John and Sue are married out of community of property. They both have children from a previous relationship. They moved into a retirement village due to the “resort style” living, security and easy access to specialised medical care. John bought the life right on their behalf (which he paid for). The contract is signed in both their names. They lived stress free, happily ever after, until the day that John unfortunately died. This article deals with what happens to their life right on John’s death as well as on Sue’s death.
It will only be fitting for me to start with a very general definition of a life right, namely that “you” as the retiree (a person 50 years or older), purchase the right to live in a home in a retirement village for the remainder of your life while the developer retains the unit’s ownership. The amount that your deceased estate will receive on your death as compensation is outlined in the contract”
It is important to keep in mind that you cannot bequeath your life right to anyone in your Will. The right will revert to the developer on your death and they will in turn, resell the unit. Alternatively if you bought the right as a couple in both your names, the right will first revert to the surviving spouse (or partner). No compensation is paid to the surviving spouse on the first dying’s death – the life right simply continues in favour of the survivor. Only on the death of the surviving spouse will an amount become payable to that spouse’s estate as per a default clause in the contract. *“The life right cannot be split. This means that the estate of the first spouse to die, receives no benefit or compensation. This is a very important consideration if you and your spouse have different provisions in your Wills. Depending on who dies first, there may be a significant gap in what you thought your loved ones would be inheriting.”
If John had children from a previous relationship and he died first, his children would certainly not benefit from the resale of the unit, as the right to compensation would pass to Sue, in terms of the contract. Therefore, unless you, before signing the contract, specifically alter the standard default clause (which normally reads: “The proceeds of the sale on the survivor’s death to his/her deceased estate” – in this case to Sue’s estate), she will most probably bequeath the proceeds to her children (from a previous relationship).
My advice to the reader of this article is to make very sure that you amend the default clause in your life right contract for the balance of the resale/compensation price to be paid to your beneficiaries/heirs of your choice and not necessarily end up in the hands of your surviving spouse/partner’s children or heirs.
All of this seems so simple, yet in my experience in the administration of deceased estates, at least 8 out of 10 couples have not thought this through. This then leaves the executor of both deceased estates to explain to the children, of John in this case, why their father paid for a life right, of which they no doubt expect the proceeds of the resale to come their way and which most probably won’t, when eventually sold.
The intention of this article is not to deal with the pros or cons of life rights, but should you be in need of more detailed information regarding the legal and/or financial implications of buying into such a scheme, you are welcome to contact myself, T Tannous at Millers Inc, George.
The Life Rights Scheme has been officially recognised by the Housing Development Schemes for Retired Persons Act 65 of 1988 (HDSRPA).
A will is a document in which a person sets out how his or her belongings must be distributed after death.
Legislation (Wills Act 7 of 1953, as amended) contains the requirements for a valid will which includes the following:
• The person who makes the will (referred to as the testator/testatrix) must be over the age of 16 (sixteen) years and mentally competent;
• The will must be in writing (handwritten/typed). If the will is written by someone else on behalf of the person who makes the will, that person cannot be a beneficiary in the will;
• Each page must be signed by the person who makes the will;
• The will must be signed by two competent witnesses (a person 14 [fourteen] years or older);
• The person who makes the will and the two or more competent witnesses must sign the will in each other’s presence.
If all the requirements are not followed, the will may be invalid and this could mean an earlier will comes into play (if one was previously made) or the Intestacy rules will apply (where there is no will).
In light of the above requirements, an unsigned will is not valid. However, the same legislation referred to above does make provision for condonation by the High Court. This means that the executor or any heir or beneficiary may approach the High Court of SA to declare the unsigned will as valid. Section 2(3) of the Wills Act contains the requirements for condonation, which section stipulates as follow:
“If a Court is satisfied that a document or the amendment of a document drafted or executed by a person who has died since the drafting or execution thereof, was intended to be his will or amendment of his will, the court shall order the Master to accept that document, or that document as amended, for the purposes of the Administration of Estates Act, 1965, as a valid will, although it does not comply with all the formalities for the execution or amendment of wills referred to in subsection (1).”
Unfortunately, this process may bring about a significant cost to the estate and will ultimately delay the winding-up of the estate.
Should you have any questions or in need of advice, you are welcome to contact our fiduciary department on 044 – 874 1140 / theresa@millers.co.za
When you get married in South Africa, your marriage is automatically in community of property unless you conclude an antenuptial contract to change this. This means that without an antenuptial contract, all assets and debt incurred before and after the marriage by both spouses, will form a joint estate for which both spouses are equally accountable. This also limits the freedom of testation of the spouses as the spouses only own 50% of the joint estate and can essentially only deal with 50% of the estate in their will.
Where spouses do conclude an antenuptial contract to exclude community of property (with or without the accrual system), it again becomes important to factor this into their wills, as the estates could be completely separate or could have claims for accrual that must be considered by the executor.
The above makes the importance of preparing your will to walk side-by-side with your antenuptial contract clear. Because you are getting married, your antenuptial contract and will jointly determine the proprietary consequences of your death and therefore need to be dealt with together when getting married and so avoid unforeseen consequences in the event of an untimely death.
In much the same way, the patrimonial consequences of a marriage are changed by divorce and it is in this pivotal moment again that your will must be updated to reflect your changed circumstances. The Wills Act 7 of 1953 in section 2B provides that if you die within three months of the date of divorce, a bequest to your divorced spouse will be deemed cancelled (except where you expressly provide otherwise). The result is, it effectively affords a divorcee three months to amend his/her will, failing which your divorced spouse could stand to inherit from your estate as indicated in your will if such is not changed.
So, remember to not forget about reviewing your will and broader estate planning when there are major changes in your life. For advice or assistance with estate planning, you should contact an estate planning advisor or specialist.
Disclaimer: This article is the personal opinion/view of the author(s) and is not necessarily that of the firm. The content is provided for information only and should not be seen as an exact or complete exposition of the law. Accordingly, no reliance should be placed on the content for any reason whatsoever and no action should be taken on the basis thereof unless its application and accuracy have been confirmed by a legal advisor. The firm and author(s) cannot be held liable for any prejudice or damage resulting from action taken on the basis of this content without further written confirmation by the author(s).
