Taxation 2A Damelin©

BACHELOR OF COMMERCE IN ACCOUNTING

TAXATION 2A

STUDY GUIDE
2021

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COPYRIGHT © EDUCOR, 2021

All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any
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copywriting will be prosecuted and will be held liable for damages.

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Table of Contents

1 About Brand .................................................................................................................................... 9

2 Our Teaching and Learning Methodology ..................................................................................... 10
Icons ...................................................................................................................................... 11
3 Introduction to the Module........................................................................................................... 13
Module Information .............................................................................................................. 13
Module Purpose .................................................................................................................... 13
Outcomes .............................................................................................................................. 13
Assessment ........................................................................................................................... 14
Planning Your Studies ........................................................................................................... 15
4 Prescribed Reading ........................................................................................................................ 15
Prescribed Book..................................................................................................................... 15
Recommended Articles ......................................................................................................... 15
Recommended Multimedia ................................................................................................... 15
5 Module Content ............................................................................................................................ 17
Study Unit 1: Introduction To Insolvency .............................................................................. 18
5.1.1 Introduction................................................................................................................... 18
5.1.2 Methods of collecting debts.............................................................................................. 19
5.1.3 Sequestration ................................................................................................................ 19
5.1.4 Procedure for sequestration ......................................................................................... 20
5.1.5 Conclusion ..................................................................................................................... 23
5.1.6 Revision questions ......................................................................................................... 23
5.1.7 Self –check activity ........................................................................................................ 23
Study Unit 2: The Application For Sequestration.................................................................. 24
5.2.1 Introduction................................................................................................................... 24
5.2.2 Jurisdiction .................................................................................................................... 25
5.2.3 What is the Master? ...................................................................................................... 25
5.2.4 Voluntary surrender ...................................................................................................... 25
5.2.5 Compulsory sequestration ............................................................................................ 27
5.2.6 Provisional sequestration order .................................................................................... 28
5.2.7 Acts of insolvency .......................................................................................................... 29
5.2.8 Friendly sequestration................................................................................................... 29
5.2.9 Discretion of the court .................................................................................................. 30
5.2.10 Final sequestration order .............................................................................................. 30
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5.2.11 Conclusion ..................................................................................................................... 32

5.2.12 Revision questions ......................................................................................................... 32
5.2.13 Self –check activity ........................................................................................................ 32
Study Unit 3: Consequences Of Sequestration ..................................................................... 33
5.3.1 Introduction................................................................................................................... 33
5.3.2 Consequences for the insolvent .................................................................................... 34
5.3.3 Consequences for the insolvent's spouse ........................................................................ 35
5.3.4 Consequences regarding legal actions .......................................................................... 36
5.3.5 Consequences regarding contracts ............................................................................... 37
5.3.6 Conclusion ..................................................................................................................... 41
5.3.7 Revision questions ......................................................................................................... 42
5.3.8 Self –check activity ........................................................................................................ 42
Study Unit 4: Curator Bonis, Provisional Trustee And Trustee ............................................. 43
5.4.1 Introduction................................................................................................................... 43
5.4.2 Curator Bonis ................................................................................................................. 44
5.4.3 Provisional trustee......................................................................................................... 44
5.4.4 Election and appointment of a trustee.......................................................................... 44
5.4.5 Grounds for disqualification .......................................................................................... 45
5.4.6 Termination of office ..................................................................................................... 46
5.4.7 Remuneration of the trustee ......................................................................................... 46
5.4.8 Powers and duties of a trustee...................................................................................... 46
5.4.9 Conclusion ..................................................................................................................... 47
5.4.10 Revision questions ......................................................................................................... 48
5.4.11 Self –check activity ........................................................................................................ 48
Study Unit 5: The Administration Process ............................................................................. 49
5.5.1 Introduction................................................................................................................... 49
5.5.2 Meetings of creditors and proof of claims .................................................................... 50
5.5.3 Types of meetings ......................................................................................................... 50
5.5.4 Proof of claims ............................................................................................................... 51
5.5.5 Proof of conditional claims ............................................................................................ 52
5.5.6 Interrogations at meetings of creditor .......................................................................... 52
5.5.7 Liquidation of assets ...................................................................................................... 53
5.5.8 Liquidation of movables ................................................................................................ 54
5.5.9 Liquidation of immovable property ............................................................................... 54
5.5.10 Application of proceeds................................................................................................. 54
5.5.11 Conclusion ..................................................................................................................... 56
5.5.12 Revision questions ......................................................................................................... 56
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5.5.13 Self–check activity ......................................................................................................... 56

Study Unit 6: The Trustee’s Account ..................................................................................... 57
5.6.1 Introduction................................................................................................................... 57
5.6.2 Description of the accounts........................................................................................... 58
5.6.3 Closing remarks ............................................................................................................. 60
5.6.4 Time of submission........................................................................................................ 60
5.6.5 Inspection of account by creditors ................................................................................ 61
5.6.6 Confirmation of account................................................................................................ 61
5.6.7 Notice of distribution or contribution ........................................................................... 68
5.6.8 Finalisation .................................................................................................................... 69
5.6.9 Conclusion ..................................................................................................................... 70
5.6.10 Revision questions ......................................................................................................... 70
5.6.11 Self–check activity ......................................................................................................... 70
Study Unit 7: Application of Proceeds ................................................................................... 71
5.7.1 Introduction................................................................................................................... 71
5.7.2 Preferent claims ............................................................................................................ 72
5.7.3 Concurrent creditors ..................................................................................................... 73
5.7.4 Encumbered assets........................................................................................................ 77
5.7.5 Contribution .................................................................................................................. 79
5.7.6 Conclusion ..................................................................................................................... 80
5.7.7 Revision questions ......................................................................................................... 81
5.7.8 Self –check activity ........................................................................................................ 81
Study Unit 8: Composition..................................................................................................... 82
5.8.1 Introduction................................................................................................................... 82
5.8.2 Defining composition .................................................................................................... 83
5.8.3 Procedure for acceptance ............................................................................................. 83
5.8.4 The effects of composition ............................................................................................ 84
5.8.5 The trustee’s duties and right to rehabilitation ............................................................. 84
5.8.6 The Trustee’s Account ................................................................................................... 84
5.8.7 Conclusion ..................................................................................................................... 89
5.8.8 Revision questions ......................................................................................................... 90
5.8.9 Self –check activity ........................................................................................................ 90
Study Unit 9: Insolvent Deceased Estates ............................................................................. 91
5.9.1 Introduction................................................................................................................... 91
5.9.2 Ordinary (solvent) deceased estates ............................................................................. 92
5.9.3 Sequestration in terms of the Estates Act ..................................................................... 92
5.9.4 Compulsory sequestration ............................................................................................ 93
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5.9.5 Contribution and rehabilitation ..................................................................................... 93

5.9.6 Protected life policies .................................................................................................... 93
5.9.7 Accounts – Insolvent deceased estates ......................................................................... 94
5.9.8 Conclusion ..................................................................................................................... 94
5.9.9 Revision questions ......................................................................................................... 95
5.9.10 Self –check activity ........................................................................................................ 95
Study Unit 10: Introduction to Deceased Estates .................................................................. 96
5.1.1 Introduction .................................................................................................................. 96
5.10.1 Concepts ........................................................................................................................ 97
5.10.2 Legislation ..................................................................................................................... 97
5.10.3 Summary of administration process.............................................................................. 98
5.10.4 Effective administration of estates ................................................................................ 99
5.10.5 Conclusion ................................................................................................................... 100
5.10.6 Revision questions ....................................................................................................... 100
5.10.7 Self –check activity ...................................................................................................... 101
Study Unit 11: Types of Marriages ...................................................................................... 102
5.11.1 Introduction................................................................................................................. 102
5.11.2 Marriage ...................................................................................................................... 103
5.11.3 The marriage contracts................................................................................................ 104
5.11.4 Matrimonial Property Act ............................................................................................ 104
5.11.5 Marital power .............................................................................................................. 104
5.11.6 Marriages in community of property .......................................................................... 104
5.11.7 Marriages out of community of property.................................................................... 105
5.11.8 The accrual system ...................................................................................................... 105
5.11.9 Conclusion ................................................................................................................... 109
5.11.10 Revision questions ................................................................................................... 110
5.11.11 Self–check activity ................................................................................................... 110
Study Unit 12: Intestate Succession .................................................................................... 111
5.12.1 Introduction................................................................................................................. 111
5.12.2 Legislation ................................................................................................................... 112
5.12.3 Applicability of the Act ................................................................................................ 112
5.12.4 Heirs ............................................................................................................................ 113
5.12.5 Distributable estate ..................................................................................................... 113
5.12.6 Degrees of consanguinity ............................................................................................ 113
5.12.7 Rules of intestate succession....................................................................................... 113
5.12.8 Definition of concepts ................................................................................................. 114
5.12.9 Intestate succession .................................................................................................... 115
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5.12.10 Conclusion ............................................................................................................... 117

5.12.11 Revision questions ................................................................................................... 119
5.12.12 Self –check activity .................................................................................................. 119
Study Unit 13: Testate Succession ....................................................................................... 120
5.13.1 Introduction................................................................................................................. 120
5.13.2 Will and Codicil ............................................................................................................ 121
5.13.3 Parties involved ........................................................................................................... 122
5.13.4 Commencement of the estate..................................................................................... 123
5.13.5 Types of wills ............................................................................................................... 124
5.13.6 Formalities during the execution of wills..................................................................... 124
5.13.7 Revocation of wills ...................................................................................................... 125
5.13.8 Formalities when a testator signs his will with his own signature............................... 126
5.13.9 Types of bequests........................................................................................................ 127
5.13.10 The right of beneficiaries to inherit ......................................................................... 127
5.13.11 Massing ................................................................................................................... 128
5.13.12 Accrual (ius accrescendi) ......................................................................................... 129
5.13.13 Interpretation of wills .............................................................................................. 129
5.13.14 The will .................................................................................................................... 129
5.13.15 Conclusion ............................................................................................................... 131
5.13.16 Self –check activity .................................................................................................. 132
Study Unit 14: Estate Duty .................................................................................................. 133
5.14.1 Introduction................................................................................................................. 133
5.14.2 What is an Estate Duty? .............................................................................................. 133
5.14.3 Who is responsible for payment of Estate Duty? ........................................................ 134
5.14.4 When is Estate Duty due? ........................................................................................... 134
5.14.5 Property....................................................................................................................... 134
5.14.6 Property deemed to be property ................................................................................ 135
5.14.7 Allowable deductions .................................................................................................. 136
5.14.8 Section 4A rebate ........................................................................................................ 138
5.14.9 Marriages in community of property .......................................................................... 140
5.14.10 Administration of the Act ........................................................................................ 140
5.14.11 Conclusion ............................................................................................................... 142
5.14.12 Revision questions ................................................................................................... 143
5.14.13 Self –check activity .................................................................................................. 143
6 References................................................................................................................................... 144

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1 About Brand

Damelin knows that you have dreams and ambitions. You’re thinking about the future, and how the
next chapter of your life is going to play out. Living the career, you’ve always dreamed of takes some
planning and a little bit of elbow grease, but the good news is that Damelin will be there with you
every step of the way.

We’ve been helping young people to turn their dreams into reality for over 70 years, so rest assured,
you have our support.

As South Africa’s premier education institution, we’re dedicated to giving you the education
experience you need and have proven our commitment in this regard with a legacy of academic
excellence that’s produced over 500 000 world – class graduates! Damelin alumni are redefining
industry in fields ranging from Media to Accounting and Business, from Community Service to Sound
Engineering. We invite you to join this storied legacy and write your own chapter in Damelin’s history
of excellence in achievement.

A Higher Education and Training (HET) qualification provides you with the necessary step in the right
direction towards excellence in education and professional development.

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2OUR TEACHING AND LEARNING METHODOLOGY

Damelin strives to promote a learning-centred and knowledge-based teaching and learning

environment. Teaching and learning activities primarily take place within academic programmes and
guide students to attain specific outcomes.

• A learning-centred approach is one in which not only lecturers and students, but all
sections and activities of the institution work together in establishing a learning
community that promotes a deepening of insight and a broadening of perspective with
regard to learning and the application thereof.

• An outcomes-oriented approach implies that the following categories of outcomes are

embodied in the academic programmes:

• Culminating outcomes that are generic with specific reference to the critical cross-field
outcomes including problem identification and problem-solving, co-operation, self-
organisation and self-management, research skills, communication skills,
entrepreneurship and the application of science and technology.

• Empowering outcomes that are specific, i.e. the context specific competencies students
must master within specific learning areas and at specific levels before they exit or move
to a next level.

• Discrete outcomes of community service learning to cultivate discipline-appropriate

competencies.

Damelin actively strives to promote a research culture within which a critical-analytical approach and
competencies can be developed in students at undergraduate level. Damelin accepts that students’
learning is influenced by a number of factors, including their previous educational experience, their
cultural background, their perceptions of particular learning tasks and assessments, as well as
discipline contexts.

Students learn better when they are actively engaged in their learning rather than when they are
passive recipients of transmitted information and/or knowledge. A learning-oriented culture that
acknowledges individual student learning styles and diversity and focuses on active learning and
student engagement, with the objective of achieving deep learning outcomes and preparing students
for lifelong learning, is seen as the ideal. These principles are supported through the use of an engaged
learning approach that involves interactive, reflective, cooperative, experiential, creative or
constructive learning, as well as conceptual learning via online-based tools.

Effective teaching-learning approaches are supported by:

• Well-designed and active learning tasks or opportunities to encourage a deep rather than
a surface approach to learning.

• Content integration that entails the construction, contextualization and application of

knowledge, principles and theories rather than the memorisation and reproduction of
information.

• Learning that involves students building knowledge by constructing meaning for

themselves.

• The ability to apply what has been learnt in one context to another context or problem.

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• Knowledge acquisition at a higher level that requires self-insight, self-regulation and self-
evaluation during the learning process.

• Collaborative learning in which students work together to reach a shared goal and
contribute to one another’s learning at a distance.

• Community service learning that leads to collaborative and mutual acquisition of

competencies in order to ensure cross cultural interaction and societal development.

• Provision of resources such as information technology and digital library facilities of a high
quality to support an engaged teaching-learning approach.

• A commitment to give effect teaching-learning in innovative ways and the fostering of

digital literacy.

• Establishing a culture of learning as an overarching and cohesive factor within institutional

diversity.

• Teaching and learning that reflect the reality of diversity.

• Taking multi culturality into account in a responsible manner that seeks to foster an
appreciation of diversity, build mutual respect and promote cross-cultural learning
experiences that encourage students to display insight into and appreciation of
differences.

Icons
The icons below act as markers, that will help you make your way through the study guide.

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Additional information
Find the recommended information listed.

Case study/Caselet
Apply what you have learnt to the case study presented.

Example
Examples of how to perform a calculation or activity with the solution
/ appropriate response.

Practice
Practice the skills you have learned.

Reading
Read the section(s) of the prescribed text listed.

Revision questions
Complete the compulsory revision questions at the end of each unit.

Self-check activity
Check your progress by completing the self-check activity.

Study group / Online forum discussion

Discuss the topic in your study group or online forum.

Think point
Reflect, analyse and discuss, journal or blog about the idea(s).

Video / audio
Access and watch/listen to the video/audio clip listed.

Vocabulary
Learn and apply these terms.

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3INTRODUCTION TO THE MODULE

Welcome to Taxation 2A:

The primary aim of this module is to develop and equip students with graduate-level knowledge,
specific skills and applied competencies in preparation for the 3rd year level. The module is designed
to facilitate students' acquisition of these competencies through knowledge of, and engagement in
relevant taxation topics found in the Insolvency and Deceased Estates laws. Start off by reading the
study guide, as it will guide you on how to obtain the knowledge from the prescribed textbooks. After
you have obtained the knowledge, it should be easier to apply it when answering the questions.

Obtaining the required knowledge, would entail working through this study unit, the textbooks and
familiarising yourself with the Insolvency and Deceased Estates laws. Thus, students are encouraged
to complete the integrated examples, case studies, revision questions, and self-assessment questions.

Module Information
Qualification title Taxation 2A

Module Title Taxation 2A

NQF Level 6

Credits 10

Notional hours 100

Module Purpose
The purpose of this module is to introduce the theoretical and practical knowledge concerning
taxation of individual business entities (Gross Income and deductions, Capital Allowances, Value
Added Tax, Sole Traders, Partnerships, Companies, Donations Tax, Trust Income, and powers and
duties of the Commissioner for SARS).

Outcomes
At the end of this module learners should be able to:

 Define and explain insolvency.

 Describe methods of collecting a debt.
 Distinguish between voluntary and compulsory sequestration.
 Interpret and apply the law of insolvency as per the Insolvency Act 24 of 1936.
 Discuss the consequences of sequestration.
 Explain the process on the election and appointment of curator bonis, provisional trustee and
trustee.
 Apply the administration processes entailed in the insolvency law.
 Describe the liquidation and distribution accounts.
 Interpret the contents of a cashbook.
 Calculate the balance available in the free residue account.
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 Draw the distribution account and calculate awards and deficits.

 Draft the trustee’s certificate.
 Explain the principles applicable to preferent claims.
 Fully discuss encumbered assets.
 Explain and calculate danger of contribution.
 Explain composition.
 Discuss the insolvent deceased estate.
 Explain the different types of marriages and their effects on the estate.
 Calculate an accrual claim.
 Interpret and apply the Intestate Succession Act of 1987.
 Interpret and apply the Wills Act 7 of 1953.
 Interpret and apply various estate duty principles on property, allowable deductions and
Section 4A rebates.
 Calculate the dutiable amount and the estate duty payable.

Assessment
You will be required to complete both formative and summative assessment activities.

Formative assessment:

These are activities you will do as you make your way through the course. They are designed to help
you learn about the concepts, theories and models in this module. This could be through case studies,
practice activities, self-check activities, study group / online forum discussions and think points.

You may also be asked to blog / post your responses online.

Summative assessment:

You are required to do one test and one assignment. For online students, the tests are made up of the
revision questions at the end of each unit. A minimum of five revision questions will be selected to
contribute towards your test mark.

Mark allocation

The marks are derived as follows for this module:

Test 20%

Assignments 20%

Exam 60%

TOTAL 100%

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Planning Your Studies

You will have registered for one or more modules in the qualification and it is important that you plan
your time. To do this look at the modules and credits and units in each module.

Create a time table / diagram that will allow you to get through the course content, complete the
activities, and prepare for your tests, assignments and exams. Use the information provided above
(How long will it take me?) to do this.

3.5.1.1 What equipment will I  Access to a personal computer and internet.

need?

4 Prescribed Reading
Prescribed Book
 Insolvent Estates, 8th edition

De Clercq B, Evans RG, Abrie W, Graham CR, 2014 (reprinted 2017)

LexisNexis - ISBN: 9780409123241

 Deceased Estates, 11th edition

De Clercq B, Schoeman-Malan MC, de W van der Spuy P, 2017

LexisNexis - ISBN: 9780409038873

Recommended Articles
 https://www.begbies-traynorgroup.com/articles/insolvency/what-is-an-insolvent-estate
 https://www.veliletintocape.co.za/Legal-Articles/entryid/379/estate-planning-types-of-
estates-and-their-differences
 https://www.nvrlaw.co.za/NewsResources/NewsArticle.aspx?ArticleID=2518
 https://www.daniepotgieterattorneys.co.za/voluntary-sequestration/sequestration-
questions/#general-questions%20

Recommended Multimedia
Websites:

 https://www.daniepotgieterattorneys.co.za/voluntary-sequestration/sequestration-
questions/#general-questions%20
 https://gimmenotes.co.za/wp-content/uploads/2016/12/MRL3701-M-Notes.pdf
 https://www.daniepotgieterattorneys.co.za/voluntary-sequestration/sequestration-
questions/#general-questions%20
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 https://gimmenotes.co.za/wp-content/uploads/2016/12/MRL3701-M-Notes.pdf

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 http://www.honeyattorneys.co.za/article/15/INSOLVENT-ESTATES-IN-A-NUT-SHELL
 https://www.stowellestate.co.za/faq/21-3-what-is-a-danger-of-contribution.html
 https://www.grocotts.co.za/2017/11/13/administration-of-deceased-estates/
 https://www.begbies-traynorgroup.com/articles/insolvency/what-is-an-insolvent-estate
 https://www.veliletintocape.co.za/Legal-Articles/entryid/379/estate-planning-types-of-
estates-and-their-differences
 https://www.nvrlaw.co.za/NewsResources/NewsArticle.aspx?ArticleID=2518
 https://www.justice.gov.za/legislation/acts/1984-088.pdf
 https://randles.co.za/2018/06/04/the-current-position-on-matrimonial-property-law-in-
south-africa/
 https://www.schoemanlaw.co.za/wp-content/uploads/2016/02/Who-inherits-if-there-is-no-
will.docx.pdf
 https://funeralguide.co.za/what-to-do-when-someone-dies/dying-without-a-will/
 www.gimmenotes.co.za
 https://www.expatica.com/za/finance/taxes/wills-inheritance-tax-and-law-of-succession-in-
south-africa-949392/
 https://www.sars.gov.za/TaxTypes/EstateDuty/Pages/default.aspx
 https://businesstech.co.za/news/business/320649/everything-youll-ever-need-to-know-
about-death-and-taxes-in-south-africa/
 https://www.sataxguide.co.za/estate-duty/
 https://www.moneyweb.co.za/financial-advisor-views/effective-estate-planning-to-limit-
estate-duty/

Video / Audio

 https://www.youtube.com/watch?v=LcNe8hKJApY
 https://www.youtube.com/watch?v=_swuI3vBXqk
 https://www.youtube.com/watch?v=JkV3T1cAFcs
 https://www.youtube.com/watch?v=i4GcU1ZtT8w
 https://www.youtube.com/watch?v=K7sk-qEk1mQ
 https://www.youtube.com/watch?v=i4GcU1ZtT8w
 https://www.youtube.com/watch?v=SPoNgn1yyqk
 https://www.youtube.com/watch?v=tavWZ0Gyjqo
 https://www.youtube.com/watch?v=94sFLnrBfIU
 https://www.youtube.com/watch?v=CbUx1c_HP_4
 https://www.youtube.com/watch?v=mEG2U2llEYw
 https://www.youtube.com/watch?v=94sFLnrBfIU
 https://www.youtube.com/watch?v=i4GcU1ZtT8w
 https://www.youtube.com/watch?v=9mkAAHPx1No
 https://www.youtube.com/watch?v=O9ze074B6WQ

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5 Module Content

You are now ready to start your module! The following diagram indicates the topics that will be
covered. These topics will guide you in achieving the outcomes and the purpose of this module.

Please make sure you complete the assessments as they are specifically designed to build you in your
learning.

Unit 1: Introduction to Insolvency

Unit 2: The application of sequestration

Unit 3: Consequences of sequestration

Unit 4: Curator Bonis, provisional trustee and trustee

Unit 5: The administration process

Unit 6: The Trustees account

Unit 7: Application of proceeds

Unit 8: Composition

Unit 9: Insolvent deceased persons

Unit 10: Introduction to deceased estates

Unit 11: Types of marriages

Unit 12: Intestate succession

Unit 13: Testate succession

Unit 14: Estate duty

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Taxation 2A

Study Unit 1: Introduction To Insolvency

The purpose herein is to introduce students to the insolvency law and the
Purpose
sequestration process.

By the end of this unit, you will be able to:

Learning  Explain the meaning of insolvency.

Outcomes  Explain the meaning of “estate” and “debtor.”
 Describe the ways in which an estate can be insolvent.
 Explain the process of sequestration

Time It will take you 6 hours to make your way through this unit.

