Newsletter 47 (Jan 2021)Dear Colleague
Welcome back! We hope that you had a relaxing, joyful and peaceful time over the festive season. May this new year bring you much joy and happiness, despite the trying times we are all facing right now. Be encouraged by the following quotes:
Keep the faith.
Hold on.
Things will get better.
It might be stormy now, but it can’t rain forever.
Keep the Faith.
The most amazing things in life tend to happen right
at the moment you’re about to give up.
HoPe
Success in not final; failure is not fatal: It is the courage to continue that counts.
Winston Churchill
We start the year with a bit of good news in announcing the names of the winners in the Legatus 2020 competition, which ended on 30 November 2020.
Congratulations to:
Winner – Craig Adams
Runner-up – Altha Stiehler
The main aim of the competition was to show our appreciation to those brokers who continuously support Legatus Trust and make use of our services on an ongoing basis.
The current imposed level 3 lockdown measures are hampering some of our services, but it is still business as usual at Legatus Trust. We will always endeavor to provide the service of excellence that you are used to.
Please note that our offices are operating on skeleton staff but are open to receive documents. Personal visits must please be kept to the minimum and must be arranged and scheduled. Be assured that all the safety protocols are in place to make it a safe environment for our staff and our visitors.
According to the media reports, Covid-19 infections are on the increase in South Africa again, as elsewhere in the world. This situation forces people to focus more than usual on their own mortality. It just highlights the importance of ensuring that their financial affairs are in order. This unplanned and unexpected situation created an awareness of how quickly things can change and how fragile life can be.
At this moment, your role as a broker is of utmost importance in providing professional advice when preparing and planning an estate. You have the objective and professional expertise to provide proper counsel and advice, while being able to offer guidance on nominating Legatus Trust as the executor and trustee in a Will, adopting appropriate tax planning and ensuring that all other important aspects of an estate have been considered.
Clients should update their Wills at least once a year to ensure that provision is made for changes in circumstances. Maybe there was a new addition to the family, someone could have passes away, some family members could have gotten married or divorced. Many things could happen that need to be considered when a Will is updated. It is vital to leave detailed directions ensuring that their remaining assets are dealt with according to their wishes. They should not wait for a life-threatening event to implement this important part of financial planning.
Please ensure that signed Wills are returned to Legatus Trust for safe keeping as soon as possible. All signed Will can be delivered to our offices in Randburg or Bellville. You can also contact your marketer to arrange for courier collection.
THINGS TO CONSIDER WHEN SELLING ASSETS TO A TRUST
Read more about this in the next edition
DOES THE PROCEEDS OF A LIFE POLICY FORM PART OF A JOINT ESTATE IN A COP-MARRIAGE?
In the previous newsletter we explained what it means to be married in community of property in South Africa. In this type of marriage, all assets/liabilities which belonged to both parties prior to getting married as well as all assets/liabilities accumulated during the marriage will fall into the joint or communal estate. They each own half a share (50%) and are equal concurrent managers of the joint estate. There are a few exceptions though. For instance, the “Protection of benefits”-clause in a Will which excludes an inheritance from a joint estate, or donations received by either of the parties. It is undoubtedly the cheapest way to get married because no antenuptial contract needs to be signed. But it has its drawbacks.
In this edition, we look at the issue of ownership of a life insurance policy in this type of marriage. Can this be considered an asset in the estate of the insured? Recent court cases determined that a life policy cannot be regarded as an insurance policy as it is a risk-only policy. One such court case is that of Naidoo vs Discovery Life in July 2019.
During the marriage, the deceased became the principal life insured and owner of a life insurance policy with Discovery Life. He initially nominated his spouse as the beneficiary of the proceeds upon his death. Unbeknown to his spouse, he changed the beneficiaries in 2011, replacing her with his parents and two siblings. When he committed suicide in March 2012, the change in beneficiaries left his spouse and two children with a heavy financial burden to carry. Discovery Life abided with the beneficiaries nominated in the policy and effected the pay-out to the third parties. The spouse turned to the courts, challenging the replacement of the beneficiaries without her written consent, and therefore held Discovery liable for the alleged unlawful payments.
