the system. If there is a bond, the conveyancer dealing with the bond will lodge the bond documents with the Deeds Office at the same time as the transfer documents. The transfer, bond and cancellation documents must be lodged in the Deeds Office at the same time to ensure simultaneous registration. If different conveyancers are dealing with registering the purchaser’s bond and cancelling the seller’s bond, then they will need to collaborate.
  1. The Deeds Office examiners go through the documentation that has been submitted, and make sure that it complies with the relevant laws and legislations.
  1. The examiners then inform the conveyancer that the deeds are ready to be registered.
  1. Registration takes place with the conveyancer and Registrar of Deeds present. The transfer of the property is then registered in the purchaser’s name. If there is a bond, it is registered at the same time.
  1. Upon registration, the purchaser becomes the lawful owner of the property. The title deed that reflects this ownership is given to the conveyancer by the deeds office after the registration. Unless a bond has been registered as well, in which case the title deed is given to the bond holder.

The time taken to register a property at the Deeds Office depends on various factors and a number of parties. On average, registering a property transfer takes six to eight weeks, although unforeseen difficulties can cause the period to be extended.

References:

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)

Renting or selling property to foreigners

Renting property in South Africa is a straightforward process. The country has a vast selection of rental accommodation including bachelor flats in apartment blocks, Victorian cottages, stand-alone houses with big gardens, and semi-detached units in modern townhouse complexes.

In South Africa, the right of a foreigner to purchase immovable property was restricted in the past by the Aliens Control Act. These restrictions were uplifted in 2003 by the new Immigration Act (“the Act”) which repealed the Aliens Control Act and many of its restrictive provisions and now clearly defines who a legal foreigner is and who is not. In short, a legal foreigner is a person in possession of a valid temporary residence permit or a permanent residence permit approved by the Department of Home Affairs.

The new Act makes provision for various temporary residence permits to be issued to foreigners, including amongst others:

  • A visitor’s permit
  • A work and entrepreneurial permit
  • A retired person permit

In principle, a landlord or tenant can legitimately lease or sell immovable property to any person recognised under the Act as a legal foreigner.

That said, foreigners working in South Africa with a legal work permit, are not regarded as “non-residents” by the South African Reserve Bank. They are considered to be residents for the duration of the period of their work permit and are therefore not restricted to a loan of only 50% of the purchase price.

It is also important to take note that the Act criminalizes the letting or selling of immovable property to an illegal foreigner by making this transaction equivalent to the aiding and abetting of an illegal foreigner and is such an act classified as a criminal offence in terms of the Act.

In conclusion, a legal foreigner may let or buy immovable property in South Africa, provided that he is the holder of either a legal temporary residence permit or a permanent residence permit approved by the Department of Home Affairs. Ensure that you enquire from your potential tenant or purchaser whether they are legally present in South Africa and obtain the necessary proof from them before entering into any transaction with a foreigner. Also, take account of the restrictions on local financing, particularly where the procurement of financing is a condition precedent to the agreement.

References:

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)

TRUSTS AND INDEPENDENT TRUSTEES: WHY AN INDEPENDENT TRUSTEE?

In the Supreme Court of Appeal case, Land and Agricultural Bank of South Africa v Parker, the dilemma of insufficient separation between the control and enjoyment of trust assets came to the forefront.

To address this issue, Cameron JA mentioned, obiter dictum, that the problem at hand may possibly be addressed as follows:

…by insisting on the appointment of an independent outsider as trustee to every trust in which (a) the trustees are all beneficiaries and (b) the beneficiaries are all related to one another. 

The Master of the High Court has now taken positive steps to implement the above obiter dictum by issuing a directive in March 2017, which requires that all new trusts registered with the Master, which are so-called family business trusts, must have an independent trustee.

The independent trustee must sign a sworn affidavit in which he/she confirms that he/she has: no family relation or connection, by blood or other, to any of the existing or proposed Trustees, beneficiaries or founder of the trust.

We therefore strongly advise that you choose your independent trustee carefully as he/she will form part of all future decisions made by the trustees.

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)