Important terms Insolvency Insolvency is a situation in which an individual or

and definitions organization cannot pay off its bills and debts.

Sequestration Process of taking legal possession of assets.

x x

x x

5.1.1 Introduction
The Law of Insolvency concerns itself primarily with the financial state of affairs of debtors.

The word insolvency is derived from the Latin word insolutus, which means the inability to pay. When
a debtor fails to meet his commitments, a creditor has several different remedies for the satisfaction
of his claim against the debtor. He may follow individual procedures or use collective procedures (De
Clercq et al, 2014).

What is Insolvency?

Insolvency is defined as the state of being unable to pay the money owned by a person or company
on time. Those in a state of insolvency are said to be insolvent. While Investopedia defines insolvency
as a scenario “when an individual or organization can no longer meet its financial obligation with its
lenders or lenders as debts become due.” Insolvency can lead to insolvency proceedings, in which legal
action will be taken against the insolvent entity and assets may be liquidated to pay off outstanding
debts.

Insolvency is an in capacity to pay debts upon the date when they become due to the ordinary course
of Business, the condition of an individual whose property and assets are inadequate to discharge the
person’s debts.

Once you have studied this section, you should be able to explain insolvency and the process of
sequestration.

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In this unit, we will cover:

 Methods of collecting debts

 Sequestration
 Procedure for sequestration

It will take you 6 hours to make your way through this study unit.

5.1.2 Methods of collecting debts

There are two methods: (a) Individual procedures (b) collective procedures

a. Individual procedures (creditor’s procedures)

 The creditor will send a letter of demand for payment to the debtor (if this procedure fails)

 The creditor can have a summons issued to the debtor and obtain judgment against him.

 If the judgment debt is not paid, the creditor will obtain a writ of execution and to have
the debtor’s assets attached. The assets can be disposed of and the proceeds will be used
to satisfy the creditor’s claim.

 The creditor can obtain a court order directing the debtor to pay the debts in installments.

 “A Garnishee” order can be obtained thereby allowing a portion of the debtors’

remuneration to be paid to the creditor.

Individual procedures (debtor’s procedures)

 The debtor can relieve himself by applying to the magistrate for an administration order,
when the debtor has too few assets to allow for his sequestration.

 This process allows the debtors to make periodic payment to an administrator, who in
turn pays the creditor the proportion of his claim.

 During the period of administration order, there will be no further action against the
debtor provided his debts do not exceed a total sum of R50 000. (S74 (i) b of Act 32 of
1944 & see generally S74 of this Act).

b. Collective procedure

This procedure is followed when the individual procedure above fails.

 The creditor is left with no other option than to sequestrate the debtor.

 Sequestrate makes provisions for other creditors interests (this is also called collective
debt collection procedure).

5.1.3 Sequestration
Sequestration is a legal process that entails the surrendering and application of a natural person’s
estate, which is bankrupt, to court to be declared insolvent.

20
Taxation 2A

Note:

 One of the consequences of sequestration is that it eventually absolves the debtor of the
payment of his debts.

 It allows the debtor the opportunity to a fresh start.

5.1.4 Procedure for sequestration

 A creditor can apply for the sequestration of a debtor’s estate if his claim complies with
the requirements of the insolvency Act.

 A compulsory sequestration will arise when one or more creditors sequestrate a debtor’s
estate.

 A voluntary surrender will occur when a debtor personally sequestrates his estates.

 The objective of sequestration of a debtor’ estate is to attempt to have creditor’s claims

satisfied fully.

 A trustee is appointed in order not to defeat the objective.

 The consequence of sequestration order is that it eventually absolves the debtor from the
payment of the debt.

 The insolvent’s estate vests on the master of the High Court who is appointed as the
trustee of the insolvent estate.

 The trustee duties are to seek out as many of the debtor’s assets as possible. For
liquidation a distribution of the proceeds in accordance with the prescribed order of
preference among the creditors (secured preferential, concurrent creditors).

 Until an insolvent is rehabilitated, all his assets except those specifically exempted by
legislation or case law are applied towards the discharge of his debts.

Note:

While it is the estate of an insolvent debtor that is sequestrated, the debtor is himself rehabilitated.

Possible prior attempts by creditors to collect

debts from debtor
Various methods ←

Insolvency Debtors
← Assets Liabilities
(R150 000) (R200 000)

20
Taxation 2A

Sequestration

Voluntary surrender compulsory

(debtor applies) sequestration
Sequestration
← (Creditors applied)

Estate vests in master and then trustee (Meetings

convened – collection, control, liquidation &
Administration
distribution/ contribution
←

Rehabilitation ← Rehabilitation

21
Taxation 2A

Additional information
Find the recommended information listed.
https://www.daniepotgieterattorneys.co.za/voluntary-
sequestration/sequestration-questions/#general-questions%20

https://gimmenotes.co.za/wp-content/uploads/2016/12/MRL3701-
M-Notes.pdf

Case study/Caselet
Apply what you have learnt to the case study presented.
You are an attorney. Your client, Grey Smith, is experiencing financial
difficulties: he owes Mr Mguni R100 000, Mrs Botha R50 000, and Mr
Zihle R60 000. His assets, at this stage, total R60 000. He authorises you
to write a letter on his behalf to his creditors, stating his financial
circumstances and inability to meet his commitments, and suggesting
the terms for paying off the debts in instalments.
You are required to draft the body of a letter which you may send to
Grey Smith’s creditors.

Practice
Practice the skills you have learned.
 Familiarise yourself with the diagram of sequestration process
in your prescribed text book – Page 4.

Reading
Read the section(s) of the prescribed text listed.
 Individual procedures – Page 1
 Collective procedures – Page 2
 A summary of the sequestration procedure – Page 2

Study group / Online forum discussion

Discuss the topic in your study group or online forum.
Critically discuss and evaluate the following statement:
“In common parlance, a person may be said to be insolvent when his
liabilities, fairly estimated, exceed his assets, fairly valued.”

Think point
Reflect, analyse and discuss, journal or blog about the idea(s).
Read the Magnum Financial Holdings case and answer the following
questions.
 Identify the problem faced by the court in Magnum Financial
Holdings.
 Summarise the authority which the court relied on to solve the
problem which it faced.

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Taxation 2A

Video / audio
Access and watch/listen to the video/audio clip listed.
https://www.youtube.com/watch?v=LcNe8hKJApY
https://www.youtube.com/watch?v=_swuI3vBXqk

5.1.5 Conclusion
In this study unit, we introduced the concept of insolvent estates. A person who has insufficient assets
to discharge his liabilities, although satisfying the test of insolvency, is not treated as insolvent for legal
purposes unless his estate has been sequestrated by an order of the court.

5.1.6 Revision questions

Revision questions
Complete the compulsory revision questions at the end of each unit.
a) What is insolvency?

b) What do you understand by the term rehabilitation of a

debtor?

c) What is the definition of a “debtor” in terms of the Insolvency

Act 24 of 1936?

d) Clearly distinguish between voluntary surrender and

compulsory sequestration.

5.1.7 Self –check activity

Self-check activity
Check your progress by completing the self-check activity.
e) Outline the individual procedures that are available to a
creditor to collect outstanding debt.

f) Explain the alternative available to a creditor should the

measures you outlined above fail.

g) Compare and contrast the two methods of collecting debt.

h) Describe the basic sequestration order.

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Taxation 2A

Study Unit 2: The Application For Sequestration

The purpose of this study unit is to make learners

Purpose

By the end of this unit, you will be able to:

 Explain in detail sequestration and the sequestration process of

Learning insolvent estates.
Outcomes  Explain what provisional sequestration is in detail.
 Describe what voluntary surrender is all about.
 Analyse and discuss the different acts of insolvency.

Time It will take you 6 hours to make your way through this unit.

Important terms Nulla bona Occurs when a creditor has obtained judgement against the
and definitions return debtor and the debtor fails to satisfy the judgement.

Rule nisi When a debtor is ordered to state reasons why his estate
should not be finally sequestrated.

x x

x x

5.2.1 Introduction
A person is not treated as insolvent for legal purposes unless his estate has been sequestrated by an
order of court, being a formal declaration that a debtor is insolvent granted either at request of:

 the debtor (voluntary sequestration); or

 one or more of the debtor’s creditors (compulsory sequestration).

Only after a sequestration order has been granted, the consequences of the Act will apply for example
Sections 26, 29, 30 and 31 making provision for some dispositions to be set aside. Although the
dispositions have taken place before sequestration, the relevant sections of the Act may be invoked
only after the court has sequestrated the debtor’s estate.

Once you have studied this section, you will be able to explain the whole process of sequestration
including the rehabilitation of the debtor.

In this study unit, we will cover:

 Jurisdiction
 What is the Master?

24
Taxation 2A

 Voluntary surrender
 Compulsory sequestration
 Provisional sequestration order
 Acts of insolvency
 Friendly sequestration
 Discretion of the court
 Final sequestration order

It will take you 6 hours to make your way through this study unit.

This unit discusses the two possible ways in which an application for sequestration can be made. This
includes what provisional sequestration is, knowledge of what voluntary surrender is all about,
knowledge of what compulsory sequestration is all about and analysis and discuss the different acts
of insolvency.

5.2.2 Jurisdiction
Only the High Court has jurisdiction regarding every debtor and the estate of every debtor who is
domiciled or owns or is entitled to property situated within the court's area of jurisdiction, or who
ordinarily resided or carried on business within the area of jurisdiction at any time within the twelve
months immediately precedi.ng the lodgement of the application (De Clercq, et al 2014).

5.2.3 What is the Master?

A Master is appointed in terms of the Administration of Estates Act to each of the Provincial Divisions
of the High Court. The Master is a “creature of statute” and thus has only the powers granted to him
by the Legislature.

For the performance of various functions, the Master can charge fees, some being payable in cash and
other by means of revenue stamps.

5.2.4 Voluntary surrender

Voluntary surrender:

The debtor himself (or his agent) may apply to the court for the acceptance of the surrender of his
estate. The Act requires a person who applies for the surrender of his estate to follow specific formal
steps and the application procedure as outlined in chapter 2 of the prescribed text book.

The applicant must publish a notice of surrender not more than 30 days and not less than 14 days
before the date on which application for the surrender of the estate will be made. This notice of
surrender must be published in the Government Gazette and in a newspaper circulating in the district
in which the debtor resides.

The next formal step which a prospective applicant for surrender must take is to prepare a statement
of the debtor's affairs which conforms with form B of the first schedule of the Act and to hand it in at
the Master's office (or the Magistrate's office in any district where there is no Master's office).

25
Taxation 2A

An application for surrender must be brought by way of notice of motion, supported by one or more
affidavits. The Act provides that the court may accept the application for surrender if it is convinced
that the conditions have been met.

Under this:

 The decision to sequestrate is taken by the debtor himself in order to prevent multiple threats
from different creditors/evade creditor’s proceedings.

 The debtor must be able to show that his application for sequestration will comply with the
provisions of the insolvency Act.

 An applicant for voluntary surrender must follow specific formal steps and the application
procedures.

 Formal steps.

 The person must disclose certain information about his financial position. This helps to provide
the creditor with sufficient information to enable them to consider opposing the application.

 Notice of application.

I. The application must publish a notice of surrender not more than 30 days and not less than
14 days before the date on which application for the estate will be made.

II. The notice must be published in the Government Gazette and a newspaper circulating in the
district in which the debtor resides.

III. This notice must correspond substantially with firm A in the first schedule of the Act.

IV. The applicant must state the date on which the application surrender will be made as well as
the place where the statement of debtors’ affairs will be open for inspection

V. Publication in the Government Gazette is very important because

a. The property of the estate may no longer be sold in execution.

b. The master may appoint a “curator bonis” to the debtor’s estate after the date of
publication.

c. The “curator bonis” must take the estate into his custody without delay and exercise
control over it

VI. The application must post a copy of the notice to each known creditor with seven days of the
publication in a government gazette so that many interested parties will be aware.

VII. Within this seven-day period, the applicant must furnish a copy of the notice to every
registered trade union, employees then serve SARS.

Statement of debtor’s affairs

 This statement is prepared to in order to confirm with form B of the first schedule of the Act
(S 4(2)).

 The statement of affairs is handed in at the master’s office or the magistrate’s office in any
district where there is no master’s office.

26
Taxation 2A

 This statement must be verified by an affidavit.

 It must be available for inspection for a period fourteen (14) days from a date to be mentioned
in the notice of surrender.

 This statement sets out the debtor’s financial position.

 It must be prepared shortly before the application for sequestration.

The application for surrender

 This is brought by way of a notice of motion supported by one or more affidavits.

 The act (first schedule of the supreme court act 59 of 1959) provides that the court may accept
the application for surrender if it is convinced that:

- The formal steps have been carried out.

- The estate of the debtor concerned is insolvent.

- The insolvent owns a realizable property of a sufficient to defray all costs of sequestration
which will be payable out of the free residue of his estate;

Note: free residue S (2) of the Act is that portion of the estate which is not subject to any right of
preference by reason of any special mortgage, legal hypothec, pledge or right of retention:

 Sequestration will be to the advantage of the creditor.

 Sufficient information such as the applicant’s name occupation, status and address, to
indicate that the court has jurisdiction.

 The reasons for the applicant’s insolvency as well as a confirmation that he wishes to
surrender the estate for the benefit of his creditors.

Even if the court is convinced that the requirements have been complied with, it is not compelled to
grant the application. In exercising its discretion, a court will take into account that the application
may not have been made in the bona fide interest of the creditors, or that a better remedy than
sequestration exists.

Note: the court has unfettered discretion.

5.2.5 Compulsory sequestration

A creditor or creditors may apply to the court for the sequestration of the debtor’s estate.

 In the case of compulsory sequestration, the application is brought by one or more of the
debtor's creditors. The requirements for a successful application by creditors are different
from those for voluntary surrender. The process gives guidance on the applicant, security for
costs, the application itself, provisional sequestration order and the final sequestration order.

 A creditor who has a liquidated claim for not less than R100, or two or more creditors, or their
agent, who in the aggregate have liquidated claims for not less than R200 against the debtor,
may apply to court for the sequestration of the debtor's estate.

27
Taxation 2A

 The applicant must include with his application a certificate of the Master, given not more
than ten days before the date of the application to the effect that security has been provided
to the Master for the payment of all costs up to and including the appointment of a trustee,
or if no trustee is appointed, for the payment of all costs for discharging the estate from
sequestration.

 The effect of this requirement is that an application must carry on the proceedings at his own
expense until such time as a trustee is appointed.

 The reasons for this requirement of furnishing security are to discourage frivolous or vexatious
proceedings against solvent persons.

I. An application for compulsory sequestration is made by way of a notice of motion, supported

by one or more affidavits.

The application has two phases. In the first phase, the estate is placed under provisional sequestration
by the court. In the second phase, the estate is finally sequestrated if the court is satisfied that the
requirements for a final order of sequestration have been complied with.

5.2.6 Provisional sequestration order

In order to obtain a provisional sequestration order, the applicant must prima facie convince the court.

This consists of two sections:

 Applications burden of proof

 Acts of insolvency

Applicant’s burden of proof

The applicant must convince the court that:

 He has a claim against the debtor

 The debtor either is factually insolvent or has committed an act of insolvency

 There is a reason to believe that it will be to the advantage of the creditors if his estate is
sequestration

The applicant’s application must contain the following information:

 The name, address, of occupation and place of residence of the applicant and the respondent
must be stated to ascertain the status of the parties and the respondent must be stated to
ascertain the status of the parties and the jurisdiction of the court.

 The amount, legal basis and nature of the applicant’s claim must be stated (state the security
and value of security for his claim)

 The debtor’s act of insolvency upon which the application is based or otherwise alleges that
the debtor is in fact insolvent.

 Whether security for cost has been provided to the master in terms of section 9(3)(b) that a
copy of the application has been furnished to every registered trade union which to the

28
Taxation 2A

applicant’s knowledge represents to the debtor’s employees, to the employees themselves

and to the South Africa Revenue Service.

5.2.7 Acts of insolvency

This consists of eight steps:

 Absence: If the debtor leaves the republic remains absent or depart from his dwelling place
with the purpose of evading or delaying payments

 Nulla bona return: This involves two acts of insolvency firstly, when a warrant for execution
is presented to the debtor and he neglects to indicate sufficient disposable property, secondly,
when it appears from the return of the officer concerned that he could not find sufficient
property.

 Disposition of property: if the debtor disposes or attempt to dispose of his property in such a
way as to prejudice hiss creditors, or to prefer one creditor above another (the result is
relevant, the intent is irrelevant).

 Removal of property: if a debtor removes or attempts to remove any of his property with the
intent to prejudice his creditors or to prefer one creditor above another, (the intent is
important) result is irrelevant

 Arrangement for release from debt: if a debtor makes or offers to make any arrangement for
one or more of his creditors to release him wholly or partly from his debts (the intent is that
the debtor’s actions must indicate his inability to pay his debts.

 No statement or incomplete statement of debtor’s affairs: A debtor will commit an act of

insolvency if, (a) after having published a notice of surrender of his estate, he fails to lodge or
he lodges an incomplete statement of his affairs with the master. (b) Or if he fails to appear
on the date which is stated in the notice of surrender as the date on which such application is
to be made.

 Notice of inability to pay: When a debtor gives written notice to any of his creditors that he is
liable to pay any of his debts (this is mostly relied upon in practice).

 Sale of business: when a trader gives notice of his intention to transfer his business in terms
of section 34(i) and is subsequently unable to pay all his debts.

5.2.8 Friendly sequestration

This is when a debtor writes a letter to the applicant on his attorney’s advice, in which he states that
he is unable to pay a debt owing to the applicant.

Note: this is often frowned upon by the courts and is therefore thoroughly scrutinized when coming
before them.

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Taxation 2A

5.2.9 Discretion of the court

 The court has a discretion whether or not to grant a provisional order, even if all the
preconditions are complied with.

 If the court does decide to make the other when exercising its discretion, the estate is placed
under provisional sequestration and a rule of nisi is given.

5.2.10Final sequestration order

The court may however give a final sequestration order if is convinced that;

 The applicant has a claim as required by the Act

 The debtor either is factually insolvent or has committed an act insolvency

 There is reason to behave that sequestration will be to the advantage of the creditor.

Note:

A heavier burden of proof rests on the applicant during consideration of final order. Since the court
must be satisfied.

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Taxation 2A

Additional information
Find the recommended information listed.
https://www.daniepotgieterattorneys.co.za/voluntary-
sequestration/sequestration-questions/#general-questions%20

https://gimmenotes.co.za/wp-content/uploads/2016/12/MRL3701-
M-Notes.pdf

Case study/Caselet
Apply what you have learnt to the case study presented.
Suppose that Bonzo Ltd is a British company which owns property
which is lying in a warehouse in Cape Town harbour. Bonzo Ltd does
not, however, have a place of business in South Africa.
 Briefly explain whether the Western Cape High Court, Cape
Town has jurisdiction to liquidate Bonzo Ltd.
 Will the Western Cape High Court, Cape Town have jurisdiction
to sequestrate Bonzo Ltd’s estate?
Practice
Practice the skills you have learned.
 Acts of insolvency – Page 11.
 Final sequestration – Page 14.

Reading
Read the section(s) of the prescribed text listed.
 Formal steps for voluntary surrender – Page 6.
 Compulsory sequestration – Page 9.
 Provisional sequestration order – Page 10.

Study group / Online forum discussion

Discuss the topic in your study group or online forum.
If Mr and Mrs Phenda were married in community of property in 2019;
and are now insolvent.
Critically discuss and evaluate who must apply for voluntary surrender
in this situation.

Think point
Reflect, analyse and discuss, journal or blog about the idea(s).
Analyse and discuss whether a debtor whose estate is under
sequestration may obtain a new estate which does not form part of the
sequestration estate.

Video / audio
Access and watch/listen to the video/audio clip listed.
https://www.youtube.com/watch?v=JkV3T1cAFcs

31
Taxation 2A

5.2.11Conclusion
Before the court can grant a final order of sequestration, it must be satisfied that there is reason to
believe that it will be to the advantage of the creditors. Creditors means all or the general body of
creditors.

If, after the costs of sequestration have been met, there is no payment to creditors, or only a minimal
payment, there is no advantage. The court must compare the position of the creditor if there is no
sequestration with the position if there is sequestration and it will only be to the advantage of the
creditors if it will result in a greater dividend than would otherwise be the case. The onus of
establishing an advantage remains on the sequestrating creditor even if the debtor committed an act
of insolvency.

5.2.12Revision questions

Revision questions
Complete the compulsory revision questions at the end of each unit.
 Explain the main purpose of a sequestration order.
 Briefly explain the meaning of nulla bona return.
 Describe the formal steps a debtor must take when applying
for the surrender of his estate.
 What is a provisional sequestration order?

5.2.13Self –check activity

Self-check activity
Check your progress by completing the self-check activity.
 Explain whether a debtor whose estate is under sequestration
may obtain a new estate which does not form part of the
sequestrated estate.
 When will a formal defect in an application for the
sequestration of an estate be fatal?
 Give reasons why a sequestration order may not be granted if
a debtor has only creditor or if there are no enough assets to
cover the costs of sequestration.
 Critically discuss what may give rise the acts of insolvency.
 Discuss the conditions under which the court may grant the
application for surrender.

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Taxation 2A

Study Unit 3: Consequences Of Sequestration

The purpose this study guide is to enable learners to explain the consequences
Purpose
of sequestration.

By the end of this unit, you will be able to:

 Explain the sequestration of insolvent estates.

Learning  Describe the consequences for the insolvent.
Outcomes  Explain the consequences for the insolvent’s spouse.
 Explain the consequences regarding legal steps.
 Describe the consequences regarding contracts.

Time It will take you 12 hours to make your way through this unit.

Concursus “Coming together” of the creditors and this prevents a

Important terms creditorum situation where one creditor receives his/her full payment
and definitions from the insolvent estate while another receives nothing.

Debt-set-off When two parties owe debts to one another, set-off can
occur.

Undue Debtor disposes of his property when his liabilities exceed

preference his assets, with an intention of preferring one creditor over
another.

5.3.1 Introduction
The granting of a sequestration order has far-reaching consequences, as the mechanisms of the law
come into operation. It is often said that sequestration results in a concursus creditorum. Concursus
creditorum refers to the legal relationships which come into existence between different creditors as
well as between creditors and their debtor. It emphasises the replacement of individual creditor
remedies with a collective execution procedure.

The main objective of a sequestration order is to satisfy creditors’ claims against the insolvent debtor’s
estate as far as possible.

Once you studied this section, you will be able to explain in detail the consequences of sequestration.

In this study unit, we will cover:

 Consequences for the insolvent

 Consequences for the insolvent's spouse
 Consequences regarding legal actions
 Consequences regarding contracts

It will take you 12 hours to make your way through this study unit.

33
Taxation 2A

5.3.2 Consequences for the insolvent

Granting a sequestration order has the immediate result that the insolvent's property vests in the
Master and later in the trustee of the estate. This has certain consequences as will be discussed in the
sections that follow (De Clercq et al, 2014).

Property acquired during sequestration:

Property which is acquired by or which accrues to an insolvent during sequestration is included in the
definition of estate for the purpose of defining property of the insolvent which vests in the Master,
and upon his appointment, in the trustee. The result is that all goods which an insolvent acquires in
the period between sequestration and rehabilitation can be applied for the payment of debts, except
for items that have been specifically excluded.

Consequences for the insolvent

Property is defined in the Act as movable or immovable property wherever situated in the Republic
and includes contingent interests in property other than the contingent interests of a fidei commissary
heir or legatee.