The court a quo considered the following two questions:
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Was the policy to be considered an asset during the lifetime of the deceased (policyholder)?
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Was the nomination of another beneficiary an alienation that required the prior written consent of the spouse in terms of s15(2)(c) of the Matrimonial Property Act, No 88 of 1984?
The court a quo as well as the Supreme Court of Appeal upheld the same verdict:
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A life insurance policy is a stipulato alteri, which means a contract for the benefit of a third party. Therefore, the proceeds of the policy would not fall into the joint estate but pass to the nominated beneficiaries.
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The beneficiary’s entitlement to the policy proceeds is a mere spes, expectation, until the actual death of the policyholder. Therefore, the policy is not an asset in the estate.
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The aggregate rights and obligations following from the policy could not in any way be regarded as property in the sense of enhancing the value of the insured’s estate, or if married in community of property, the value of the joint estate.
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The insured had a personal right to nominate or substitute beneficiaries which right could be exercised until his death.
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The substitution would not constitute an alienation of property that required the spouse’s prior written consent in terms of the Act because it is not an asset in the estate.
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215(2)(c) of the Matrimonial Act does not apply to life policies.
The Supreme Court added the following:
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They made a clear distinction between a life policy which is a “risk-only policy” and an insurance policy with a current value like an endowment policy.
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The proceeds of a “risk-only policy” cannot be paid to the policyholder or the beneficiary while the insured is still alive.
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A “risk-only policy” does not constitute an “insurance policy”.
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The only rights a policyholder has during his/her lifetime are those contractual rights to nominate or change beneficiaries, to cede or terminate the policy. In this case, the deceased never lost his right to change or cancel his nomination of beneficiaries up until his death.
Discovery’s payment of the proceeds to the third parties was thus lawful.
Sources: https://legacyfs.co.za/naidoo-v-discovery-life-confirmation-that-the-proceeds-of-a-life-policy-fall-outside-the-joint-estate-of-spouse-married-in-cop/
https://www.divorcelaws.co.za/marriage-in-community-of-property.html
NAPOLEON BONAPARTE’S WILL
Napoleon Bonaparte was one of the world’s greatest military leaders and the first emperor of France. Although he ruled by dictatorship with sole control of his empire, he was also revered as a great hero. He conquered much of Europe in the early 19th century. He was a meticulous planner and amongst others, revolutionised military organization and training.
After his first defeat by Russia, Napoleon was exiled to Elba, and spent only 300 days on the island. He escaped back to France and was finally defeated at the battle of Waterloo in Belgium. His second exile was on the island of Saint Helena, where he died on 5 May 1821 at the relatively young age of 51.
In his last days, he spent a lot of time on the drafting and finalisation of his last Will and Testament. A lot of thought went into the planning of his last wishes and he named numerous people in his Will but unfortunately, he exaggerated quite a bit. Ultimately, he only possessed half of the Franc-value needed to satisfy all the giftings in his Will.
He also bequeathed property that he did not own and added seven more codicils to his Will. There were two remarkable lists, “A” and “B”, in which he listed all tangible personal property, including some interesting properties like his hair.
His Will stipulated that his hair had to be made into bracelets with a fine gold clasp for a few of his closest loved ones. Unfortunately, he lacked enough hair to make all the bracelets he described. Today his hair is on display at the museum of Fine Arts in Montreal.
However, the French court ruled that his Will was invalid because he was labelled a “rebel and traitor”, and therefore the millions he deposited with the Paris banker, Laffite, were not his property to give away. After arbitration, some of his unusual legacies were eventually paid out in part though.
Until next time!
“The Legatus Times” Team