The term contingent interest means something which may become a vested interest on the happening
of an event.

Right to inheritance

If the right to an inheritance accrues to an heir during his sequestration, it will form part of his
insolvent estate as property for purposes of the Act. But if an inheritance has repudiated by the debtor
before or during the sequestration of his estate, that inheritance will not form part of the debtor’s
insolvent estate, so it will not be available for the advantage of the creditors.

Testator and the property

A testator cannot bequeath property in such a manner that it will not form part of the insolvent estate
of his heir. However, the property may be bequeathed to an heir on condition that, should he be an
un-rehabilitated insolvent at the time of the inheritance, it goes to another heir.

Property excluded from the insolvent estate:

 Any compensation for any loss or damage suffered by reason of defamation or personal injury,

 The insolvent's wearing apparel, bedding, his household furniture, tools and other essential
means of subsistence, or such part thereof as the creditors may determine,

 Any pension which the insolvent may be entitled to for services rendered by him and

 Remuneration for work done or for professional services rendered by or on behalf of the
insolvent after sequestration, although any surplus, in the opinion of the Master, may be
applied for the payment of debts, but until such time as the Master makes a decision in this
regard, such income vests in the insolvent for his own benefit.

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Taxation 2A

Protected life policies:

 In terms of section 63 of the long-term Insurance Act 52 of 1998 policy benefits provided to a
person under one or more assistance, life, disability or health policies are protected if such a
person or his/her spouse is the life insured and the policy has been in force for at least three
years.

 Other than for a debt secured by such policy, the policy benefits (or afore mentioned assets)
will

During his or her lifetime, not be liable to be attached or subjected to execution (under a judgment of
a court or form part of his or her insolvent estate: or

Upon his or her death, if he or she is survived by a spouse, child, step child or parent, not be available
for the purpose of payment of his or her debts

The fact that a person is an un-rehabilitated insolvent does not detract from his capacity to conclude
contracts, provided that, he does not thereby attempt to alienate property of his insolvent estate.

Sequestration limits an insolvent's capacity to practice certain occupations or professions. For

example, he is disqualified from occupying the following offices; member of the national assembly of
parliament and the provincial legislatures, member of certain statutory bodies or councils, company
director, except with the permission of the court, liquidator of a company or a close corporation, and
trustee of an insolvent estate.

 These policy benefits are only protected if they devolve upon the spouse, child, step child or
parent of the beneficiary in the event of the latter’s death.

 This protection is however limited in that it applies to: Assets acquired solely with the policy
benefits, for a period of five years from the date on which the policy benefits were provided:
and

 Policy benefits and assets so acquired (if any) to an aggregate amount of R50 000 or another
amount prescribed by the minister.

 The insolvent must assist the trustee with the collection and liquidation of estate assets if
requested to do so. For as long as his estate remains under sequestration the insolvent keeps
a detailed record of all property he receives from whatever source and of all disbursements
made by him in the course of his profession, occupation or employment

5.3.3 Consequences for the insolvent's spouse

 In discussing the consequences of sequestration for an insolvent's spouse, a distinction must
be made between marriages in community of property and those out of community of
property.

 In the case of a marriage in community of property, there is, in principle, only one joint estate
which is already under sequestration. Both spouses acquire the status of an insolvent.

 In the case of marriages out of community of property, when a debtor's estate is sequestrated,
it often happens that he indicates that all his valuable assets are the property of his wife, to
whom he is married out of community of property, thereby placing such property beyond the

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Taxation 2A

reach of his creditors. Section 21 of the Insolvency Act attempts to prevent this evil by placing
the burden of proof on the solvent spouse to prove which assets are her properties.

 The solvent spouse' property also vests in the Master and later in the trustee until the solvent
spouse has proved ownership of the property, and the property has been released to her

Note: 1

When the property of the solvent spouse has vested in the master or trustee, she has an opportunity
to claim the release of all property which is proved to have been:

 Her property immediately before her marriage to the insolvent

 Acquired by her under a marriage settlement;

 Acquired by her during the marriage with the insolvent by a little valid against creditors of the
insolvent

 Safeguarded by the provisions of certain insurance legislation

 Acquired with any such property as aforesaid or with the income or proceeds thereof

Note 2:

If the trustee refuses to release property, the solvent spouse may approach the court for such an
order.

Note 3:

If the release of property is not claimed successfully, the property is liquidated like any other property
of the insolvent estate

5.3.4 Consequences regarding legal actions

 A sequestration order has the result that the execution of judgments against the insolvent
estate ceases the moment when the officer (sheriff) charged with the execution of the
judgment becomes aware of the sequestration order.

 Even if some of the insolvent’s assets have already been sold in execution, the judgment
creditor will not be sold in execution, the judgment creditor will not be entitled to the
proceeds if these have not yet been paid over to him at the time of the order.

 Unless the execution has been completed, the story operates irrespective of the stage which
the process of execution has reached.

Note:

 The estate of an insolvent, which vests in the master and trustee, includes the proceeds of
property sold in execution and which are still in the lands of a sheriff.

 After the master’s confirmation of the trustee’s accounts, no one may institute legal
proceedings against the estate in respect of a liability which arose prior to sequestration

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5.3.5 Consequences regarding contracts

General: -

This section discusses the consequences of sequestration in respect of contracts which have not been
completed at the time of the sequestration of one of the parties to the contract.

The effects of sequestration on certain types of contracts which are regulated by statute are different
from those regulated by common law.

The general principle regarding those contracts which are not regulated by statute is that
sequestration does not cause a contract to be terminated (De Clercq et al, 2014).

Note:

As a result of “concursus creditorum” the trustee of an insolvent estate cannot be compelled to

comply specifically with the contract. Because, if he was to comply specifically with the contract, he
would be granting that one creditor a greater advantage than the other creditors (who did not receive
specific performance) who are all part of the general body of creditors.

 When a trustee is confronted with an uncompleted contract, he can elect to enforce or to

repudiate the contract.

 If the trustee is of the opinion that the outstanding commitments of the opposing contracting
party are of greater value than those of the insolvent, the trustee will elect to fulfill the
outstanding obligation in order to take advantage of the opposing party’s greater obligation.

 Should the trustee be of the opinion that the value of the insolvent’s outstanding liability is
greater than the other party, he will refuse performance of the insolvent’s liability

 Should the trustee elect to abandon the other party to the contract, he need not complete the
insolvent’s outstanding obligations and the other party to the contract then has a concurrent
claim against the insolvent estate for damages suffered.

Contracts regarding immovable property:

Sequestration of the purchaser

Section 35 of the Insolvency Act refers to the case where the estate of a purchaser of immovable
property is sequestrated before the property is transferred to him. The trustee of the insolvent estate
may either uphold or abandon the contract. The seller can instruct the trustee in writing to exercise
his choice, and if the trustee neglects to do so for six weeks after the demand, the seller may apply to
the court for the cancellation of the contract.

Note 1:

If trustee is in possession of the property, the seller in his application may also request to be placed in
possession of the property.

Note 2;

The seller may also institute a concurrent claim against the estate for any loss suffered by him as a
result of non-fulfilment of the contract

Sequestration of the seller

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Taxation 2A

The seller remains the owner of the property until such time that it has been transferred to the
purchaser by means of registration of transfer into the name of the purchaser. The Insolvency Act
does not provide for the case where the estate of a seller of immovable property is sequestrated
before the property is transferred in title to the purchaser. In terms of the general rules regarding
uncompleted contracts, a purchaser will only have a concurrent claim for the repayment of
instalments already paid and for damages.

Note:

 The insolvency Act does not provide for the case where the estate of a seller of immovable
property is sequestrated before the property is transferred in title to the purchaser.

 In terms of general rules regarding uncompleted contracts, a purchaser will only have a
concurrent claim for the repayment of installments already paid and for damages.

Note further:

For those who buy immovable property and pay in instalments are protected by the alienation of land
Act 68 of 1981. This affords a purchaser to either get an o opportunity to take transfer of the property
or if transfer is not claimed the trustee abandons the contract, to obtain a preferment claim to its
proceeds for the repayment of instalments already paid by him. On the following conditions

→Transfer costs plus the amount still owing in terms of the contract between the purchaser and seller
or

→The sum of the following

 Administration costs in terms of S 89(i) of the insolvency Act

 Amount which are by statute payable as endorsement, levy or development contribution.

 The amount which is required to settle the amount owing to the holder of a mortgage bond
over the property

Whichever one of (1) or 2 is the greatest

Note also that, if for any reason the purchaser does not wish to take transfer, he has a preferent claim
to the proceeds of the property for the payment of the following amounts:

 All amounts paid to the seller together with interest at the prescribed rate

 Reasonable compensation for essential expenses incurred by him in respect of the property
with or without the owner’s permission.

 Any expenditure which increased the value of the property and which was incurred with the
owner’s permission.

In order of preference, the purchaser’s preferent claim stands directly after that of any bond
registered in the deeds’ office before or on the day on which the contract was recorded.

Note also that, alteration of land Act provides protection to a remote purchaser. If the intermediary
with whom he contacted is sequestrated.

A → B → C

Owner intermediary Remote

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Taxation 2A

Purchaser

Movables - sequestration of the purchaser:

 Section 36 of the Insolvency Act deals with the situation where a seller sells movable property
to a purchaser on a cash basis, and the purchaser's estate is sequestrated before the seller
has been paid in full. The seller is afforded the right to reclaim the property if within ten days
after the delivery of that property he gives written notice to the purchaser or to the trustee
of the insolvent estate or to the Master that he is reclaiming the property.

 If sequestration occurs more than ten days after delivery or if the seller does not enforce his
rights within ten days, the sale will be deemed to be a credit sale and the right of ownership
of the property will be deemed to have vested in the insolvent estate.

 In such a case, the seller will only have a concurrent claim against the estate based on the
general principles pertaining to uncompleted contracts.

Lease agreements:

Sequestration of the lessee

Section 37 of the Insolvency Act is the relevant one in this instance. A lease is not terminated by the
sequestration of the lessee's estate. The trustee of the lessee's estate is however able to

Repudiate the contract by written notice to the lessor. The lessor has a concurrent claim for the
compensation for any loss which he may have suffered due to non-compliance with the contract.

Note:

 If the trustee does not notify the lesser that he wishes to continue the lease on behalf of the
estate within three months from his appointment, he is deemed to have repudiated it.

 In terms of section 37 (3) the lessor has a claim for rent due from the date of sequestration to
date on which the lease is terminated, and this is regarded as part of the costs of
sequestration.

Sequestration of the lessor (immovable property)

The trustee cannot repudiate a lease of immovable property concluded by the insolvent as a lessor.
The trustee must realise the property subject to the lease. The trustee may, however, be compelled
to repudiate the lease if the property is subject to a real right (for example a mortgage bond) which
was registered prior to the lease. The trustee must first put the property up for sale subject to the
lease. Should the highest bid be insufficient to cover what is owing to the holder of the real right at
the request of the holder, the trustee must sell the property free of the lease. Thereafter the lessee
has a concurrent claim for damages resulting from the breach of contract.

Contracts of employment:

Sequestration of employer

Refer to Section 38 of the Insolvency Act. A contract of employment entered into between an
employer and employee is immediately suspended when the employer's estate is sequestrated. From
the commencement of the suspension, the employees are entitled to unemployment benefits
provided for by the Unemployment Insurance Act 63 of 2001.

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Taxation 2A

An employee whose contract of employment has been terminated or suspended may claim
compensation from the estate for loss suffered as a result of the suspension or early termination of
the contract of service. The employee may also claim severance benefits from the insolvent estate in
accordance with the section forty-one of the Basic Conditions of Employment Act 75 of 1997. The
latter is the preferred one.

Sequestration of the employee

The contract of employment is generally not affected by the sequestration of the employee's estate.
However, there may be statutory provisions which prohibit the employee from holding a particular
office or position while he is insolvent.

Effect on instalment agreements:

Sequestration of the seller's estate

Where goods have been sold and ownership remains vested in the seller, the common law applies.
Within reasonable time the trustee must decide whether to fulfil the terms of the contract or whether
to repudiate the contract. If he upholds the contract, he must also fulfil the insolvent's outstanding
contractual obligations. When the trustee makes such election, the interest of the general body of
creditors must be considered. If the trustee elects to perform, he must make sure the instalments are
paid as required.

Sequestration of the purchaser's estate

If a person took delivery of movable goods under an instalment agreement with a reservation of
ownership under the National Credit Act, and that person's estate is sequestrated, then a

Hypothetic is created over that movable property in favour of the other party to the agreement. This
secures the amount owing to him under the agreement.

You must read the provisions of the Insolvency Act relating to the consequences of sequestration on
contracts a given in the prescribed text book in chapter 3.

Your study should include consequences of sequestration on contracts regarding immovable property,
consequences on movables, lease agreements, contracts of employment and the effect on instalment
agreements. You may not read the disposition that can be set aside.

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Taxation 2A

Case study/Caselet
Apply what you have learnt to the case study presented.
De Polo v Dreyer: insolvent may not enforce performance in his favour
unless the Insolvency Act specifically gives him this right. Insolvent may
enforce payment for work done after sequestration because section
23(9) gives him this right. The mere fact that an insolvent can enter into
a contract does not have the consequence that he is entitled to sue on
that contract for his own benefit. There is no nexus between the right
to enter into a contract and the entitlement to receive the benefit of
that contract adversely to the estate.
You are required to critically discuss and evaluate the above case in
relation to the consequences of sequestration in respect of contracts
which have not been completed at the time of sequestration.

Reading
Read the section(s) of the prescribed text listed.
 Property acquired during sequestration – Page 17.
 Property excluded from the insolvent estate – Page 18.
 Protected life insurance – Page 19.
 Contracts of employment – Page 26
 Disposition that can be set aside – Page 33

Study group / Online forum discussion

Discuss the topic in your study group or online forum.
Suppose that Baker has three creditors: he owes Paulo R100, Bheki
R500, and Chad R6 000. Baker decided to call Bheki to inform him that
he was unable to pay him.
Discuss the significance of a telephone call from Baker to Bheki to say
that he cannot pay the R500.

5.3.6 Conclusion
The sequestration of a debtor’s estate imposes on him a form of reduction in status which curtails his
capacity to contract, earn a living, litigate and hold office. Even though the debtor retains a general
competency to make binding agreements, but there are certain restrictions to protect creditors.

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Taxation 2A

5.3.7 Revision questions

Revision questions
Complete the compulsory revision questions at the end of each unit.
a) Explain the meaning of the term concursus creditorum.
b) What is undue influence?
c) What do you understand by collusive dealings?
d) What effects does sequestration have on the insolvent's
spouse?

5.3.8 Self –check activity

Self-check activity
Check your progress by completing the self-check activity.
a) Discuss the consequences of sequestration on contracts.
b) Argue, with reasons, why you think an insolvent is prohibited
from working as a general dealer or a manufacturer or from
having an interest in these activities without the consent of the
trustee.
c) Describe in detail the consequences to the debtor if he
disposes an asset when he is experiencing a negative working
capital.
d) Discuss whether an employee may continue in his employment
even after sequestration.

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Study Unit 4: Curator Bonis, Provisional Trustee And Trustee

The purpose of this study unit is to enable apply the principles embodied in the
Purpose
appointment and disqualifications of trustees.

By the end of this unit, you will be able to:

 Explain the appointment and functions of the curator bonis.

Learning  Explain the appointment and functions of the provisional trustee.
Outcomes  Explain the election and appointment of the trustee.
 Describe the grounds for disqualification as a trustee.
 Explain the remuneration, powers and duties of the trustee.

Time It will take you 6 hours to make your way through this unit.

Important terms Curator bonis Legal representative appointed to manage the

and definitions sequestrated estate.

Provisional Person elected to temporarily manage the sequestrated

trustee estate.

x x

5.4.1 Introduction
In this study unit, we deal with the election and appointment of the trustee. The Insolvency Act
provides that some persons may not be appointed as trustees to any estate, and that some persons
may not be appointed to a particular estate.

It is the task of the trustee in an insolvent estate to take charge of the estate, to collect as many assets
as possible in order to satisfy the creditors’ claims to liquidate these assets and distribute the proceeds
among the proven creditors in their order of preference, after deduction of certain costs.

Once you have studied this section, you will be able to discuss the election and appointment of
a trustee.
In this study unit, we will cover:

 Curator Bonis
 Provisional trustee
 Grounds for disqualification
 Termination of office
 Remuneration of the trustee
 Powers and duties of a trustee

It will take you 6 hours to make your way through this study unit.

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Taxation 2A

5.4.2 Curator Bonis

One of the results of the publication of a notice of surrender is that the Master may appoint a curator
bonis to take custody of the estate without delay and to exercise control over it.

The function of a curator bonis is to protect the interests of the estate until the provisional trustee or
the trustee is appointed. (De Clercq et al, 2014)

5.4.3 Provisional trustee

As soon as an estate has been sequestrated, or when someone who has been appointed as trustee
vacates his office, the Master may appoint a provisional trustee for the estate.

The Master appoints a provisional trustee at the request of the creditors. The estate vests in the
provisional trustee immediately upon his appointment.

5.4.4 Election and appointment of a trustee

At the first meeting of the creditors of an insolvent estate the creditors who have proved their claims
against the estate may elect one or two trustees. The candidate who has obtained a majority of votes
in number and in value is elected as trustee. If one candidate obtains a majority of votes according to
value and another the majority of votes according to number, both are deemed to be elected as
trustees. If no candidate obtains the required majority of votes in number, the person who has
obtained a majority of votes in value is elected and vice versa (De Clercq et al, 2014).

Note:

If no trustee is elected at a meeting of creditors and the estate has not, at that stage, vested in a
provisional trustee, the master may appoint a trustee.

 The ultimate responsibility for the appointment is the master’s

 The trustee is appointed once the master delivers to him a certificate of appointment which is
valid throughout the republic of South Africa

After receipt of this certificate the trustee must give notice in the government gazette of his
appointment and of his address

In terms of the act, the Master can refuse to confirm the appointment of a trustee under the following
situations:

 Was not properly elected

 Is disqualified from being elected or appointed as a trustee in terms of the provisions of the
act, or if he is disqualified from appointment as trustee of the estate concerned

 He has failed to give the required security within seven days from the date upon which he was
notified that the master has confirmed his election

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Taxation 2A

 The master is of the opinion that he should not be appointed as trustee

In this case, the Master must give notice of his refusal to the elected trustee, stating reasons.
Thereafter, he must convene a meeting of creditors for the purpose of electing a new trustee.

5.4.5 Grounds for disqualification

Grounds for disqualification from appointment as a trustee in an insolvent estate may be absolute or
relative.

Absolute means that the person concerned cannot be appointed as a trustee in any estate

Relative means that the person concerned is only disqualified from being appointed as a trustee in
respect of certain estates.

The following persons are either absolutely or relatively ng elected or disqualified from being elected
or appointed as a trustee in an insolvent estate.

 An insolvent

 A blood or marital relation of the insolvent within the third degree (insolvent 1st degree
parents 2nd degree siblings 3rd nephews/nieces)

 A minor or any other person under legal disability

 Any person who does not reside in the republic

 Any person who has an interest opposed to the general interest of the creditors of the
insolvent estate.

 A former trustee whose estate is sequestrated and who retained any money of the estate
concerned or used property of the estate without lawful cause.

 Any person declared unfit by the court to be a trustee, for so long as the incapacity continues,
or any person removed from an office of trust by the court on account of misconduct

 A corporate body

 Any person who has at any time been convicted of theft, fraud, forgery or handing out a forged
document or perjury and has been sentenced to a term of imprisonment without the option
of a fine or to a fine exceeding R200.

 Any person who was at any time a party to an agreement or arrangement with any debtor or
creditor whereby he undertook, when performing the functions of a trustee, that he would
grant or endeavor to grant to any debtor or creditor any benefit not provided for by law.

 Any person who has by means of any misrepresentation or any reward or offer of any reward,
induced or attempted to induce any person to vote for him as trustee or to assists in effecting
his election as trustee of any insolvent estate.

 Any person who at any time during a period of twelve months immediately preceding the date
of sequestration acted as the bookkeeper, accountant or auditor of the insolvent.

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 An agent who is authorized to act for or on behalf of a creditor at a meeting of creditors and
who act or purports to act under such authority.

5.4.6 Termination of office

 Vacation of office
 Disqualification by the court
 Removal by the Master
 Leave of absence or resignation
 Election of a new trustee

5.4.7 Remuneration of the trustee

Every trustee is entitled to a reasonable remuneration for his services, to be taxed by the Master
according to tariff B in the second schedule.

5.4.8 Powers and duties of a trustee

The trustee of an insolvent estate is responsible for the administration of the estate in terms of the
provisions of the Act. In order to perform this task, he obtains certain powers and has certain duties,
which are bestowed on him by the Act.

a) Taking charge of the estate

b) Opening bank accounts

c) Record of all receipts

d) Liquidation of estate assets

e) Notice to registered creditors

f) Continuation of the insolvent's business

g) Sale of property prior to the second meeting

h) Report to creditors

i) Obtaining legal advice

j) Extension of time for payment, compounding of debts and arbitration

k) Other obligations: The trustee must also give attention to the following matters;

i. He must give notice of his appointment in the Government Gazette

ii. He must convene all meetings of creditors which are held after his appointment

iii. He must examine all claims which have been proved against the estate to ascertain whether
the estate does in fact owe the amount claimed

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Taxation 2A

iv. He must ensure that any amount exceeding R40 which is collected on behalf of the estate is
deposited into the estate bank account on the day after its receipt at the very latest.

v. He must prepare the various estate accounts.

Case study/Caselet
Apply what you have learnt to the case study presented.
Jack’s estate has been sequestrated. Three creditors proved their
claims against his estate, Andrew, Barker and Charlize. Jack is indebted
to these creditors in the amounts of R10 000, R20 000 and R40 000
respectively. At the first meeting of creditors Vincent was elected as
the trustee by Andrew and Barker while Charlize elected Winnie as the
trustee.
Discuss who will be appointed as the trustee of Jack’s insolvent estate?
Substantiate your answer.

Reading
Read the section(s) of the prescribed text listed.
 Election and appointment of a trustee – Page 42.
 Grounds for disqualification – Page 44.
 Termination of office – Page 45.
 Powers and duties of a trustee – Page 46.

Study group / Online forum discussion

Discuss the topic in your study group or online forum.
Chad sold his house to Dave for R3 million. Before the registration of
the transfer in the Deeds Office, Dave’s estate was sequestrated. Thus,
the sequestrated took place before the whole registration process at
the deeds’ office could be finalised.
You are required to advise Chad on the steps he should take in giving
notice to the trustee of Dave’s insolvent estate.

5.4.9 Conclusion
It must be borne in mind that the master has the final authority when it comes to the appointment of
a trustee. The Master may refuse to accept the person the creditors elected as trustee. If he accepts,
once the person has given satisfactory security for the proper performance of his duties as trustee,
the Master must confirm the election and appointment by delivering a certificate of appointment.

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Taxation 2A

5.4.10Revision questions

Revision questions
Complete the compulsory revision questions at the end of each unit.
a) Why is it necessary to appoint a curator bonis?
b) Explain how a trustee is elected.
c) How may a trustee be elected and appointed?
d) Name the grounds upon which the Master may refuse to
appoint a person as a trustee.

5.4.11Self –check activity

Self-check activity
Check your progress by completing the self-check activity.
a) On what grounds can a person be disqualified from
appointment as a trustee?
b) Discuss the powers and duties of a trustee.
c) Why must a trustee who has been found guilty of offences such
as theft and fraud be removed from office?
d) If the creditors have elected a trustee unlawfully the Master
may exercise his discretion to appoint this person as the
trustee if he was the only candidate nominated by the creditors
present and entitled to vote at the creditors’ meeting.
Discuss the above statement in relation to the powers and
duties of the Master.

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Taxation 2A

Study Unit 5: The Administration Process

The purpose of this study unit is to enable learners to apply the principles of
Purpose
the administration process for insolvent estates.

By the end of this unit, you will be able to:

 Describe the administration process of an insolvent estate.

Learning  Discuss the different types of meetings.
Outcomes  Discuss the different types of interrogations.
 Describe the liquidation of assets.
 Describe the application of proceeds.

Time It will take you 8 hours to make your way through this unit.

Secured Creditor holding security in the form of a mortgage, lien,

Important terms
preferent charge, pledge, or privilege against an asset of the insolvent
and definitions
creditors person as a security for a debt due.

Unsecured Creditors who do not hold any security for their claims but
preferent who are entitled to the proceeds of estate assets in
creditors preference to other unsecured creditors.

Concurrent These creditors are entitled to the remaining assets after

creditors the secured creditors are paid

x x

5.5.1 Introduction
As indicated in earlier study units, the main purpose of the sequestration process is to collect as many
assets as possible for payment of the insolvent's debts, and to realize these assets at the lowest
possible cost. The proceeds are then divided among the creditors in the order of preference that
existed at the moment of sequestration. In this and the following two study units we will discuss the
administration process step by step (De Clercq et al, 2014).

Once you have studied this section, you will be able to explain the administration process in the
sequestration of estates.

In this study unit, we will cover:

 Meetings of creditors and proof of claims

 Types of meetings
 Proof of claims
 Proof of conditional claims
 Interrogations at meetings of creditor
 Liquidation of assets
 Liquidation of movables
 Liquidation of immovable property

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Taxation 2A

 Application of proceeds

It will take you 8 hours make your way through this study unit.

5.5.2 Meetings of creditors and proof of claims

Creditor meetings play an important role in the administration of insolvent estates. At these meetings
creditors prove their claims against the insolvent estate and exercise control over the administration
process (De Clercq et al, 2014). The Act makes provision for the following meetings:

 A first meeting

 A second meeting

 A general meeting

 A special meeting

 Meeting to consider an offer of composition (to be treated in chapter 8)

5.5.3 Types of meetings

First meeting

The first meeting of creditors is convened by the Master by means of a notice in the Government
Gazette once he has received notice of the sequestration order. The purpose of this meeting is to give
creditors and opportunity to prove their claims against the estate and to elect a trustee.

Note:

 The notice in the government gazette must be published at least ten days before the date
of the meeting and must state the time and place of the meeting (S40(2)

Second meeting

The second meeting of creditors is held at any time after the first meeting and after a trustee has been
appointed. The trustee convenes the second meeting by giving notice thereof in the Government
Gazette and in one or more newspapers circulating in the district in which the insolvent resides or
where his principle place of business is situated.

Note:

The meeting is arranged by the master

It is arranged to give creditors a further opportunity to prove their claims against the estate, to receive
the trustee's report on the estate and to give instructions regarding the estate and to interrogate the
insolvent and other persons if required.

General meeting

These are convened only if the need arises. The trustee is obliged to convene a general meeting if
required to do so by the Master or by the creditors whose claims represent a quarter of the value of

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all claims proved against the estate. The purpose is to instruct the trustee regarding the administration
of the estate. The notice of the general meeting must state which matters will be dealt with.

Special meeting

A special meeting is convened by the trustee at any time after the second meeting for the purpose of
proof of claims if required to do so by an interested person who tenders payment to the trustee of all
expenses to be incurred in connection with such a meeting. The meeting is convened by notice in the
Government Gazette.

Note

 The meeting can be convened at any time with the sole purpose of interrogating the insolvent

 Also, when a creditor who has proved its claim against the estate requests such a meeting and
the master gives his consent

5.5.4 Proof of claims

In order to share in the proceeds of the property of an insolvent estate, a creditor must prove his claim
against the estate in accordance with the provisions of the act. The claims of the preferent portions
of employees of the insolvent are exceptions to this rule because these creditors do not have to
formally prove their claims.

Apart from its amount, the nature of a creditor's claim is important since it will, together with the
amount of the proceeds of the state, determine the extent to which the claim will be satisfied.

While the greater part of a secured creditor's claim will probably be paid, concurrent creditors often
have to be satisfied with a small dividend, or in a worst-case scenario, be responsible for payment of
a contribution.

Note:

 Any creditor who has a liquidated claim against the insolvent estate, the cause of which prior
to sequestration, can prove his claim at any stage prior to the final distribution of the estate

 A creditor with an unliquidated claim, also must submit his claim at a meeting of creditors,
although the value of this unliquidated claim may then be still uncertain.

 When a claim against the estate has been admitted or compromised or settled by a judgment
of the court, it is deemed to have been proven and admitted.

 A claim cannot be recovered “out of” the property of the estate unless such claim is proved
and admitted against such estate.

 Any claim submitted to a meeting of creditors must be supplied by such evidence as the
presiding officer of the meeting deems to be sufficiently and must be handed in at the office
of the presiding officer at least 24 hours before the meeting.

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 The presiding officer of a meeting of creditors can, of his own accord, or at the request of the
trustee or a proven creditor, summon a creditor who wishes to prove a claim for the purpose
of interrogating him about his claim.

 After a meeting of creditors, the officer who presided at the meeting must hand every claim
proved at the meeting, together with supporting documents to the trustee.

 The trustee must examine all relevant documents to ascertain the validity of the different
claims, sort and correct any problem before submitting to a statutory meeting. Of condition
claims.

5.5.5 Proof of conditional claims

It often happens that a creditor's claim against an insolvent estate depends on the occurrence of an
uncertain future event or condition. A conditional creditor proves his claim against the estate like any
other creditor, provided it is liquidated in the sense that its amount is determined, and provided the
condition is still capable of fulfilment when the concursus creditorum is instituted. Since it is uncertain
whether he is actually entitled to the amount, no part of his claim can be paid out until the occurrence
or non-occurrence of the condition.

Withdrawal of proven claim

A creditor who has proved his claim against an insolvent estate may withdraw it by addressing a
registered letter to the Master and the trustee. The trustee must inform all other creditors in writing
of the withdrawal.

5.5.6 Interrogations at meetings of creditor

The main purpose of the provisions regarding interrogation s to assist in finding assets which can be
applied for the payment of the insolvent's debts. Sections 64, 65 and 66 of the Insolvency Act provide
guidance in this respect. The Act makes provision for three kinds of interrogation; Interrogation of a
creditor who wishes to prove his claim, interrogation of the insolvent and other person at meetings of
creditors, interrogation of the insolvent, trustee or other person by the master

Interrogation at meetings of creditors

The insolvent must attend the first and second meeting of creditors unless he has obtained prior
permission of the presiding officer of the meeting to be absent. He must also attend each subsequent
meeting if the trustee of the estate gives him written notice to attend.

Read paragraph 26.3 to 26.4 of the prescribed textbook

Interrogation by the Master

If at any time during the period between the sequestration of an insolvent's estate and his
rehabilitation the Master is of the opinion that the insolvent, the trustee of the estate or any other
person is able to give information about the insolvent, his estate, the control of his estate or a claim
made against the estate, he may instruct such a person by means of a written notice to appear before
him or before a magistrate or other public servant for interrogation. The person summoned can then

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be interrogated on any matter relating to the insolvent or his estate or the administration of the
estate.

5.5.7 Liquidation of assets

The majority of assets in an insolvent estate will normally not consist of cash. It is therefore logical
that assets will first have to be turned into cash in order to satisfy the claims of proven creditors as far
as possible. The Act attempts to ensure that the maximum proceeds are obtained for these assets.

Sale before second meeting

Estate property may not be sold by the trustee before the second meeting of creditors unless
authorized to do so by the Master or pursuant to the terms of a composition.

Instructions will normally be given to the trustee regarding the sale of estate assets after the creditors
have considered the trustee's report given to them at the second meeting of creditors. In certain cases,
it may be necessary to dispose of assets before the second meeting. Some of the estate assets may
be perishable products, or it may become possible to obtain an unusually good price for an asset. The
trustee may make a recommendation to the Master in this regard. The Master may authorize the sale
of the property on such conditions as he may deem fit.

Sale after second meeting

Property not subject to secured rights after the creditors have received the trustee's report at the
second meeting, they may give him instructions regarding the liquidation of estate assets. As soon as
he receives the creditors' authorization, the trustee must sell the assets in the manner and upon the
conditions directed by the creditors. If the trustee sells assets contrary to the creditors' directions,
such sale is unauthorized and void, unless the purchaser purchased it in good faith.

Property subject to secured rights description of security before the liquidation of securities can be
discussed meaningfully, it is necessary to be sure of the meaning of the concept of security. Preference
means the right to payment of a claim out of a specific property of the estate in preference to other
claims. Security means a specific property of the estate over which the creditor has a preferent right
by Virtue of a:

 Special mortgage

 Landlord’s legal hypothec

 Pledge

 Right of retention

Note:

 The Act refers to the rights of both the secured preferent creditors and unsecured preferent
creditors as preferent rights

 An unsecured preferent creditor has a preferent claim above other unsecured creditors to the
proceeds of the property or as part of the property, which is not subject to a security by virtue
of the provisions of the Act.

 Assets which are subject to a security are referred to as encumbered assets.

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Taxation 2A

5.5.8 Liquidation of movables

A creditor of an insolvent estate who holds movable property as security for his claim must give
written notice thereof to the Master and to the trustee of the estate before the second meeting of
creditors. If the property in the possession of the creditor consists of marketable securities or bills of
exchange, he has the capacity to realize the property himself before the second meeting of creditors.
If the property does not consist of a marketable security or a bill of exchange, the trustee may take
over the property at a value agreed upon between him and the creditors at a meeting of creditors, or
at the full amount of the creditor's claim.

Notes:

 If the creditor’s security consists of a right of action, he may not realize it without the
permission of the trustee or the master.

 If a creditor does not liquidate moveable property of the estate which he holds as security
before the second meeting of creditors, he must hand it to the trustee as soon as possible after
the commencement of the meeting

 In terms of S44 (4) of the Act, the trustee has three courses of action at his disposal.

Firstly, provided that the creditor valued his claim, he may take the property over from the creditor at
the amount at which the latter valued it when he proved his claim.

Secondly, the trustee has the right to liquidate the property for the benefit of all the creditors whose
claims are secured thereby according to their respective rights.

Thirdly, the trustee may, if authorized by the creditors abandon the property the proved in favour of
the secured creditor at the value which the later placed on the property when he proved his claim
against the estate.

5.5.9 Liquidation of immovable property

A creditor who holds immovable property of the estate as security does not have the capacity, as is
the case with movable property, to liquidate the property himself.

Note:

The trustee has the same three choices that have for movables which were not liquidated.

5.5.10Application of proceeds
As soon as all estate assets which do not consist of cash have been converted to cash, the trustee is in
the position to distribute the proceeds among the creditors who have proven their claims, after
deducting certain costs.

Note:

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Taxation 2A

There is a distinction between assets which form part of the free residue and those which do not form
part of the free residue. The free residue is that part of the estate which is not subject to a secured
right (the Act refers to preferent right) by reason of any special mortgage, legal hypothec, pledge or
right of retention property which does not form part of the free residue is that which is held as security
by the various secured creditors.

The liquidation of assets has cost implications. These costs, together with other costs of sequestration,
must be derived from the assets which form part of the free residue of the estate and from those
assets which do not form part of it, depending on where the costs were incurred.

The following categories of creditors are entitled to share in the proceeds of the estate;

Secured preferent creditors have a preferent right to payment from the net proceeds of certain
property by virtue of a special mortgage, landlord's legal hypothec, the hypothec of a hire-purchase
seller, a pledge or a right of retention.

Unsecured preferent creditors are those who do not hold any security for their claims but who are
entitled to the proceeds of estates assets in preference to other unsecured creditors. They rely on the
free residue for the settlement of their claims. They are entitled to payments from the free residue.

Unsecured or concurrent creditors have no security for their claims and are not entitled to payment
from the proceeds of the estate assets in preference to other creditors. They rely on free residue
which remains after payment of costs and unsecured preferent creditors on a prorate basis.

Additional information

Find the recommended information listed.

http://www.honeyattorneys.co.za/article/15/INSOLVENT-ESTATES-IN-
A-NUT-SHELL

Reading
Read the section(s) of the prescribed text listed.

 Meetings of creditors and proof of claims – Page 49.

 Interrogations – Page 55.
 Liquidation of assets – Page 56.
 Application of proceeds – Page 61.

Study group / Online forum discussion

Discuss the topic in your study group or online forum.

Discuss and evaluate whether the creditor who holds immovable

property of the estate as security has the right or capacity to liquidate
the property himself.

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Taxation 2A

5.5.11Conclusion
This is a very basic overview of the procedure that is followed when an insolvent estate is
administered, and many of the insolvent estates are more complicated and there will then be extra
procedures followed by the Trustees.

5.5.12Revision questions

Revision questions
Complete the compulsory revision questions at the end of each unit.
a) Describe the type of meetings of creditors.
b) What does the interrogation by the Master entail?
c) Explain whether a creditor whose claim against an estate is
dependent upon a condition has the right to vote at the
creditors meeting.
d) What is the main purpose of the interrogations?

5.5.13Self–check activity

Self-check activity
Check your progress by completing the self-check activity.
a) Discuss and evaluate the categories of creditors.
b) In what circumstances can an estate asset be sold before the
second creditors' meeting?
c) Describe how movables are liquidated.
d) Describe how immovable are liquidated.

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Taxation 2A

Study Unit 6: The Trustee’s Account

The purpose of this study unit is to enable learners to explain the trustee’s
Purpose
account and how to do the calculations of the various liquidation accounts.

By the end of this unit, you will be able to:

 Describe the different types of accounts

Learning  Explain the types of trusts, their provisions and the taxation
Outcomes implications thereof;
 Calculate the taxable income of all related parties to a trust with
respect to amounts that accrue to the trust during a year of
assessment.

Time It will take you 8 hours to make your way through this unit.

Free Residue Account that contains that portion of the estate which is
account not subject to any right of preference by reason of any
Important terms special mortgage, legal hypothec, pledge or right of
and definitions retention.

Liquidation Report that contains a record of all money received by the

account trustee and all money disbursed in order to sequestrate the
estate, except for transactions that took place in course of
business conducted on behalf of the estate.

Distribution Report that contains the proceeds which will be used in

account settling the administration costs and pay dividends to the
creditors who have proved a claim.

x x

5.6.1 Introduction
The trustee of an insolvent estate is obliged by law to prepare certain accounts. These accounts are
an important element in the sequestration process since they reflect the state of the insolvent estate,
the manner in which the trustee dealt with the property, and its application and distribution (De Clercq
et al, 2014).

Once you have studied this section, you will be able to explain the what constitute the trustee’s
account and the calculation of the distribution account.

In this study unit, we will cover:

 Description of the accounts

 Closing remarks
 Time of submission
 Inspection of account by creditors

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Taxation 2A

 Confirmation of account
 Notice of distribution or contribution
 Finalisation

It will take you 8 hours to make your way through this study unit.

5.6.2 Description of the accounts

When an estate is sequestrated, the trustee’s first step will be to liquidate the assets and pay the costs
in connection with the sequestration (liquidation).

Secondly, he will distribute the net available proceeds among the creditors (distribution).

These actions will be reflected in the account which the trustee must prepare. The account will contain
the following subdivision;

 A liquidation account (reflecting how the assets were liquidated)

 A distribution account (reflecting how assets were distributed among creditors)

 If applicable, a contribution account (reflecting how creditors contributed towards costs of

sequestration)

 If he carried on business on behalf of the estate, he must prepare a trading account

 If the first (liquidation and distribution account) was not the final account, a supplementary
liquidation, distribution or contribution account must also be prepared and submitted

 Section 92(3) provides that the account must be accompanied by vouchers in support of the
receipts and payments.

 A schedule reflecting the pro rata costs that are shared between encumbered asset accounts
and the free residue account for example Master’s fees, Bond and security payment and in
some cases advertising in respect of an auction or tender.

Heading

The account must be provided with a heading that must reflect at least the following information;

 It must indicate the status of the account (first or second or final)

 It must describe the account (liquidation and distribution account)

 It must indicate that it is an account in an insolvent estate

 It must indicate whose estate is being dealt with (to prevent misunderstanding)

 The heading must give the date of sequestration and the Master’s reference number.

If it is the account of an insolvent company close corporation which the liquidator must prepare, the
insolvent may be described by the company or close corporation’s name and the registration number
only. The words IN LIQUIDATION must appear after the name of the corporate body concerned.

Liquidation account

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Taxation 2A

The liquidation account must contain a record of all money received by the trustee and of all money
disbursed in order to sequestrate the estate, but it does not include money which was received or
distributed in the course of a business which was conducted on behalf of the estate as this appears in
the trading account.

The liquidation account must reflect the nature, date and amount of every receipt or disbursement.

NOTE:

The liquidation account must reflect at least the following:

 A description of property, sufficient to make it identifiable beyond all doubt

 The name of the person or institution to whom or through which the asset was sold;

 The method of disposal, for example by public auction;

 The date on which it was sold; and

 The gross amount (proceeds) which the assets yield.

In respect of the disbursement, it also means that the liquidation account must reflect at least the
following:

 Details of the name of the disbursement

 The date of payment and

 The amount of the disbursement.

If a liquidation account is not the final account, the trustee must set out in the account all property
not yet liquidated, all outstanding debts still due to the estate and the reasons why the property has
not yet been realized or why debts have not been collected.

A trading account is in effect a liquidation account relating only to a business which the trustee carried
on behalf of the estate.

NOTE

The following particulars must be reflected in such account:

 A record of the value of the stock on land at the date of sequestration;

 A record of the value of the stock on hand on the date on which the account was prepared

 The daily total of the receipts and payment in connection with the business;

 The result of the trustee’s conduct of the business

Distribution account

A distribution account must provide the following information in parallel columns under separate
headings;

 The amount of every claim or part thereof against the estate which is secured or otherwise
preferent

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Taxation 2A

 The amount of every claim or part thereof against the estate which is concurrent

 The amount awarded to every creditor of the estate in that account as well as in any previous
distribution account

 The deficiency in respect of each claim.

NOTE: the account must be prepared in such a manner that a distribution in terms therefore will be
in accordance with the provisions of the Act.

A contribution account must reflect in parallel columns the claims in respect of which the creditors
concerned are liable for contribution, as well as the amount which must be paid by

Certificate

A trustee must sign every account which he submits to the Master and he must verify, by means of an
affidavit, that the account is a full and true account of the administration of the estate in question up
to the date of the account, and that as far as he is aware, all the assets of the estate have been
disclosed in the account

NOTE: an example of a certificate

I, the undersigned………………………………………… In my capacity as the trustee in the insolvent estate of

……………, hereby declare under oath that the foregoing account is a full and true account of the
administration of the estate in question up to the date on which it was signed by me and that, as far
as I am aware, all the assets of the estate have been disclosed in the account

See example of a certificate in chapter six of your text book.

5.6.3 Closing remarks

A liquidation, distribution and / or contribution account form part of one account. If an account is not
a final account, the trustee merely sets out account to the master of the high court after he has
liquidated all the property of the estate but before any distribution in terms therefore has been
physically paid to the creditors.

See how a Liquidation and Distribution account appears in chapter 6 of the prescribed text book.

5.6.4 Time of submission

As a rule, the trustee’s account must be submitted to the Master within a period of six months from
the date of his appointment. However, it will often be impossible for the trustee to finalise his account
within this period. In such a case, the trustee must before the expiry of the period of six months from
the date of his appointment, or within such further period as the Master may allow, submit to the
Master an affidavit in which he states;

The reasons for his inability to submit the account on time

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Taxation 2A

Affairs, transactions or maters of importance relating to the insolvent or the estate as the Master may
require the amount of money available for payment to the creditors or the deficiency which the
creditor must contribute. The trustee must send a copy of the affidavit to every creditor who has
proved his claim.

NOTE:

 If the trustee has not submitted his account within the prescribed period and has not requested
an extension of time to do so, the master may instruct him in writing to submit either the
account, or an affidavit containing the information listed above.

 If the master refuses to extend the time allowed for the submission of the account, the trustee
may, after notice to the master, apply to the court for an order extending the period within
which he must submit his accounts.

 It is also possible that the trustee may be orders to submit his accounts before the expiry of
the period of six months from the date of his appointment.

 If he has funds on hand which, in the master’s opinion, ought to be distributed among the
creditors, the master may direct him in writing to submit a distribution account in respect of
these funds, although the prescribed period may not have elapsed.

5.6.5 Inspection of account by creditors

As soon as possible after the trustee has submitted an account to the Master, and the Master consents
thereto, the trustee must give notice that the account will lie open for inspection at the Master’s office
for a period of fourteen days from date of publication. The notice must appear in the Government
Gazette and in a newspaper circulating in the district where the insolvent resides or where his most
important place of business is situated. The notice must appear in English and in Afrikaans
simultaneously, and each must occupy more or less the same amount of space.

If the insolvent resided or carried on business in a district in which there is no Master’s office, a copy
of each account must also be sent to the Magistrate’s office in the district where the insolvent resided
or carried on business, and that the account must lie open for inspection at that office.

5.6.6 Confirmation of account

When a trustee’s account has laid open for inspection in the prescribed manner, and no objection has
been lodged; or an objection has been lodged and the account has been amended in accordance with
the Master’s directions, and if necessary has again been open for inspection and no application has
been made to court so set aside the Master’s decision; or

An objection has been lodged but withdrawn or has been sustained and the objector has not applied
to court, the Master must confirm the account. The Master’s confirmation is final, except against a
person who has been permitted by the court to reopen the account.

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Taxation 2A

Worked example:

Examples of how to perform a calculation or activity with the solution

/ appropriate response.

The estate of Miss Magaline, an unmarried person of I first Avenue, Johannesburg, ID Number
4912120000081, was sequestration on 2 January 2011; estate number 11/2011.

The following cash book reflects the cash transactions entered by 1 caretaker, the trustee of Miss
Zine’s estate up to 31 May 2011.

CASH BOOK

INSOLVENT ESTATE OF MAGAZINE

RECEIPTS Deposit – Flux Auctioneers 96 960

04/03/2011 {furniture and paintings, as per list sold on 1 March 2011 on

a public auction (R101 000 less R4 040 auctioneer’s commission)}

PAYMENTS 1 Caretaker (1 525)

10/05/2011 {Cost of security, advertisements, bank charges and stationery as

per schedule – paid on behalf of estate, now claimed back}

10/05/2011 Move Quick (810)

(Transport costs of furniture and paintings to auctioneer’s premises)

31/05/2011 Bank balance 94 625

The following claims were proved against the estate

1. Slower Lane Bank 30 000

(Bank Overdraft - Unsecured)

2. Miss Vanessa Reckless 390 000

(Miss Reckless instituted a claim against Miss Zine for slandering her in a newspaper article. The court
ruled in favour of Miss Reckless and ordered. Miss Zine to compensate Miss Reckless for the damage
suffered)

You are required to prepare the:

 First and Final Liquidation Account.

 Distribution Account

 Certificate

 Notes – Master’s Fees

 Trustee’s remuneration

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Taxation 2A

SOLUTION

First and Final Liquidation and Distribution Account in the insolvent estate of MAGAZINE, who
resides at 1 First Avenue, Johannesburg (ID Number 4912120000081) was sequestration on 2
January 2011; estate number 11/2011.

Table 1: Liquidation account

FREE RESIDUE ACCOUNT

RECEIPTS:

Proceeds of furniture and painting - per schedule 1 101 000

(sold by flux auctioneers at a public auction 01/03/2011)

LESS EXPENSES 17 000

Auctioneer’s Commission 1 4 040

(Paid to flux auctioneers on 01/03/2011)

0ther costs – As per schedule 2 1 525

(Cost of security, advertising, bank charges and

Stationery – paid on 10 /05/2011)

Transport Costs 3 810

(Paid to move quickly on 10/05/2011)

Master’s fees 4 525

Trustee’s remuneration 5 10 100

AVAILABLE IN FREE RESIDUE 84 000

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 Taxation 2A

Distribution account

Claim Creditors Total Claims Awards Deficit

No claim
Secured prefere Concur secured Prefere Concur- and
nt nt rent outstanding
ent
awards

1 Slower lane 30 000 - - 30 000 6 000 24 000

bank

2 Vanessa 390 000 - - 390 000 78 000 312 000

Reckless

420 000 420 000 *84 000 336 000

**A = +B +C +D

*** A= +E +F +G +H

NOTE:

*This is the amount available according to the free residue account

**Column B + column C + column D= R42 000. This is equal to column A, namely R420 000

*** Column E + column F + column G + column H = R420 000. This is equal to column A, namely R420
000.

Certificate

I, the undersigned, I caretaker, in my capacity as the trustee in the insolvent estate of magazine, do
hereby declare under oath that the foregoing account is a true and just account of the administration
of the insolvent estate up to the date on which it was signed by me and that so few as l am aware, all
the assets have been reflected in the account.

I caretaker 28 June 2011

Signature of the trustee Date

I certify that the deponent acknowledges that he is aware of and understands the contents of this
declaration. This statement was made under oath before me at Johannesburg on this 28th day of June
2011

Big Dadda 28 June 2011

Commissioner of oaths Date

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Taxation 2A

1. Master’s fees were calculated according to the prescribed tariff in the third schedule to the
insolvency Act. According to the tariff, master’s fees are calculated on the gross value of the
estate, i.e. R101 000 in this case:

The calculation was therefore as follows:

On the first R15 000 of the gross estate R100

On the remainder

(R86 000 (Total gross value of R101 000 less R15 000)

Therefore 86 000 x R25

5 000 425

525

Note: the tariff refers to complete multiples of R5 000. There are only 17 complete multiples of R5
000 in the R86 000 by which the gross estate exceeds R15 000 (R 101 000 – R 15 000 = R86 000). The
R1 000 above R85 000 (17 x R5 000 = R85 000) is less than a complete multiple of R5 090 and is
therefore ignored.

2. Trustee’s remuneration is calculation according to the prescribed tariff in the second schedule
to the insolvency Act. The tariff for trustee’s remuneration is as follows. On the proceeds of
furniture and paintings, being movables sold, therefore 10% of R101 000 = R101 000. If the
calculated remuneration was less than R2 500 it would have been adjusted to R2 500 being
the minimum remuneration.

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Taxation 2A

Learning example:

Examples of how to perform a calculation or activity with the solution

/ appropriate response.

The estate of Miss Megan Zille, an unmarried person of 1 ness street, Lakefield, ID number
671014001088, was sequestrated on 4 January 2008, estate number 17/2008.the following cash book
reflects the cash transactions entered by G Loveday, the trustee of Miss Zilles estate to 30 June 2008.

Cashbook: Insolvent estate of Megan Zille:

Receipts
3/2/2008 Deposit – Executive Auctioneers 127 240 00

Furniture and Jewelry as per list

Sold on 31 January 2008 on a public auction

(R 133 260 less R 6 020 auctioneer’s commission)

Payments

13/4/2008 G Loveday (3 240 00)

Cost of security, advertisements, bank charges and stationery as

per schedule

Paid on behalf of the estate, now claimed back

Prompt movers (pty) Ltd

11/6/2008 (1 920 00)
Transport costs of furniture and jewelry to premises of
auctioneer
30/6/2008 122 080 00
Bank balance

The lists and schedules are not shown for the purposes of this example.

Claims proved against the estate

(a) Growth – link Bank overdraft - unsecured 41 000 00

(b) Mrs. Patricia Johnstone 300 000 00

Mrs. Johnstone instituted a successful claim against Miss Zille for

slandering her in a newspaper article. The court ruled in favour
of Mrs. Johnstone and ordered Miss Zille to pay for damages 341 000 00
suffered

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 Taxation 2A

Assume, for the purpose of this example that Master’s fees amounted to R800, and trustees’
remuneration amounted to R13 326.

The above information was used to prepare the following account for submission to the Master of the
Supreme Court:

First and final liquidation and distribution account in the insolvent estate of Megan Zille, who resides
at 1 Ness Street, Lakefield (ID Number 671014001088), and who was sequestrated on 4 January 2008.

Liquidation account

Free residue account

Receipts

proceeds from sale of furniture and jewellery 1 133 260 00

(As per attached schedule) *

- Sold by Executive Auctioneers at a public auction – 31 (25 306) 00

January 2008
6 020 00
Less expenses:
3 240 00
Auctioneer’s commission
1
- Paid to executive auctioneers on 31 January 2008
1 920 00
Cost of security, advertising, bank charges and stationery
2 800 00
(As per attached schedule)*
13 326 00
Transport costs
3
- Paid to prompt movers (Pty) ltd on 11 June 2008
106 954 00

Master’s fees

Trustee’s remuneration

Available in free residue

Not shown for the purpose of the example

Distribution account

DISTRIBUTION ACCOUNT

Claim Creditors Claims Awards Shortfall

No
Secure preferre Concurrent secur preferre Concurrent
d d ed d

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 Taxation 2A

1 Growth link bank - - - - 41 000 00 - - - - 12 860 00 28 140 00

2 Patricia - - - - 300 000 00 - - - - 94 094 00 205 906 00

Johnstone

- - - - 341 000 00 - - - - 106 954 00 234 046 00

a = 106 954 / 341 000 x 41 000 = 12 860

b = 106 954 / 341 000 x 300 000 = 94 094

CERTIFICATE

I, the undersigned, G Loveday, in my capacity as the trustee in the insolvent estate of Mega Zille, do
hereby declare under oath that the foregoing account is a true and just account of the administration
of the insolvent estate up to the date on which it was signed by me and that so far as l am aware, all
the assets have been reflected in the account.

G Loveday 28 July 2008

Signature of the trustee Date

I certify that the deponent acknowledges that he is aware of and understands the contents of this
declaration. This statement was made under oath before me at Johannesburg on this 28th day of
June 2008.

Dam Elin 28 July 2008

Commissioner of oaths Date

5.6.7 Notice of distribution or contribution

Immediately after the confirmation of his account, the trustee must distribute the funds in accordance
with the account or collect any contribution which may be payable. He must give notice of the
confirmation of his accounts in the Government Gazette and, depending on the circumstances, state
that a dividend is payable or that a contribution will be levied.

The trustee must lodge the receipts for dividends paid to creditors with the Master. If a dividend has
not been paid to a creditor entitled to such a dividend within two months from the confirmation of
the accounts, the trustee must pay it to the Master, who deposits it in the Guardian’s Fund for the
account of the creditor.

In exceptional cases where, after payment of all costs, claims and interest, there is a residue, the
trustee must pay the surplus over to the Master who deposits it in the Guardian’s Fund. The insolvent
is entitled to these funds after his rehabilitation.

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Taxation 2A

The act grants certain powers to a trustee which enables him to collect contributions from creditors
speedily and without obtaining a court order. After the expiry of a period of 30 days from the delivery
or posting of a notice contribution to a creditor, the trustee may apply for a writ of execution against
a creditor in a Magistrate’s court in which the creditor could ordinarily be sued. This allows him to
attach as much of the creditor’s assets as may be necessary to cover the contribution, or if the trustee
has incurred any expenses in connection with the recovery of any contribution, and these expenses
are deemed to be irrecoverable, the trustee must draw up a supplementary contribution account in
which the outstanding amount is revered from those creditors who are able to pay.

5.6.8 Finalisation
After the approval of the accounts, the trustee pays the creditors as set out in the distribution account.
The planned distribution according to the distribution account now becomes the actual record of
distribution.

Before the Master of the High Court will discharge the trustee, he must prove that he paid the
creditors as set out in the distribution account.

Case study/Caselet
Apply what you have learnt to the case study presented.

A bought a house and caused a mortgage bond for R120 000 to be

registered over it in favour of B Bank. Later, C fitted new wooden floors
in the house at a contract price of R15 000. This improvement increased
the value of the property by R10 000.

Because A has not yet paid C, C holds a right of retention over the
house, and A is prevented from moving into his house. A’s estate is
sequestrated, and the outstanding amount on the bond is R100 000.

You are required to explain what amount B Bank and C will, each
receive if the proceeds of the property after deduction of the initial
costs are R120 000, R112 000 and R100 000 respectively.

Reading
Read the section(s) of the prescribed text listed.

 Liquidation account – Page 65.

 Distribution account – Page 66.

 Time of submission – Page 68.

 Confirmation of account – Page 70.

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Taxation 2A

Study group / Online forum discussion

Critically discuss the main purpose of the free residue account.

5.6.9 Conclusion
When the trustee drafts his account, he will usually already have sold the assets in the estate and paid
the costs. He is therefore, in the position to draft the liquidation account. Thus, the liquidation account
is basically a redraft of the cashbook in the format as prescribed by section 92 of the Insolvency Act.

5.6.10Revision questions
Revision questions

Complete the compulsory revision questions at the end of each unit.

a) Describe what is a liquidation account.

b) What information must the distribution account contain?
c) When should a trustee account be submitted to the Master?
d) Who must inspect the accounts after they have been
submitted to the Master?
e) Compare and contrast the liquidation account and the
distribution account.

5.6.11Self–check activity
Self-check activity

Check your progress by completing the self-check activity.

a) Show how the Liquidation Account and the Distribution

Account are prepared.

b) Explain the finalization process leading to the Master’s

discharge of the trustee.

c) What are the three conditions that must be met before the
Master can confirm the trustee’s account?

d) Evaluate measures that can be put in place to stop accrued

interest from disadvantaging other creditors.

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Study Unit 7: Application of Proceeds

The purpose of this study unit is to enable learners to apply the distribution of
Purpose the proceeds of the estate in relation to various principles of preferent claims
and encumbered assets.

By the end of this unit, you will be able to:

 Explain the procedure of the application of the proceeds.

Learning  Explain the requirements of the application of the proceeds.

Outcomes  Describe rights of preferent creditors and secured creditors.

 Explain contributions and withdrawals of claims.

 Calculate encumbered assets claims and danger of contribution.

Time It will take you 12 hours to make your way through this unit.

Important terms Encumbered Property that is subject to a legal claim by another party.
and definitions assets

Legal Form of security given by contract to a creditor over

hypothec property of the debtor without transfer of possession.

5.7.1 Introduction
In terms of the Insolvency Act, certain unsecured creditors have a preference for their claims to be
satisfied first from the net proceeds of the unencumbered assets or out of the unencumbered portion
of encumbered assets. These creditors are referred to as preferent creditors.

Preferent creditors are first in line to share in the net proceeds which appear in the liquidation
account’s sub-account, known as the free residual account. The portion of creditors’ claims which is
not preferent or secured can be claimed against the free residue of the insolvent estate (De Clercq et
al, 2014).

Once you have studied this section, you will be able to explain the principles applicable to preferent
claims, encumbered assets and danger of contribution.

In this study unit, we will cover:

 Preferent claims
 Concurrent creditors
 Encumbered assets

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 Contribution

It will take you 12 hours to make your way through this study unit.

5.7.2 Preferent claims

Principles applicable to preferent claims

A preferent claim shares in the free residue before concurrent claims. Any remaining balance is divided
among the concurrent creditors’ pro rata. The portion of the creditor’s claim which does not qualify
to be preferent can still be claimed as concurrent.

 Funeral and deathbed expenses

 Costs of sequestration

 Costs of execution

 Salaries and wages of employees

 Statutory obligations

The following claims enjoy preference in terms of this section:

 Any amount due in terms of those work men’s compensation Act 30 of 1941. This Act was
replaced by the compensation for occupational injuries and Diseases Act 130 of 1993.

 Any amount deducted or withheld by the insolvent in terms of the provisions of the income
Tax Act 58 of 1962 by way of tax to:

• From royalties or interest payable to a non-resident

• From any salary, pension, wage or other in his capacity as agent of the commissioner of Inland
Revenue

• From remuneration as employee’s tax

• From an insurance benefit under an insurance policy in respect of the liability of any person for
normal tax.

 An amount which is due by an insolvent in terms of the provisions of the occupational diseases
in mines and works Act 78 of 1973.

 Any amount, penalty or interest due by the insolvent in terms of the customs and exercise Act
91 of 1964.

 Any amount of value added tax interest, fine or penalty which in terms of the value Added Tax
Act 89 of 1991 was due by the insolvent immediately prior to the sequestration of the estate.

 Any amount provided to the insolvent by the state from the National Supplies Procurement
fund in terms of the National Supplies Procurement Act 89 of 1970.

 Any amount owned by the insolvent in his capacity as employer to the unemployment
insurance fund under the unemployment insurance Act 30 of 1966. This Act was replaced by the

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unemployment insurance Act 63 of 2001 and is now governed by the unemployment contribution Act
4 of 2002.

 Income tax

 General bonds and certain special bonds

5.7.3 Concurrent creditors

Note; summary – Ranking of preference claims

The ranking of preference claims can be summarized as follows

Rank Types of claim Maximum Account

i. Funeral expenses R300

ii. Death bed expenses R300

iii. Cost of sequestration

a. Sheriff’s charges
b. master’s fees
c. other tax cost of sequestration

a. Cost of execution

a. taxed fee of sheriff or messenger

b. other taxed costs R50

iv. Salaries and wages R12 000

v. Other pay/ deductions

• leave / holiday pay R400

• Paid absence R4 000
• severance or retrenchment pay R12 000
• pension / provident/ medical aid R12 000

vi. Statutory obligations

vii. Other taxes

General mortgage bond plus interest

If a balance of the free residue remains after paying all the above, it is distributed amongst the
concurrent creditors.

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Facts: Example – Preferent claims

Examples of how to perform a calculation or activity with the solution

/ appropriate response.

A provisional order for the sequestration of Louise Armstrong, a widow of 111 Arms Street, Armsburg,
Gauteng, ID number 490819 0030 081, who traded as strong Dealers, was given on 28 February 2011.
The final order was made on 31 April 2011. The master’s reference number in this estate was
111/2011.

The assets in the estate were liquidated as follows:

Trading stock sold by public auction on 15 may for R60 000

The balance in Louise’s current account at Burg Bank was R10 000

The following claims and sworn statement were submitted to the estate:

 Box and berry submitted a claim of R1 400 for funeral expenses in respect of Louise’s minor
daughter who died on 15 February 2011.
 Telkom submitted an account of R500 for telephone charges
 The South African Revenue Services (SARS) also instituted a claim of R2 700 for employees’
tax deducted but not paid over.
 The South Africa Revenue Services (SARS) also instituted a claim of R1 900 – R1 500 for income
tax due for the 2010 year and penalty for late submission R400.
 Miss penny change submitted a sworn statement in respect of an arrear salary for November
and December 2010 and for January 2011 at R4 000 per month. Leave pay of R3 500 for three
weeks leave is also due to her
 Summer sales instituted a claim of R90 000 in respect of goods delivered to strong dealers.

The trustee placed the legally prescribed advertisements which, together with other minor costs of
sequestration, were repaid to him on 15 August 2011. Particulars of these costs were summarised in
a separate schedule and amounted to R4 650. In order to comply with the master of the High Court’s
security requirements, the trustee took out a security policy with an insurance company on 1 May
2011 at a cost of R875. The master’s fees and trustee’s remuneration were paid on 115 August 2011
in accordance with the prescribed tariffs. Auctioneers charged

A commission of ten recent on the proceeds of the stock sold at the public auction. The trustee paid
all the claims against the estate on 31 August 2011, in accordance with the distribution account.

Solution

Accounts – example – preferent claims

First and final liquidation and distribution account in the insolvent estate of Louise Armstrong, who
resided at 111, Arms street, Amstrong, Gauteng (id-number 4908190030 801) and traded as strong
dealers. The estate was sequestrated on 28 February 2011. Estate number 111/2011.

LIQUDATION ACCOUNT

FREE RESIDUE ACCOUNT

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Vouchers

RECEIPTS 70 000

Trading stock – sold by public auction on 15/5/2011 1 60 000

Cash in current account at Burg Bank 2 10 000

LESS EXPENSES 3 18 000

Auctioneer’s commission – paid 15/5/2011 4 6 000

Costs of sequestration – paid 15/8/2011 5 650

Master’s fees – paid 15/8/2011 6 375

Cost of security- paid 1/5/2011 7 875

Trustee’s remuneration – paid 15/8/2011 8 6 100

AVAILABLE IN FREE RESIDUE 52 000

LESS: Awarded to preferent creditors 20 000

AWARDED TO CONCURRENT CREDITORS 32 000

DISTRIBUTION ACCOUNT

Claim Creditors Total Claims Awards Deficit

No claim
secure prefere Concur- Secured Prefere Concur and
d nt nt - rent outstanding
rent
awards

1 Donald Doolittle 1 400 300 1 100 300 383 717

2 Samuel Sucker 500 500 174 326

3 Cyril Sachs 2 700 2 700 2 700

4 Sure 1 900 1 500 400 1 500 139 261

Wholesalers

5 Miss penny
change

- salary 12 000 12 000 12 000

- Leave 3 500 3 500 3 500

pay

6 Summer sales 90 000 90 000 31 304 58 696

112 000 20 000 92 000 20 000 32 000 60 000

The standard certificate must accompany this account. (See paragraph 6.7.3 in chapter 6.)

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Calculations

1. Master’s fees were calculated according to the prescribed tariff in the third schedule to
the Act (last page of the Act), as follows:

On the first R15 000 …………………………………………………………….…. 100

On the balance: R55 000 (70 000 – 15 000) ……………………………..275

Thus 55 000/5 000 x R25 = R275

375

2. Trustee’s remuneration was calculated according to the prescribed tariff in the second
schedule to the Act (second last page of the Act, as follows):

10% on movables (10% of R60 000) …………………………………….....6 000

1% on cash (1% of R10 000) …………………………………………………… 100

6 100

(Note; all amounts have been rounded off to the nearest rand)

Comments: example – preferent claims

An amount of R52 000 is available in the free residue account.it was used, firstly, to pay preferent
claims which amounted to R20 000. The R32 000 which remained was divided pro rata among the
concurrent creditors. The concurrent claims totaled R92 000 while only R32 000 was available for
distribution. This meant that Box and Berry received R383 (32 000/92 000 x 1 100/1 = 383) on its
concurrent claim of R1 100, that is to say 35c in the rand (rounded off). The 35c in the rand was
calculated as follows: 32 000/92 000 = 35c. The awards to the other concurrent creditors were
calculated in the same manner. The awards are discussed in more detail below:

1. Box and berry claimed R1 400 of amount they received R300 in terms of their preferent
claim and R383 in respect of the award for their concurrent in total rent claim of R1 100.
They received R683 in total which means that the part of their claim which was not paid
amounted to R717. You will notice that all this information is clearly reflected in the
distribution account and in respect of the other creditors as well.

2. Telkom is not entitled to a preference in terms of the act and its claim is treated as a
normal concurrent claim.

3. SARS’s total claim for employee’s tax is preferent in terms of section 99 of the Act.

4. SARS’S claim for income tax due is preferent in term of section 101 of the Act interest on
income tax due is also preferent, but not any penalty. The penalties are therefore a
concurrent claim.

5. Summer sales is not entitled to any preference and is treated as a concurrent creditor

6. Thus, the preferent claims = R (300 + 2 700 + 1 500+ (3 X 4 000) + 3 500) = R20 000

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The calculation of master’s fees and trustee’s remuneration does not have to be shown as part of the
account. As an alternative these calculations can be attached to the account submitted to the master
as part of the supporting vouchers.

5.7.4 Encumbered assets

Subdivision of the liquidation account

Because of the danger of losing money in the event of a debtor becoming insolvent, most people are
obviously cautious about granting loans. Additional protective measures are sometimes necessary to
promote economic activities. The following types of assets can be used to secure debts owing to
creditors;

Assets subject to special mortgages including:

Fixed property

Specially described movables over which a notarial bond has been registered
Assets subject to a landlord’s legal hypothetic which protects the rights of a lessor (landlord)

Assets which have been pledged

 Assets to which the creditor has a right of retention (lien) Assets secured in terms of an
instalment sale agreement
 Security is also provided to a creditor who, prior to taking transfer, made payments in terms
of an agreement of purchase and sale of fixed property and who had the agreement recorded
at the Deeds office.

The liquidation account is subdivided,

With a separate sub-account for every encumbered asset, and a sub-account, known as the free
residue account, reflecting inter alia the proceeds of assets which are not encumbered.

Types of assets conferring preference

Bonds

A bond is a real right which secures a creditor’s claim over movable or immovable property
belonging to his debtor or to a third party.

Landlord’s legal hypothetic

A landlord’s legal hypothetic is a right enjoyed by a lessor (landlord) in respect of arrear rent. The
hypothetic is over movables brought onto the rented premises by the lessee, and over the natural
fruits yielded by the property.

A landlord’s legal hypothetic does not confer a preference in respect of all arrear rent but only for;

Three months, if the rent is payable monthly or at shorter intervals,

 Six months, if the rent is payable at intervals exceeds one month but not exceeding three
months,
 Nine months, if the rent is payable at intervals exceeding three months but not exceeding six
months
 Fifteen months in any other case.

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It is not always practical to remove assets from the premises rented by the insolvent on the date of
sequestration. The trustee may therefore find it necessary or desirable to continue renting the
premises for a period after the date of sequestration. Rent after the date of sequestration is a cost of
sequestration and therefore does not appear in the distribution account, but in the free residue
account or in an encumbered asset account if the premises specifically had to be rented in order to
realize the specific encumbered assets. Rent prior to sequestration is a claim and is reflected in the
distribution account.

Pledge

A pledge is a limited real right which secures a creditor’s claim over movables belonging to the debtor
or to a third party, provided that the creditor is placed in possession of the movables. A creditor will
have a preferent right to the proceeds of the pledged property for the payment of his claim, provided
he is in possession of the pledged property to the time of the sequestration of his debtor’s estate.

Right of retention

A person obtains a right of retention (lien) over an asset which belongs to another, if the asset is in his
possession and if he spent money and labour thereon. Rights of retention differ from legal hypothecs
in the sense that possession is an indispensable requirement for a retention holder’s real right, but
possession is not required in the case of a landlord’s legal hypothec, if agreed upon between the
trustee and landlord.

Other encumbered assets

i. Instalment agreement hypothec

 Where movable property has been delivered to a debtor under an instalment agreement, and
the debtor’s estate is sequestrated, that transaction creates a hypothec in favour of the credit
provider (seller), in respect of the movable property in question.
 Immovable property on instalment
 The second case is where the estate of the seller of immovable property on instalment is
sequestrated before transfer has been given to the purchaser. The purchaser has a right of
preference to the proceeds of the property for all amounts which he paid to the seller,
provided the purchaser caused the contract to be recorded in a deeds’ office.

Multiple claims to one encumbered asset

It is possible for several secured creditors to have rights to the same security. In the case where the
secured creditors’ real rights of security are of the same nature, their order of preference is
determined by the moment at which the rights were created.

The holder of an enrichment lien or right of retention is first in line. The claim of the holder of a pledge
is satisfied next and the claim of the holder of a special mortgage over immovable property will be
paid in third place. A debtor-creditor’s right of retention is fourth in line, a landlord’s legal hypothec
fifth and a seller in terms of an instalment sale agreement, sixth.

Reliance on security only

A creditor may limit his claim to the proceeds of the property which constitutes his security. This
means that if the net proceeds of the encumbered asset are insufficient, he nevertheless limits his
claim to such proceeds. This limits his liability in respect of the costs of sequestration.

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If a secured creditor does not limit his claim, the portion of his claim which is not secured by the net
proceeds of the relevant encumbered asset becomes a concurrent claim.

Apportionment of costs

The costs of realizing an asset are accounted for in the sub-account which shows the proceeds of the
relevant asset. The same applies in respect of costs incurred to maintain or conserve an asset. The
trustee’s remuneration is apportioned to a sub-account at the rates which apply to the asset
concerned (De Clercq et al, 2014)

The free residue is used firstly to pay the preferent portion of funeral and deathbed expenses. If,
however, the free residue is insufficient to satisfy these claims, they are satisfied from the proceeds
of the encumbered assets, in proportion to their value, but payable only after the costs in terms of
section 89(1), namely the cost of conserving, maintaining and realizing the particular asset have been
paid.

Interest on claims and distribution of the net proceeds

After payment of the above-mentioned costs and funeral and deathbed claims, the residue of the
proceeds of the different encumbered assets (securities) is applied to pay the claims of the secured
creditors who have the rights thereto. This includes interest as prescribed below:

 Interest before sequestration

 Interest after sequestration

5.7.5 Contribution
In this discussion so far, it has been assumed that the proceeds would be sufficient to pay the cost of
sequestration. It is possible than an estate is so hopelessly insolvent that there are insufficient funds
in the free residue account to pay the costs of sequestration.

A danger of contribution usually exists in the Liquidation and Distribution Account once it becomes
known that there are no sufficient funds available to defray all administration expenses. In this regard
the concurrent creditors would have to contribute pro rata based on their claim in order to settle
these costs.

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Additional information

Find the recommended information listed.

https://www.stowellestate.co.za/faq/21-3-what-is-a-danger-of-
contribution.html

Practice
Practice the skills you have learned.

 Preferent claims – Facts: Example – Page 81.

 Encumbered assets – Accounts: Example – Page 93.

 Contribution – Accounts: Example – Page 111.

Reading
Read the section(s) of the prescribed text listed.

 Principles applicable to preferent claims – Page 81.

 Types of assets conferring preference – Page 94.

 Apportionment of costs – Page 98.

 Contribution – Page 108.

 Withdrawal of claims – Page 114.

Study group / Online forum discussion

Discuss the topic in your study group or online forum.

Critically discuss and evaluate what may give rise to the danger of
contribution, and how creditors are affected it.

5.7.6 Conclusion
The proceeds of each encumbered asset are applied to pay the claim(s) secured by that asset. Any
balance remaining after payment of secured creditors is combined with the proceeds of the
unencumbered assets to pay the remaining creditors. This money (“free residue”) is then used first to
satisfy the preferent creditors in full (in their order of preference) and thereafter to pay the claims of
the concurrent creditors.

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5.7.7 Revision questions

Revision questions

Complete the compulsory revision questions at the end of each unit.

a) What is an encumbered asset?

b) Describe circumstances that will cause a creditor to withdraw

his or her claim.

c) Describe how may a creditor limit his claim to the proceeds of

the property which constitutes his security.

5.7.8 Self –check activity

Self-check activity

Check your progress by completing the self-check activity.

a) Discuss the principles applicable to preferent claims.

b) What types of asset can confer preference?

c) Discuss the liability of concurrent creditors, preferent creditors

and secured creditors in relation to contribution.

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Study Unit 8: Composition

The purpose of this study unit is to enable learners to apply the principles of
Purpose
composition.

By the end of this unit, you will be able to:

 Explain the procedure for acceptance

Learning
 Explain the effects of a composition
Outcomes
 Describe the trustee’s rights and obligations

 To prepare and present a trustee’s account

Time It will take you 4 hours to make your way through this unit.

Important terms Composition A contract between the insolvent and his creditors.
and definitions

5.8.1 Introduction
The sequestration of a person’s estate usually has considerable negative consequences for both the
insolvent and his creditors. Sometimes, however, it is possible to reduce the negative consequences
by means of a composition. After a provisional order of sequestration has been granted, or even
before, the insolvent may enter into a written agreement with his creditors and the provisional trustee
to pay certain dividends on the creditors’ claims, on condition that he be released from his debts and
any provisional order of sequestration be discharged.

Since composition is a contract between the insolvent and the creditors, it may sometimes, however,
enable the creditors to reduce their losses because they may collect a larger portion of their claims
and to receive their portion sooner.

Therefore, a debtor who is in financial difficulty or whose estate has been provisionally sequestrated
can avert insolvency by entering into a compromise with his creditors.

Once you have studied this section, you will be able to fully explain composition and its effects.

In this study unit, we will cover:

 Defining composition
 Procedure for acceptance
 The effects of composition

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 The trustee’s duties and right to rehabilitation

 The trustee’s account

It will take you 4 hours to make your way through this study unit.

5.8.2 Defining composition

A composition is a contract between the insolvent and his creditors. The parties may include and
juridical permissible provisions in the contract. However, a composition usually entails the insolvent
making an amount available to the creditors forthwith, on condition that the creditors write off the
remainder of their claims and undertake not to attach all or certain of the insolvent’s assets (De Clercq
et al, 2014).

A composition may enable creditors to reduce their losses because it may enable them to collect a
larger portion of their claims and to receive this portion sooner, while on the other hand, the insolvent
is enabled to take possession of all or a part of his assets, and to recover financially sooner.

A typical agreement will provide that an amount will be paid to the trustee by the insolvent by the
insolvent or another person on his behalf, in order to cover the following:

 The full cost of sequestration

 The full amount of secured and preferent claims

 For all the other creditors an agreed amount, for example 40c of every rand claimed.

As a counter performance the trustee will return the insolvent’s assets to him. A composition can be
entered into in terms of the common law or in terms of the provisions of the Insolvency act.

A common law composition can only bind creditors who accept it and who have thereby become
contracting parties. Such agreements are, however, often subject to a condition that it must be
accepted by all the creditors, in which case the agreement will not be binding on any creditor until the
condition has been complied with. An agreement or compromise of this nature is usually referred to
as a non-statutory agreement or compromise (De Clercq et al, 2014)

The composition provisions of the Act create a mechanism whereby a majority of the creditors can
bind a minority. These provisions do not function to the exclusion of the common law and, especially
where the Act’s composition provisions are not applicable, a composition is often established in terms
of the common law.

5.8.3 Procedure for acceptance

The terms of the provisions of the Act, the earliest stage at which an insolvent can make an offer of
composition to his creditors is after the first meeting of creditors. Any composition before this stage
must come about in terms of the common law.

An insolvent wishing to make a statutory offer of composition must submit the offer to his trustee in
writing after the first meeting.

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If the trustee is of the opinion that the creditors are unlikely to accept the offer, he must inform the
insolvent that he does not propose to send the offer to the creditors. In such a case the insolvent may
appeal to the Master, who, after having considered a report from the trustee, may direct the trustee
to send the offer to the creditors if he is of the opinion that they might accept it.

Once a trustee sends an offer of composition to the creditors, he must convene a meeting of creditors
to consider the offer.

Until the insolvent’s offer of composition has been accepted, there can be no contract. In order to
prevent a small minority of creditors from frustrating the others, the Act provides that, for it to be
binding on all creditors, an offer of composition must be accepted by creditors whose claims amount
to at least three quarters in value and number of votes of all the creditors who have proved claims
against the state.

No offer of composition may be accepted if it contains any condition whereby a creditor would obtain
any benefit at the expense of another creditor and which he would not have been entitled to if the
estate had been districted in the usual manner.

5.8.4 The effects of composition

Although both secured and preferent creditors may vote on the acceptance of an offer of composition
in terms of the act, its acceptance has the result that a contract is created only between the insolvent
and the concurrent creditors. The rights and obligations arising between the insolvent and his
concurrent creditors as at the institution of the concursus creditorum are exclusively defined in the
composition.

Sometimes the content of a composition provides that certain assets of the insolvent will be handed
back to him in exchange for his undertaking to generate income with these assets, which can be used
to pay his debts.

5.8.5 The trustee’s duties and right to rehabilitation

Any monies paid and anything done for the benefit of creditors in pursuance of a composition must,
as far as possible, be done through a trustee. An insolvent may immediately apply for his rehabilitation
where an offer for composition has been accepted. To do so, the insolvent must have obtained a
certificate from the Master showing that the offer has been accepted and that payment has been
made, or security given for such payment of not less than 50 cents in the rand for every concurrent
claim proved.

5.8.6 The Trustee’s Account

When a composition has been entered into between an insolvent and his creditors, the trustee must
draw up an account of all the receipts which are, or which will become available for distribution among
the creditors in terms of the composition. All the provisions of the Act which relate to an ordinary
liquidation and distribution account also apply here. The procedure which the trustee must follow will
differ in certain respects from the procedure he would follow under a normal sequestration.

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The procedure is first to calculate the amounts that are payable to the creditors in terms of the
composition. The costs of sequestration, excluding Master’s fees and trustee’s remuneration, are
added to this for a sub-total. The amounts of the Master’s fees and trustee’s remuneration are to be
added to this subtotal. These amounts are however calculated by using the result after these amounts
were added and that result is at this stage unknown. It can be calculated by using the following formula

X = sub+25/0.975

Where” x” represents the total to be collected by the trustee and “sub” he sub-total before Master’s
fees and trustee’s remuneration. This figure is not always hundred percent correct, therefore using
the calculated figure as a point of departure you have to calculate the Master’s fees and trustee’s
remuneration again in the usual manner to make sure you arrive at the correct result. This process is
best illustrated by way of an example.

Read paragraph 8.4 to 8.7 from the prescribed textbook

Worked example – composition

Examples of how to perform a calculation or activity with the solution

/ appropriate response.

The estate of Jan verboten who carried on business as a general dealer was sequestrated on 1 January
2011. The creditors accepted a written offer of composition which was guaranteed by Jan’s father,
Mr. P.A Verliren. The offer provided that concurrent creditors would receive 50c for every rand
claimed and that other costs and claims would be paid in full. Jan’s assets would then be handed back
to him.

The following claims have been proved against the estate:

 Free State Bank submitted a claim of R380 000 based on a first bond over Jan’s residence.
Interest on the bond is calculated at 10% per annum and is compounded monthly. Interest up to 1
January 2011 has been included in the sum of R380 000

 Frost Bank submitted a claim of R14 000, being the amount by which Jan’s current account
was overdrawn on 1 January 2011. The bank did not prove any security for the overdraft. The bank
charged interest at 12% per annum on the overdrawn amount, compounded monthly.

 Allan Allbright, a farmer employee, submitted a sworn statement in respect of two month’s
salary before sequestration at R4 000 per month in arrears

 Bountiful Wholesalers instituted an unsecured claim for an amount of R20 000 in respects of
goods delivered.

The amount payable to the trustee in terms of the composition was paid to him by Jan Verloren’s
father on 1 July 2011. The trustee paid the accounts for the expenses he incurred in connection with
the sequestration, which amounted to R1 950, together with all other payments, 0n 30 June 2011.
This amount did not include the master’s fees or trustee’s remuneration, which were also paid on that
date.

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Schedule – calculation of amount payable in terms of composition

CLAIMS AWARDS

SECURED CLAIMS 399 000 399 000

Freestate Bank 380 000 380 000

- Capital 19 000 19 000
- Interest (10% for 6 months)

PREFERENT CLAIMS 8 000 8 000

Allan Allbright – R8 000 8 000 8 000

CONCURRENT CLAIMS 34 000 17 000

Frost Bank 14 000 7 000

Bountiful Wholesalers 20 000 10 000

COSTS OF SEQUENTRATION 1 950

SUB-TOTAL 446 000 425 950

MASTER’FEES 2 200

428 150

TRUSTEE’SREMUNERATION 8 738

GRANDTOTAL 436 888

Schedule – calculation of amount payable in terms of composition formula to calculate total

Sub-total- according to calculation above R425 950

Total = (sub-total + 25)/0.975

= (425 950 + 25)/0.975

= R436 897

This total is slightly different from the final figure (R436 888) as this formula gives only an
approximate total. See comments at the end of example.

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ACCOUNTS

FIRST AND FINAL LIQUIDATION AND DISTRIBUTION ACCOUNT IN THE INSOLVENT ESTATE OF JAN
VERLOREN OF ------------, ID-NUMBER ……………… AND WHO WAS SEQUESTRATED ON 1 JANUARY
2011. ESTATE NUMBER …………….

LIQUDATION ACCOUNT

FREE RESIDUE ACCOUNT

Vouchers

RECEIPTS 1 436 888

LESS EXPENSES 12 888

Cost of sequestration paid on 30/4/2011 2 1 950

Master’s fee – paid on 30/06/11 3 2 200
Trustee’s remuneration (2%) – paid on 30/06/2011 4
8 738

AVAILABLE FOR DISTRIBUTION 424 000

AWARDED TO:

424 000

Secured creditors

Preferent creditors 399 000

Concurrent creditors 8 000

17 000

SURPLUS/ DEFICIT Nil

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DISTRIBUTION ACCOUNT

Claim Creditors Total Claims Awards Deficit

No claim
Secured prefer Concur- secured prefere Concur
ent nt - rent
Rent

1 Free State Bank 399 000 399 000 399 000

2 Frost Bank 14 000 14 000 7 000 7 000

3 Allan Allbright 8 000 8 000 8 000

4 Bountiful 20 000 20 000 10 000 10 000

Wholesalers

441 000 399 000 8 000 34 000 399 000 8 000 17 000 17 000

A certificate from the trustee must accompany this account.

Comments

Before he starts preparing his accounts, the trustee will start with the calculation of the amount
payable in terms of the composition, that is to say the amount which he is to receive in terms of the
offer. This is shown in a schedule to the accounts. All the claims are first calculated in this schedule.
Note that the claims are payable in full in terms of this composition, except for the concurrent portion
of claims which only one half (50c of every rand) is paid. The costs of sequestration are added to obtain
a total of R425 950. The formula is applied to calculate the total amount payable – R436 897. The
master’s fee is calculated on the approximate R436 897 as follows:

On the first R15 000 100

On the balance 2 100

= 421 897/ 5 000 (R436 897 – R15 000 = R421 897)

= 84 (the fraction is ignored, only complete amounts of

R5 000 according to tables) x 25

2 200

The master’s fee is added to the sub-total, that is to say R425 950 plus R2 200 = R428 150. The trustee’s
remuneration is now calculated on this figure of R428 150. The R428 150 is the amount which must
be paid to the trustee in terms of the composition but before the trustee’s remuneration has been
taken into account. The trustee’s remuneration amounts to 2% which means that the R428 150
represents 98% of the total amount. The trustee’s remuneration is therefore R8 738 (2/98 x 428 150).
By adding the R8 738 to the R428 150 the trustee will arrive at R436 888, the final and correct total of
the amount to be paid to him in terms of the composition.

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Practice

Practice the skills you have learned.

 Example – Composition – Page 129.

Case study/Caselet
Apply what you have learnt to the case study presented.

A, B and C are concurrent creditors of Houston for R6 000, R1 500 and

R4 000 respectively. D and F are preferent creditors for R2 000 and R1
000 respectively. D has waived his preference. The insolvent, Houston,
makes a written offer of composition to his creditors. A, C and D vote
in favour of the composition.

You are required to discuss whether the composition is valid.

Reading
Read the section(s) of the prescribed text listed.

 Procedure for acceptance – Page 126.

 The effects of composition – Page 127.

 The trustee’s duties and right to

rehabilitation – Page 128.
Study group / Online forum discussion

Discuss the topic in your study group or online forum.

If the creditors accept an offer of compromise because they feel sorry

for the insolvent, even though they know that the offer of compromise
is not in the interests of the estate or for the benefit of creditors.

Critically discuss and evaluate the above-mentioned statement.

5.8.7 Conclusion
A debtor who is in financial difficulty or whose estate has been provisionally sequestrated can avert
insolvency by entering into a compromise with his creditors. However, in order to give rise to a binding
composition, the offer must be accepted by the creditors whose votes amount to not less than three-
fourths in value and three-fourths in number of the votes of all proved creditors. It should be noted
that creditors may not just enter into composition arrangements, just because they feel pity for the
debtor. Composition must always be done in a bona fide manner, otherwise it might be rendered
invalid.

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5.8.8 Revision questions

Revision questions

Complete the compulsory revision questions at the end of each unit.

a) What is the meaning of composition in insolvency?

b) Distinguish between a common-law compromise and a
section-119 composition.
c) Describe the procedure for the acceptance of an offer of
composition.

d) What is the minimum amount of claim that disqualifies

creditors from casting a vote?

5.8.9 Self –check activity

Self-check activity

Check your progress by completing the self-check activity.

a) Explain why only concurrent creditors are involved in

compromise.
b) Discuss and evaluate the effects of composition.
c) Describe the trustee’s duties and right to rehabilitation
d) State, in your own words, what you consider the advantage of
compromise for the concurrent creditors.

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Study Unit 9: Insolvent Deceased Estates

The purpose of this study unit is to enable learners to interpret and apply the
Purpose
law in relation to insolvent deceased estates.

By the end of this unit, you will be able to:

 Explain ordinary (solvent) deceased estates

Learning
Outcomes  Explain sequestration in terms of the Estates Act

 Explain compulsory sequestration, contribution and rehabilitation as

well as protected life policies

Time It will take you 4 hours to make your way through this unit.

Important terms Ordinary Applies when the value of the deceased estate is less than
and definitions deceased R125 000.
estates

Administration Process by which a deceased person’s debts are paid and

of an estate the balance of his estate is awarded and transferred to the
beneficiaries.

5.9.1 Introduction
The collective of assets, income and liabilities of the person who died is known as the deceased estate.
Note that it is a legal term and not a person. Therefore, the estate is vested in the Master of the Court
and the executor or executors are appointed to manage or handle the estate.

However, if the liabilities exceed all assets in the deceased estate then the estate is insolvent. In such
an instance the executor will notify the creditors of the insolvent status in writing and the estate will
then be handled according to the regulations of the South African Insolvency and Estates Acts.

Once you have studied this section, you will be able to explain and apply the law with regards to the
insolvent deceased estate.

 In this study unit, we will cover:

 Ordinary (solvent) deceased estates
 Sequestration in terms of the Estates Act
 Compulsory sequestration
 Contribution and rehabilitation
 Protected life policies
 Accounts – Insolvent deceased estates

It will take you 4 hours to make your way through this study unit.

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5.9.2 Ordinary (solvent) deceased estates

Value less than R125, 000

If the value of a decease estate does not exceed R125, 000, the Master may dispense with the
appointment of an executor and give directions as to the manner in which such an estate is to be
liquidated and distributed.

Value more than R125, 000

If the value of the property in a deceased estate exceeds R125, 000, the Master will appoint an
executor who will be responsible for the administration of the estate. Once the period during which
creditors of the estate have the opportunity of proving their claims against the estate has expired, the
executor must satisfy himself that the estate is solvent. If, at any time before the distribution of the
estate commences, the executor comes to the conclusion that the estate is insolvent, he must give
written notice thereof to the creditors of the estate.

5.9.3 Sequestration in terms of the Estates Act

To avoid unnecessary costs and difficulties the act provides that, under certain circumstances, the
executor may continue with his administration of an insolvent deceased estate without resigning or
waiting until a trustee is appointed. This is done by giving notice to the creditors that, unless the
majority in number and in value of all the creditors instructs him in writing to surrender the estate
under the Insolvency Act, he will realize the estate assets in accordance with the provisions of the
Administration of Estates Act.

If the required majority of creditors in an insolvent deceased estate instruct the executor to surrender
the estate, the usual rules which apply to an application for surrender will come into effect.

In the case of a marriage in community of property, the executor in the estate of the first dying cannot
surrender the joint estate without the permission of the surviving spouse. The application must be
made by the executor and the spouse together.

If the executor is not instructed by the prescribed majority of creditors to surrender the estate, he
must deal with the estate in terms of the provisions of section 34 of the Administration of Estates Act.
In terms of this section he must give fourteen days written notice to the creditors regarding the
manner in, and conditions under which the assets are to be sold. This is recorded in a liquidation
account. Thereafter the executor must prepare a distribution account which sets out the distribution
of the proceeds of the property in accordance with the order or preference prescribed by the
Insolvency Act. The date of sequestration is deemed to be the date which follows immediately after
the expiry of the date stated in the notice given by the executor to the creditors.

A creditor may, at any time before the sale of an asset, lodge an objection against the intended manner
of sale. He must also send a copy of his objection to the Master. After consideration of the objection
and any comments the executor may have made, the Master gives instructions regarding the sale of
the assets.

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5.9.4 Compulsory sequestration

The provisions mentioned above shall not detract the right of a creditor of an insolvent estate to make
an application for the sequestration of the estate. Steps to bring about a compulsory sequestration
cannot, however, be taken until such time as an executor has been appointed for the estate. The
creditor must prove that the requirements for obtaining a sequestration order have been complied
with.

5.9.5 Contribution and rehabilitation

If an insolvent deceased estate is administered in terms of the provisions of section 34 of the
Administration of Estates Act, creditors can never be liable for a contribution in respect of outstanding
costs. Should the estate be formally sequestrated in terms of the provisions of the Insolvency Act,
there is a possibility that creditors may have to contribute in terms of section 106 of the Act.

5.9.6 Protected life policies

The value of a life policy which belongs to an insolvent estate is part of the property of the estate
which can be realized and distributed among creditors. Life policies can become a part of any insolvent
estate even if they have only a surrender value.

In terms of section 6 of the log-term Insurance Act 52 of 1998 policy benefits of certain long-term
policies are protected. Policy benefits provided to a person under one or more assistance, life,
disability or health policies are protected.

Other than for a debt secured by the policy, such policy benefits; will not form part of his or her
insolvent estate during such person’s lifetime,

Or, will not be available for the payment of his or her debts if such person is survived by a spouse,
child, stepchild or parent upon such person’s death.

This protection applies to;

 Assets acquired solely with the policy benefits, for a period of five years from the date on
which the policy benefits were provided, and

 Policy benefits and assets so acquired to an aggregate amount of R50, 000 or another amount
prescribed by the Minister

 Section 74(2) of the new long-term Insurance Act 52 of 1998 contains provisions to facilitate
agreements entered into in terms of the previous Insurance Act 27 of 1943.

Your textbook quotes section 74(2) of the new Long-term Insurance Act 52 of 1998.

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5.9.7 Accounts – Insolvent deceased estates

The accounts in an insolvent deceased estate are similar to the accounts in an ordinary insolvent
estate, but that they are prepared in terms of the Administration of Estates Act and more particularly
in terms of section 34 and 103 of this Act.

Additional information
Find the recommended information listed.

https://www.grocotts.co.za/2017/11/13/administration-of-deceased-
estates/

https://www.begbies-traynorgroup.com/articles/insolvency/what-is-
an-insolvent-estate

Practice

Practice the skills you have learned.

 Example - Insolvent deceased estate: Page 141

Reading

Read the section(s) of the prescribed text listed.

 Ordinary deceased estates - Page 135

 Contribution and rehabilitation - Page 138

 Protected life policies - Page 138

 Accounts – Insolvent estates: Page 139

Study group / Online forum discussion

Discuss the topic in your study group or online forum.

Discuss and evaluate the similarity of the sequestration process for

deceased estate with the one for ordinary insolvent estate.

Video / audio
Access and watch/listen to the video/audio clip listed.

https://www.youtube.com/watch?v=i4GcU1ZtT8w

https://www.youtube.com/watch?v=K7sk-qEk1mQ

5.9.8 Conclusion
It is important to understand who will take control of the estate of the deceased, pay all the creditors
and administration costs, and then transfer the balance of the estate to the rightful heirs of the
deceased.

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When a person dies, their debts are not discharged as a matter of course. Some of the debt might be
covered by an insurance policy, in the case of a mortgage for example, or taken over by their partner
if the debt is held in joint names, but other debts in the sole name of the deceased have to be repaid
from the estate.

5.9.9 Revision questions

Revision questions

Complete the compulsory revision questions at the end of each unit.

a) If a person dies, who would apply for the voluntary surrender

of his estate?
b) Describe what is a protected life policy.
c) Explain circumstances in which creditors can be liable for a
contribution in respect of outstanding costs.

5.9.10Self –check activity

Self-check activity

Check your progress by completing the self-check activity.

a) Compare and contrast between an asset that is valued less

than R125 000 and the one valued more than R125 000, with
respect to its liquidation and distribution.
b) Discuss how will the deceased estate’s assets be realised and
distributed.

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Study Unit 10: Introduction to Deceased Estates

The purpose of this study unit is to introduce learners to the legislation

Purpose concerning the administration of estates and how to apply the law on
deceased estates.

By the end of this unit, you will be able to:

 Describe the concepts of deceased estates and the applicable laws.

Learning
Outcomes  Explain the administration system of estates and the legislation
thereof.

 Explain effective administration systems.

Time It will take you 4 hours to make your way through this unit.

Important terms Deceased All assets and liabilities which a deceased person leaves
and definitions estate behind at his death.

Administration Process by which a deceased person’s debts are paid and

of an estate the balance of his estate is awarded and transferred to the
beneficiaries.

5.1.1 Introduction
There are certain matters in life which are unfortunately, unavoidable. Most people at some stage of
their lives, have to content with the reporting of a deceased estate. There are two types of Estates -
each with brief differences in their administration.

Section 18(3) Estate

The first type of estate is a section 18(3) estate. In a section 18 (3) estate, the value of the assets
amount to R250 000.00 or less, irrespective of whether the deceased left a will or not. The estate must
be reported. The Master will issue Letters of Authority as opposed to Letters of Executorship. The
person appointed in terms of Letters of Authority is referred to as the Master’s Representative.

Once Letters of Authority are issued, it is the Master’s Representative’s duty to ensure that the heirs
receive what they ought to receive in terms of the deceased’s will or the Intestate Succession Act.
There is no need for a Liquidation & Distribution Account or advertisements.

A Conventional Estate

The second type of estate is a conventional estate. In a conventional estate, the value of the assets
amount to more than R250 000.00. In this type of estate, the Master will issue Letters of Executorship.
The person appointed in terms of Letters of Executorship is referred to as the Executor. The

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administration of a conventional estate is more complicated than a Section 18(3) estate, in that there
are certain advertisements that must be placed.

Once you have studied this section, you will be able to explain the concepts of deceased estates and
the applicable laws, notwithstanding the efficient administration process.

In this study unit, we will cover:

 Concepts
 Legislation
 Summary of administration process
 Effective administration of estates

It will take you 4 hours to make your way through this study unit.

5.10.1Concepts
A deceased estate consists of all the assets and liabilities which a deceased person leaves behind at
his death. The administration of an estate can be briefly defined as the process by which a deceased
person’s debts are paid and the balance of his estate is awarded and transferred to his beneficiaries.
This process takes place in terms of the law and under the supervision of the Master of the High Court
(De Clercq et al, 2017).

A beneficiary is someone who receives a benefit from the deceased estate in terms of the will of the
deceased or in terms of the law of intestate succession.

The person who is usually responsible for the administration of the deceased estate is known as the
executor. He is appointed by the Master of the High Court, who keeps a watchful eye over the executor
during the performance of his duties.

The person who actually performs the administration of an estate is known as the administrator. The
executor can act as the administrator himself, or he may appoint an agent to act as administrator.

5.10.2Legislation
The administrator must have a thorough knowledge of all the different aspects of the applicable law.
Both the law of testate succession and the law of intestate succession are of major importance to the
administrator of an estate in determining how estate assets should be distributed.

A number of statutory provisions are important to the administration of deceased estates. The
principal acts are given below;

 The administration of estates act 66 of 1965

 The will act 7 of 1953

 The intestate succession act 81 of 1987

 The trust property control act 57 of 1988

 The estate duty act 45 of 1955

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Legislation concerning types of marriages

 The maintenance of surviving spouses Act 27 of 1990

 The children’s act 38 of 2005

 Subdivision of agricultural land act 70 of 1970

 The deeds registry act 47 of 1937.

5.10.3 Summary of administration process

The administration of an estate entails a large number of activities which differ from case to case. The
sequence in which the various steps are carried out will not be exactly the same for each estate. Read
through the summary of the administration process that is given in your prescribed textbook.

NOTE:

Summary of the administration process

 A first interview with the relatives to obtain essential information and to have documents
signed.
 Reporting the estate by lodging the death notice, inventory, original will and the acceptance
of trust an executor with the master.
 The opening of a main file and sub-files for correspondence, documents, assets, liabilities,
cheque account and the liquidation and distribution account.
 Letters to creditors and debtors in order to determine claims for and debtors in order to
determine claims for and against the estate.
 Obtaining valuations of movable and immovable estate assets.
 The completion and submission of an income tax return.
 Receipts of the letter of executorship
 Placement of the notice to creditors in the government gazette and in a newspaper
 Opening an estate cheque account
 Determining whether the estate is solvent and determine a suitable method of administration
in consultation with the beneficiaries.
 The collection of sufficient cash: payment of debts.
 The preparation and submission of the liquidation and distribution account (sometimes also
referred to as the “executor’s account” or the “estate account”) and the preparation of the
estate duty return.
 The placement of a notice in the government gazette and in a newspaper to the effect that
the liquidation and distribution account is lying open for inspection.
 The payment of any outstanding debt. The payment and/or transfer of legacies and
inheritances to beneficiaries.
 The payment of master’s fees
 The payment of estate duty, if the estate is dutiable from the master
 Fulfillment of the master’s final requirements of filling no
 Receipts of filling notice the master.

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Note: there are computer programs which can greatly simplify an executor’s task by automatically
calculating the master’s fees, executor’s remuneration and estate duty provided that someone who is
acquainted with the administration of estates as well as the applicable Acts and the other legal rules
is used to operate the computer programs.

5.10.4 Effective administration of estates

Compliance with the following condition is important in order to ensure effective administration;

Speed. It is in the interest of the beneficiaries and the executor that the estate be finalised as soon as
possible.

Accuracy. Without accuracy, speed may actually cause delays.

Sensitivity for the wishes and needs of beneficiaries. The administrator must never act dictatorially.
He must administer the estate in consultation with the beneficiaries, in order to ensure the greatest
measure of convenience for them. Beneficiaries should be provided with regular progress reports.

Expertise. The administration of estates is a specialized field which sometimes brings interesting but
also complex problems to the fore. The administrator must ensure that he is properly equipped for
these challenges.

Additional information

Find the recommended information listed.

https://www.veliletintocape.co.za/Legal-Articles/entryid/379/estate-
planning-types-of-estates-and-their-differences

https://www.nvrlaw.co.za/NewsResources/NewsArticle.aspx?ArticleID=2518

Case study/Caselet

Apply what you have learnt to the case study presented.

In the case of Moloto, the Court held that the payment of legal fees by the
estate could not be said to be a dissipation or alienation of the assets of the
estate. It was further found that section 26 of Act No. 66 of 1965 empowers
the Executor to provide for maintenance for the family or household of the
deceased if the Executor is of the opinion that it is necessary to do so.

You are required to critically discuss and evaluate the conclusion made by the
court on the amounts that were withdrawn from the estate of the deceased’s
bank account.

Reading

Read the section(s) of the prescribed text listed.

 Legislation concerning the administration of estates – Page 3

 Assets excluded from the usual administration process – Page 6

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 Summary of the administration process – Page 7

 Effective administration of estates – Page 8

Study group / Online forum discussion

Discuss the topic in your study group or online forum.

Critically discuss how immovable property maybe bequeathed subject to an

extended fideicommissum which stretches over several generations.

Video / audio
Access and watch/listen to the video/audio clip listed.

https://www.youtube.com/watch?v=i4GcU1ZtT8w

5.10.5Conclusion
In South Africa, like in most countries, death and taxes go together in the form of inheritance taxes.
These are taxes that the deceased estate must pay, in addition to the personal tax of the deceased
person for their final tax year. The personal tax is levied on the income the deceased person received
before their death, in the course of the tax year, whereas the inheritance taxes are levied on what
they leave behind in their Will.

5.10.6Revision questions
Revision questions

Complete the compulsory revision questions at the end of each unit.

a) What is a deceased estate?

b) Describe the administration process of deceased estates.

c) State and explain which assets are excluded from the usual
administration process.

d) What should a person know to create greater confidence in the

process of estate administration?

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5.6.12Self –check activity

Self-check activity
Check your progress by completing the self-check activity.

a) What are the four factors that will ensure effective

administration of deceased estates?

b) Evaluate the usefulness of computer programs in the

administration process.

c) Give a summary of the administration process.

d) Who can be appointed as executor to deal with the

administration of an estate and what is the role of the
executor?

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Study Unit 11: Types of Marriages

The purpose of this study unit is to enable learners to interpret and apply laws
Purpose
relating to marriages.

By the end of this unit, you will be able to:

- Describe the different types of marriages recognised by the South

African Law.
Learning
- Explain the matrimonial property act and marital power.
Outcomes
- Distinguish between marriages in community of property and out of
community property.

- Discuss the accrual system in marriages.

Time It will take you 4 hours to make your way through this unit.

Important terms Civil union Voluntary union of two persons who are both 18 years of age
and definitions or older which is solemnised by laws of the Republic.

Indexing Net value of an estate at the commencement of the

marriage is calculated with the allowance for any difference
between the value of money at the commencement and
the value of money at the dissolution of the marriage.

5.11.1Introduction
Three types of marriages are recognised under South African law: civil marriages, customary marriages
and civil unions. The solemnisation and registration of these marriages are managed by the
Department of Home Affairs.

When you enter into a civil marriage or civil union, the marriage officer will issue a handwritten
marriage certificate free of charge at the ceremony. You can apply for a copy of the marriage
certificate from the Department of Home Affairs if you have been married in South Africa and your
marriage is registered. The first issue of an abridged marriage certificate is free, but you will have to
pay for a second issue or an unabridged certificate. Where one partner has passed away and you need
to prove that you had been married, an unabridged marriage certificate will be issued.

The definition of a customary marriage is one that is “negotiated, celebrated or concluded according
to any of the systems of indigenous African customary law which exist in South Africa”. You must
register your customary marriage within three months of the date of celebration or entering into the
marriage to make it legal. This can be done at any office of the Department of Home Affairs.

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Once you have studied this section, you will be able to explain and apply the laws embodying
marriages notwithstanding the different systems available therein.

In this study unit, we will cover:

 Marriage
 The marriage contracts
 Matrimonial Property Act
 Marital power
 Marriages in community of property
 Marriages out of community of property
 The accrual system

It will take you 4 hours to make your way through this study unit.

5.11.2Marriage
Choice of type of marriage

The South African Law recognises two marriage systems; a civil marriage and a customary marriage.
When the spouses conclude a civil or a monogamous customary marriage, the marriage can be within
community of property or without community of property (De Clercq et al, 2017).

Note:

The patrimonial consequences of all monogamous customary marriages concluded without an ante
nuptial are in community of property, similar to all civil marriages.

It is also the view that a polygynous marriage can be concluded within or without community of
property (with or without the accrual). The choice that is made has legal consequences, particularly
as regards the assets of the married couple.

Superficially speaking, the advantages of getting married out of community of property are obvious if
one of the spouses were to become insolvent. Note that when a marriage is dissolved, either because
the couple divorce or one of them dies, the type of marriage originally chosen will have major financial
implications at that time (from a purely material perspective, divorce is far more disruptive than death,
precisely because most people do not plan for it).

With the coming into operation of the Civil Union Act 17 of 2006, marriage law now makes provision
for civil unions. A civil union is defined as “…the voluntary union of two persons who are both 18 years
of age or older, which is solemnized and registered by way of either a marriage or a civil partnership,
in accordance with the procedures prescribed in the Act, to the exclusion, while it lasts, of all others”
(De Clercq et al, 2017).

Note:

A civil union refers to:

 Two institutions either a marriage or a civil partnership.

 Monogamous and not polygynous.

 Those based on western common law system as well as black customary law.

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• The marriage contracts

When two people decide to get married, they can enter into an ante nuptial contract. This contract
comes into effect when the couple becomes married. Marriage contracts must be executed by a
notary.

An ante nuptial contract is necessary if a couple wants to be married out of community of property.
Where there is no ante nuptial contract, the marriage is automatically in community of property,
which means that the couple’s assets become part of a joint estate.

• Matrimonial Property Act

This Act radically changed the matrimonial property law in South Africa. The Act stipulates that couples
who married before 1 November 1984 may change from the old dispensation that was valid before 1
November 1984, to the new dispensation by means of a High court application.

• Marital power
Prior to 1 December 1993 some men held marital power in their marriages, and therefore had the
right to manage the couple’s joint assets. The Fourth General Law Amendment Act 132 of

1993 abolished marital power. Since 1 December 1993 marital power has had no force in marriages in
which it would have applied. This abolition holds only for transactions entered into after 1 December
1993.

• Marriages in community of property

In marriages in community of property, all the assets of the married couple belong to them jointly. If
a sequestration takes place, the joint estate is sequestrated.

Equal powers of spouses married in community

Subject to the provisions of this Chapter, a wife in a marriage in community of property has the same
powers with regard to the disposal of the assets of the joint estate, the contracting of debts which lie
against the joint estate, and the management of the joint estate as those which a husband in such a
marriage had immediately before the commencement of this Act.

Donations between spouses permissible

Subject to the provisions of the Insolvency Act, 1936 (Act No. 24 of 1936), no transaction effected
before or after the commencement of this Act is void or voidable merely because it amounts to a
donation between spouses.

Donations or bequests to someone who is married in community of property may also benefit his or
her spouse.

When a marriage in community of property is dissolved, the estate is divided. If dissolution takes place
because of the death of one of the spouses, the estate is divided after all debts have been settled

10
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Taxation 2A

except for burial costs or estate duty that is paid from the deceased’s half of the joint estate (De Clercq
et al, 2017).

Note:

One of the consequences, from an estate duty point of view, of marriage in community of property is
that if the joint estate is worth R2 million, the deceased spouse’s estate amounts to only R1 million,
because half belongs to the surviving spouse. The deceased’s estate is therefore not subject to estate
duty because R3.5 million rebates are allowed on all estates.

• Marriages out of community of property

Marriages before 1 November 1984.

Most ante nuptial contracts made before 1 November 1984 excluded community of property,
community of profit and loss and the marital power of the husband from the marriage. In such cases
each spouse therefore retained and builds up his or her own estate. Apart from the fact that the
husband’s marital power no longer applies, the principles for marriages out of community of property
with exclusion of profit and loss concluded before 1 November 1984 are currently still valid for such
marriages.

Marriages after 1 November 1984.

Since 1 November 1984, couples who want to marry out of community of property can choose
whether or not the accrual system should apply to their marriage. Section 2 of the Act states that if
the marriage is subject to a marriage contract, the accrual system automatically applies unless it is
expressly excluded in the ante nuptial contract.

Couples may stipulate in their ante nuptial contracts that certain donations must revert to the donor
if the marriage ends in divorce; but may be retained if the donor dies. Donations provide an effective
means whereby one spouse can provide for the other and, at the same time, substantially reduce the
size of the donor’s estate in order to achieve savings on estate duty and administration costs (De
Clercq et al, 2017).

During the marriage each spouse retains control of his or her own property, builds up their own estate
and each is responsible for their own debts… “What’s yours is yours and what’s mine is mine.” On
dissolution of the marriage by death or divorce, the value of the assets obtained during the marriage
(the accrual) will be shared equally. The accrual is determined by calculating the difference in the net
starting value and the net final value of the estate of each spouse with the exclusion of inheritances,
legacies and donations. On dissolution of the marriage the value of the difference in the accrual of the
two estates, taking inflation into account, is then divided equally unless this has been varied in the
antenuptial contract.

• The accrual system

The accrual system applies automatically to marriages out of community of property unless expressly
excluded. In the course of the marriage, each spouse retains his or her own estate. However, when
the marriage is dissolved through divorce or death, the spouse or his (her) estate has a claim for the
amount accrued to the other spouse or his (her) estate.

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The accrual in a spouse’s estate is the amount by which the net end value of his or her estate upon
dissolution of the marriage exceeds the commencement value at the start of the marriage.

On entering into a marriage, each of the parties should list the value of their respective assets in the
ante nuptial contract. However, many couples prefer not to list their assets and the value of these in
an ante nuptial contract, because this document is frequently scrutinized by strangers such as traders
or bankers. Accordingly, the Act provides that the parties may give details of their assets in a separate
statement, which does not then become a public document. This statement may be drawn up as soon
as the marriage is solemnized or within the following six months (De Clercq et al, 2017).

Whoever calculates the accrual can therefore obtain the commencement value quite readily from
either the marriage contract or the separate statement.

Example

Examples of how to perform a calculation or activity with the solution

/ appropriate response.

Calculation of accrual
Michael dies a month after his marriage with Nancy. They were married out of community of property,
and the accrual system was applicable. The couple failed to declare the commencement values of their
respective estate on solemnizing their marriage. After Michael’s death, it is established that his net
estate is worth R8 000 000 before deducting estate duty amounting to R100 000. Nancy has no assets,
she just owes the bank R 10 000. Inflation for the month of their marriage is taken as zero percent.
Nancy’s accrual claim against Michael’s estate is calculated as follows:

Michelle Nancy

Value of estate on dissolution 8 000 000 – 10 000

Value of estate on commencement - -

Accrual in respective estates 8 000 000 -

Comments on the Example

The commencement values of both estates are nil because no values were declared.

Accrual in Nancy’s estate is therefore negative - in other words, it has decreased from nil to minus R10
a) Negative growth is ignored. Accrual in Nancy’s estate is taken as nil.

Accrual in Michael’s estate was R8 000 000

The R100 000 liability in respect of estate duty is ignored, because estate duty is an obligation incurred,
because estate duty is an obligation incurred following Michael’s death for which Nancy’s estate must
not be held liable.

The difference in accrual is R8 000 000 (R8 000 000 less R nil).

Nancy is now entitled to half of the difference, namely R8 000 000/2 = R4 000 000

Michael’s estate was presumably worth R8 000 000 when the couple got married.

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By not declaring commencement values, his estate decreased by half, in this case as a result of the
accrual claim. On the other hand, his estate duty obligation also decreased dramatically.

On R8 000 000 the estate duty would have been R 900 000 (20% of R8 000 000 less R3 500 000 rebate)

• Assets excluded from accrual.

• Substitute assets Proceed from the sale of a house which was initially left out
for another child outside marriage Inheritances, legacies and donations that
accrue to a spouse during the course of a marriage Donations between
spouses are ignored Non patrimonial (or non- pecuniary damages)

Example

Examples of how to perform a calculation or activity with the solution

/ appropriate response.

Daniel and Frieda smith were married on 3 December 2002, out of community of property. Daniel died
on 12 May 2011. The executor presents you with the following information; and requests you to
calculate a possible accrual claim.

Information:

a) Commencement values in the marriage contact Daniel Smith R200 000 (Rand value in 2002)
Frieda Smith R20 000 (Rand value in 2002)

b) End values of the estates on 12 May 2011. Daniel Smith R2 400 000 (Rand value in 2011).
Frieda Smith R1 000 000 (Rand value in 2011)

c) Bequest to Frieda on 13 March 2005. R300 000

d) Donation to Daniel by Frieda on 20 March 2005, R200 000

e) The consumer price indices are as follows.

December 2002 75.3

March 2005 79.3

May 2011 116.4

Suggested solution

Daniel Frieda

Net end value of estate 2 400 000 1 000 000

Less: amounts excluded 293 569 440 353

Bequest 13/03/2005 R300 000: 2005 Rand Converted to 2001 293 569 440 353
Rand (R300 000 x 116.4/ 79.3)

End values after exclusions 2 106 431 559 647

Less: commencement value

R200 000 x 116.4/75.3 = R309 163

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R20 000 x 116.4/75.3 = R30 916 309 163 30 916

Accrual 1 797 268 528 731

Difference in accrual

(R1 797 268 less R528 731) 1 268 537

Frieda’s accrual claim (50% of 1 268 537) 634 269

Comment

• Under the accrual system, there is no division of assets when a marriage is dissolved.
• The claim of the spouse with the smallest accrual is a value that is paid with a monetary
amount.
• Amounts excluded from the final balance also have to be adjusted for inflation because it is
their present value that is excluded. But if the exclusion referred to a particular asset, such as
farm, it would be the current value of the farm that would be excluded, and a calculation of
inflation would not be necessary. (The index figure for month in which the relevant event
takes place is used.

Additional information

Find the recommended information listed.

https://www.justice.gov.za/legislation/acts/1984-088.pdf

https://randles.co.za/2018/06/04/the-current-position-on-
matrimonial-property-law-in-south-africa/

Case study/Caselet

Apply what you have learnt to the case study presented.

Mr and Mrs Chetty are married in community of property. Mr Chetty

plans to perform the following juristic acts with property which all form
part of the joint estate: selling a beach house which the family no
longer use; signing surety for his (Mr Chetty’s) brother who is starting
a new business; purchasing a dairy farm in Kwazulu-Natal; selling ten
expensive paintings which they hold mainly as investments in order to
fund the dairy farm; receiving R60 000 from Book Bank which is due to
Mrs Chetty as remuneration for services rendered and receiving a prize
which Mrs Chetty has won in a national crossword competition.

Discuss and evaluate the consent, if any, to be obtained for each

juristic act by Mr Chetty.

Practice

Practice the skills you have learned.

• Calculation of the accrual – Page 14

• Indexing – Page 16

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 Example of an accrual claim – Page 17

Reading

Read the section(s) of the prescribed text listed.

6 Marriages in community of property – Page 11

7 The accrual system – Page 13

8 Commencement value of an estate – Page 14

9 Assets excluded from accrual – Page 15

Study group / Online forum discussion

Discuss the topic in your study group or online forum.

Mr and Mrs Light entered into a civil marriage without an antenuptial

contract. At the time of entering into the marriage, Mrs Light was
unaware of the fact that Mr Light was already a party to another civil
marriage in community of property. Mrs Light found out about the
other civil marriage after Mr Light’s death.

You are required to indicate what type pf marriage Mr and Mrs Light’s
marriage is and give a definition of this type of marriage.

Video / audio

Access and watch/listen to the video/audio clip listed.

https://www.youtube.com/watch?v=SPoNgn1yyqk

https://www.youtube.com/watch?v=tavWZ0Gyjqo

5.11.9Conclusion
The matrimonial property system which you choose before you marry will affect your whole future
and your estate. You must exercise an informed choice to determine your proprietary rights during
your marriage, as well as when it is dissolved, either by death or divorce. Think carefully in your own
personal interests and goals and do not allow your heart to cloud your judgment.

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• Revision questions

Revision questions
Complete the compulsory revision questions at the end of each unit.
i. What are the requirements of a civil marriage?

ii. What are the differences between marriages in community of property and marriages out
of community of property?

iii. Compare and contrast between a civil union and a marriage contract.
iv. Briefly describe the advantages and disadvantages of marriage out of community of
property with the accrual system.
v. Explain the powers of spouses married in community of property.

• Self–check activity

Self-check activity
Check your progress by completing the self-check activity.
a. Briefly explain the legal consequences of the two types of marriages mentioned above.
b. Briefly describe the accrual system.
c. Discuss the effects of the abolition of marital power as amended.
d. Explain whether donations between spouses is permissible.

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Study Unit 12: Intestate Succession

The purpose of this study unit is to enable learners to interpret and apply the laws and procedures relating
Purpose
to the law of succession with regards to intestate succession.

By the end of this unit, you will be able to:

• Explain the rules governing interstate succession.

Learning
• Define heirs, relationships and diagrams.
Outcomes
• Explain circumstances around collation.
• Determine the distribution of estate the qualifying heirs.

Time It will take you 6 hours to make your way through this unit.

Important Competent heirs Person not disqualified for one reason or another from being an heir.
terms and
definitions
Stirpes Child of the deceased and includes adopted children.

Representation Occurs in the case of per stirpes distribution when one of the stirpes cannot
inherit.

Succession per capita Inheritance according to the degree of relationship to the deceased.

Collation Process by which the inheritance of certain heirs of the deceased is adjusted to
any substantial benefits received from the testator during his lifetime.

5.12.1Introduction
When a person dies and distribution must take place in terms of the Act, the Act must be studied to
determine who the intestate heirs are.

Regulated by intestate succession act 81 of 1987. The law of intestate succession identifies the heirs to a
deceased estate when the deceased has failed to regulate the devolution of his or her estate by will or where it
is impossible to carry out the wishes of the deceased because the beneficiaries are unable to inherit, do not wish
to inherit or are predeceased. It is possible for a person to die completely intestate or only partly intestate.

The law of intestate succession determines the heirs to a deceased estate in the following circumstances:
• When the deceased has failed to determine how and to whom his or her property must be awarded by will
or antenuptial contract; or

• Where it is impossible to carry out the wishes of the deceased because the beneficiaries are, for example,
unable to inherit, or do not wish to inherit or are predeceased.

Once you have studied this section, you should be able determine the distribution of the estate in the absence
of a valid will.
In this study unit, we will cover:
• Legislation
• Heirs

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• Applicability of the Act

• Distributable estate
• Degrees of consanguinity
• Rules of intestate succession
• Definition of concepts
• Intestate succession
It will take you 6 hours to make your way through this study guide.

5.12.2Legislation
When a person dies without a will in South Africa, the estate is distributed according to the Intestate
Succession Act.

Intestate succession in South Africa allows for an estate to be divided between a surviving spouse and
children, with the surviving spouse receiving at least R125,000. Excluding this, the estate is then
divided equally between spouse and children.

If spouses were married in community of property (i.e., they were joint owners) then one half of the
estate goes to the surviving spouse and the other half is distributed according to the laws of intestate
succession in South Africa.

If a person dies and leaves an estate (assets and liabilities) which cannot be distributed in terms of a
will, the Intestate Succession Act 81 of 1987 comes into operation, and the distribution of the estate
is made according to the provisions of this Act. The law of intestate succession has been largely
codified, which means that this single act covers almost every aspect of this field of study (De Clercq
et al, 2017).

Note

There is no any difference between Black, White, or Coloured persons who die Intestate. The
perception is that the law of intestate succession only applies in the case of estates where there is not
a valid will. However, it is provided in the Act that it shall also apply when a person dies partially
intestate. This means that the Act applies to assets which are not dealt with in a will that is in cases
where there is a valid will, but in which certain assets have not been dealt with.

5.12.3Applicability of the Act

The perception is that the law of intestate succession applies only in the case of estates where there
is not a valid will. However, the Act provides that it shall also apply when a person dies partially
intestate. This means that the Act applies to assets which are not dealt with in a will, that is in cases
where there is a valid will, but in which certain assets have not been dealt with. Sometimes the
provisions of a will are unclear or impossible to carry out, in which case the assets concerned will also
devolve in terms of the law of intestate succession.

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5.12.4Heirs
Under the law of intestate succession, beneficiaries will always be referred to as heirs. The Intestate
Succession Act provides that spouses, adopted children and children born out of wedlock are entitled
to inherit intestate.

The intestate heirs are determined at the death of the deceased.

Note:

A person who predeceased the deceased therefore cannot be an intestate heir. An unborn descendant
(who was conceived before the death of the deceased) can inherit if he/she is later born alive. Such a
person’s rights are upheld until his/her birth. It may sometimes happen that an estate only becomes
intestate subsequent to the date of death of the deceased, in which case the intestate heirs will be
determined at such later date.

• Distributable estate
A deceased estate normally consists of assets and liabilities. The estate liabilities must be paid before
the remaining assets can be distributed.

In the case of a marriage in community of property the spouse will receive half of the estate in terms
of the matrimonial property law and in addition also receive the full amounts as determined by the
Intestate Succession Act (De Clercq et al, 2017).

• Degrees of consanguinity
• Father and son = first degree
• Grandfather and grandson = second degree
• Each generation = one degree

• Rules of intestate succession

• If a person dies intestate and is survived by a spouse ONLY such spouse inherits entire intestate estate.
• If a person dies intestate and is survived by a descendent or descendants ONLY such descendent or
descendants shall inherit entire intestate estate.
• If person dies leaving both a spouse and descendants shall inherit either a Childs share of the intestate
of R125 000 (whichever is greater) and descendants will inherit the residue if any. – child’s share is
calculated by dividing the value of the intestate estate by the number of children of the deceased who
have either survived him or have predeceased him but are survived by their descendants plus one.
• If a person dies without leaving a spouse or descendants but has both his parents – they will inherit
intestate estate.
• If a person dies without leaving a spouse of decedents but only leave one parent and descendants of his
deceased parent, surviving parent inherits half estate and other half is divided amongst descendants of
his or her predeceased parent. If no descendants, then the surviving parent takes entire estate.
• If survived by only descendants of his mother who are related to him through her only as well as
descendants of his deceased father related to the deceased through him only (i.e half-brothers and half-

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sisters) intestate estate is divided equally amongst them. Cloven/cleaving – mean that the estate rises
to the deceased parents and is split into 2 equal shares.
• If the deceased is survived only by descendants of one of his deceased parents who are related to him
through such parent alone, such descendants inherit the intestate estate.
.

• Definition of concepts
Competent heirs

A competent heir is a person who is not disqualified for one reason or another from being an heir,
either as a result of the provisions of the law of intestate succession or by other stipulations.

Note:

An incompetent heir is a person who is not related to the deceased or who murdered the deceased.

The murderer is not competent to inherit from his victim. A person is also disqualified to inherit if he
/ she commits a crime which would result in his/her own enrichment.

In terms of the Act, an adopted child can inherit from his adoptive parents and their blood relations,
but not from his natural parents and their blood relatives, except if one of his natural parents also
adopted him or was married to the adoptive parent at the time of the adoption.

In terms of section 1(2) of the Intestate Succession Act an illegitimate child born out of wedlock is
declared capable of inheriting from his biological father as well as from the father’s blood relations,
and they in turn, are also capable of inheriting from the illegitimate child. An adopted child born out
of wedlock is regarded as an adopted child and the rules relating to adopted children will apply. This
means that such a child will not inherit from his biological parents.

The Reform of Customary Law of Succession and Regulations of Related Matters Act confirm that the
Act is extended to persons subject to customary law. In this Act descendant is defined for that purpose
as a person who is a descendant in terms of the Intestate Succession Act and includes descendants
who during the lifetime of the deceased person, were accepted by the deceased person in accordance
with customary law as his own child.

For dividing the intestate estate, spouse includes a partner in a customary marriage that is recognized
in terms of the Recognition of Customary Marriages Act and therefore includes every spouse who
survived the deceased (De Clercq et al, 2017).

Blood relations

In principle, a person’s blood relations can be divided into three groups; ascendants, descendants and
collaterals. Ascendants include the deceased’s parents, grandparents, great-grandparents and further
ancestors. Descendants of a deceased include his children, grandchildren, great-grandchildren and
further descendants. In relation to the deceased the concept ‘direct line’ means relations in the
ascending line as well as relations in the descending line. An adopted child and a child born out of
wedlock or he adoptive parents and the parents of a child born out of wedlock would also be regarded
as descendants or ascendants.

Collaterals are those persons who are related to the deceased through a common parent or
grandparent, such as brothers, sisters, uncles, aunts, nephews, nieces and cousins. An adopted child

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and a child born out of wedlock or the adoptive parent sand he parents of a child born out of wedlock
would also be regarded as collaterals.

If any of the above relatives are or were adopted or illegitimate children, they will be regarded as
blood relations for the purposes of the law of intestate succession.

Parental

A reference to parental means a particular parent or parent group and his or her descendants. The
deceased and his descendant are referred to as the first parental. The parents of the deceased and
their descendants are referred to as the second parental. The deceased’s grandparents and their
descendants are referred to as the third parental.

The persons in the first parental will always inherit first. If nobody in the first parental is alive or
competent, the process moves to the second parental and so forth.

Stirpes

A stirpe is a child of the deceased, and/or a predeceased child who is survived by living descendants
and includes adopted children or children born out of wedlock.

Representation

Representation occurs in the case of per stirpes distribution when one of the stirpes cannot inherit. A
person can be unable to inherit because he or she is already dead, or has repudiated his/her right to
inherit, or is not competent to inherit.

Representation will only occur in the first and second parental.

Degree of relationship

In the case of per capita distribution, it is sometimes necessary to determine the degree of
relationship, since only the person or persons in the closest degree of relationship will qualify to
inherit.

The degree of relationship between two blood relations is calculated by adding the number of
generations between them.

Child’s share

When there are a spouse and children of the deceased who can inherit, a child’s share must be
calculated. This is done by dividing the monetary value of the estate by a number equal to the number
of stirpes of the deceased, plus one for the surviving spouse or one for every surviving spouse.

• Intestate succession
When a person dies and a distribution must take place in terms of the Intestate Succession Act, the
Act must be studied to determine who the intestate heirs are. The broad principles which must be
followed are the following;

• If the deceased is survived only by a spouse, such spouse inherits the entire intestate estate.
if the deceased is survived only by descendants, they inherit the intestate estate per stirpes.

• If there is a combination of a spouse and descendants, they inherit the estate in a special ratio.

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• If there are no spouse of descendants, the deceased’s parents and/or their descendants
inherit the estate.

Note:

If there are no parents or descendants of parents, then grandparents and other collaterals inherit the
estate per capital (third or further parental).

The spouse as sole heir

If the deceased is survived by a spouse but has no descendants, the spouse inherits the entire intestate
estate. If the deceased was marriage to more than one wife, all of them will inherit the intestate
estate.

See worked examples in chapter 3 of your prescribed text book.

Descendants as sole heirs

If the deceased is not survived by a spouse but by descendants, those descendants inherit the estate
per stripes to the exclusion of ascendants. The distribution of the estate will take place per stirpes and
predeceased children will be represented by the descendants.

Spouse and descendants

If the deceased is survived by a spouse as well as descendants, the assets available for distribution are
divided among them in a particular

ratio. The spouse and descendants inherit to the exclusion, for example, of the parents and their
descendants. The spouse’s inheritance is calculated first. The descendants then inherit the balance of
the assets, if any. They inherit per stirpes and by representation.

In the case of a marriage in community of property, the spouse firstly receives her half of the joint
estate by virtue of the marriage in community of property. In the case of a marriage out of community
of property where the accrual system applies, the accrual must first be calculated.

The value of the deceased’s estate can then be determined and distributed. If the accrual system did
not apply, the deceased’s estate is divided without any adjustments.

Parents and their descendants

The parents and descendants of parents can inherit from the deceased intestate but only if there is
not a spouse or descendant in the first parental. One now moves to the second parental.

Descendants of parents

If the deceased has been predeceased by both his parents and he leaves neither a spouse nor
descendants, the descendants of the predeceased parents inherit the intestate estate in a particular
ratio. The estate is divided in two; competent heirs in the second parent inherit to the exclusion of
persons in the third parental.

The adopted child

The adopted child can inherit from his adoptive parents and their blood relations. The adoptive
parents and their blood relations can also inherit from the adopted child. The adopted child cannot,
however, inherit from his natural parents or their blood relations, nor can they inherit from him.

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No intestate heirs

If someone dies intestate and leaves no competent heirs, the amount which cannot be paid to heirs
must be paid into the Master’s guardian fund. If no competent heirs are found, the money is forfeited
in favour of the state after 30 years.

Collation

It often happens that a deceased, during his lifetime, substantially benefits a specific child in excess of
his other children. In the law of succession there is a presumption that the deceased wishes to benefit
his descendants equally, unless the contrary can be proved.

Collation means that the value of such benefits bestowed on a child or children during the deceased’s
lifetime must be taken into account in determining the amounts to be awarded to each descendant.

• Conclusion
The deceased loses the opportunity to appoint an executor, (the person who administers the estate),
a trustee (if a testamentary trust is created), and a guardian for his or her children. The process of
intestate succession can be quite lengthy, and the most important rules will be summarized and
shortly explained in this article. According to our common law, in such cases the State acquired the
whole estate as bona vacantia.

Additional information

Find the recommended information listed.

https://www.schoemanlaw.co.za/wp-content/uploads/2016/02/Who-
inherits-if-there-is-no-will.docx.pdf

https://funeralguide.co.za/what-to-do-when-someone-dies/dying-
without-a-will/

www.gimmenotes.co.za

Case study/Caselet

Apply what you have learnt to the case study presented.

Long Live inherited a fortune from his grandfather when he was ten
years old. On his fourteenth birthday, he signed a document stating
that he wishes to leave his entire fortune to his two brothers, Dan and
Fred. This document was attested by two of his fourteen-year old
friends. Long Live died in a car accident when he was seventeen and
left his parents, Anna and Ben, and his brothers Dan and Fred behind.

Answer the following questions:

a) Will Long Live's estate devolve testate or intestate? Give

reasons for your answer.

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b) Who will inherit from Long Live’s estate?

Practice
Practice the skills you have learned in your prescribed text book.

 Figure 4 – Page 29

 Figure 7 – Page 31

 Figure 9 – Page 33

 Figure 13 – Page 37

 Figure 16 – Page 39

Reading

Read the section(s) of the prescribed text listed.

3. Competent heirs – Page 23

4. Stirpes – Page 25

5. Succession per capita – Page 26

6. Intestate succession – Page 28

7. Collation – Page 45

Study group / Online forum discussion

Discuss the topic in your study group or online forum.

Critically discuss and evaluate the circumstances that may lead to the
State acquiring the whole estate bona vacantia.

Think point
Reflect, analyse and discuss, journal or blog about the idea(s).

The value of Khathu’s intestate estate is R1 250 000.

The deceased is survived by a spouse and 3 children.

You are required to discuss what will be each child’s share of the estate.

Video / audio

Access and watch/listen to the video/audio clip listed.

https://www.youtube.com/watch?v=94sFLnrBfIU

https://www.youtube.com/watch?v=CbUx1c_HP_4

https://www.youtube.com/watch?v=mEG2U2llEYw

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• Revision questions
Revision questions

Complete the compulsory revision questions at the end of each unit.

i. What is the difference between inheriting with "a half hand" or "a full hand"?

ii. What is the difference between inheriting "per stirpes" and

"per capita"?

iii. Define the term "residue of the estate".

iv. Who is entitled to collation?

v. Briefly explain what is meant by competent heir.

• Self –check activity

Self-check activity

Check your progress by completing the self-check activity.

 What is the basis of collation? In other words, why does it have to take place?

 Is an adopted child entitled to inherit any of a deceased

parent’s estate? Explain based on the relevant law.
 X dies intestate and leaves the following relatives: His wife W to whom he was married in
community of property, his son S, his mother M and his full brother B. The total value of
the estate is R400 000.
You are required to explain the devolution of X's estate, by
giving reasons for your calculations.

 A general unworthiness to inherit testate or intestate attaches to a murderer, and therefore

a murderer may never inherit from anybody.

You are required to discuss the above-mentioned statement in

relation to the application of the law of succession.

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Study Unit 13: Testate Succession

The purpose of this study unit is to enable learners to interpret and apply the
Purpose laws and procedures relating to the law of succession with regards to testate
succession.

By the end of this unit, you will be able to:

Learning  Explain the rules governing testate succession.

Outcomes  Discuss the formalities during the execution and revocation of wills.
 Describe the different types of bequests.
 Explain the rights of beneficiaries to inherit.

Time It will take you 12 hours to make your way through this unit.

Important terms
and definitions Will Written document that stipulates what should happen to
your estate after death.

Codicil Addition or addendum to an existing will.

Testator Person who makes a will

Adiation Heir or legatee accepts benefits from a deceased estate.

Legatee A person who inherits a specific asset.

Massing Occurs when two or more people execute a joint will.

5.13.1Introduction
When a person dies, he or she leaves behind not family/friends but more importantly for our purposes
rights and duties that must be finalized. The law of succession deals with the finalization of the debt
and assets the deceased leaves behind.

Law of succession – comprises those legal rules or norms which regulate the devolution of a deceased
person’s estate upon one or more persons. Thus, the law of succession is concerned with what
happens to a deceased person’s estate after his death.

During his lifetime a person can execute a will in which he determines how his estate must devolve
and be distributed when he dies. The law of testate succession refers to the legal rules that apply to
wills and related matters. If no will had been made, an estate is distributed in accordance with the
provisions of the law of intestate succession; otherwise, it is distributed in terms of the will and
principles of the law of testate succession.

A person can die partially testate and partially intestate. For example, a will may contain only one
provision, namely that the testate bequests R500, 000 to his spouse. Since the will contains no
provisions regarding the remainder of the estate, the balance must be distributed in terms of the law
of intestate succession.

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Testate and intestate successions have many aspects which overlap, but the administration process is
the same in all cases. It is only the way in which heirs are determined that there are differences
between testate and intestate succession.

Aspects of testate succession are arranged by the Wills Act 7 of 1953. The Wills Act arranges matters
such as the competency of persons to make a will, who may sign as witnesses (attest), the formality
requirements for making a valid will, the amendment of a wills and related matters such as
representation, and rules for the interpretation of wills.

Other aspects of testate succession, such as content provisions, revocation of wills, adaptation and
repudiation, collation, interpretation of wills and rectification, which are not arranged by the Act, can
be found in sources dealing with the common law (De Clercq et al, 2017).

Once you have studied this section, you should be able to explain in details testate succession and
the formalities during the execution and revocation of a will.

In this study unit, we will cover:

• Will and Codicil

• Parties involved
• Commencement of the estate
• Types of wills
• Formalities during the execution of wills
• Revocation of wills
• Formalities when a testator signs his will with his own signature
• Types of bequests
• The right of beneficiaries to inherit
• Massing
• Accrual (ius accrescendi)
• Interpretation of wills
• The will

It will take you 12 hours to make your way through this study unit.

• Will and Codicil

Will and codicil

A will can be defined as a written document in which someone, by means of a voluntary unilateral
legal act and in accordance with ruling legal requirements, stipulates what should happen to his estate
after his death.

A codicil is an addition or addendum to an existing will which usually contains further details,
amendments, changes or additions.

As far as execution is concerned, no distinction is made between a will, a codicil or addendum to a

will.

Any testamentary writing must comply with the requirements of the act. It is not possible to make a
will by way of a video or a sound cassette. A will which is drawn up electronically must be printed and

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signed on the hard copy since it is unclear whether a will signed by scanning your signature
electronically will be valid.

A will can be drafted by the testator personally or it can be done for him by someone else.

Execution of wills

The execution of a will refers to the process through which a valid will, which has been properly
drafted and signed, comes into existence. A document which has been created with the intention of
drafting a will, but which does not comply with the necessary formalities, means that there is not a
properly executed will.

Condonation of wills

Section 2(3) of the Wills Act provides that a will which does not comply with the formality
requirements of the act may be accepted as a valid will by the court. This is referred to as condonation.

Estate

The testator’s estate consists of all his assets and liabilities as at the date of death. Before the estate
can be distributed, it may be necessary to apply some of the assets to pay the liabilities. Only the
assets which remain after the liabilities have been paid are distributed among the beneficiaries (De
Clercq et al, 2017).

• Parties involved
The testator

The testator is the person who makes a will or for whom a will is drawn up. In terms of section 4 of
the Wills Act any person over the age of 16, who is not mentally incapable of appreciating the nature
and effect of his act, is competent to execute a will. Only a person with such testamentary capacity
can execute, amend or revoke a will. The person executing the will must understand the nature of his
act, namely that he is executing a will, including its effects and implications of any bequests.

Note

Factors which may influence a testator’s mental capacity, and which may bring about a failure on his
part to understand the nature and effect of his act are drunkenness, the effects of drugs and mental
incapacity. Section 4 also provides that a person who alleges that a testator was mentally incapable
of executing a will shall bear the burden of proof.

A will supposes a voluntary expression of the testator’s intent. The testator must exercise his
testamentary capacity personally. The testator has freedom of testation and he/she can nominate the
beneficiaries and their inheritances.

Draftsman

A person may draft his/her own will or may instruct someone else to do it on his behalf. The draftsman
should make sure that the testator or someone else (executor or family member) takes custody of the
will.

Note:

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It is strongly recommended that the assistance of a knowledgeable person be obtained in this regard
since a will must comply with statutory requirements which an untrained person may be unaware of.
Confusion about the intentions of the testator can easily arises are used. Institutions and persons who
normally prepare wills include lawyers, accountants, and boards of executors, insurers and banks.

Executor

The executor is the person who is responsible for the administration of the testator’s estate. The
executor has no function during the life of the testator. The executor administers the estate by taking
control of estate assets, settling the liabilities and paying out or transferring the legacies and
inheritances once the liquidation and distribution account has been approved by the Master of the
High Court (De Clercq et al, 2017).

Witnesses and attestation

Witnesses are the persons who must confirm that it was the testator who signed the will. The testator
signs the will in the presence of witnesses.

Attestation means that witnesses, by signing the will, confirm the testator’s signature by signing in his
presence.

Section 1 defines a competent witness as anyone aged 14 or over who is competent to give evidence
in a court of law. If a witness was incompetent to attest, the will is invalid.

Any person involved with the execution process is disqualified from inheriting under that will.

Beneficiaries

Beneficiaries are persons who are entitled to benefits in terms of the provisions of a will. In intestate
succession all beneficiaries are referred to as heirs. In the law of testate succession, a distinction is
made between heirs and legatees. Not all beneficiaries are capable of inheriting. A potential
beneficiary can be disqualified, for example because he caused the death of the testator by murdering
him and would be enriched by his own crime.

A person who signs a will as a witness, or one who writes or signs the will on the testator’s behalf, is
an incompetent heir and cannot inherit.

A person who attempted to make a will on behalf of the deceased after his/her death will be
incompetent to inherit intestate from the deceased. A person who negligently caused his/her spouse’s
death is incompetent to inherit in terms of the deceased’s will (Clercq et al, 2017).

• Commencement of the estate

In terms of the law of testate succession, beneficiaries are usually entitled to inherit once the testator
has died. This means that the testator’s rights in respect of his estate cease and that the heirs and
legatees obtain claims against the estate.

In legal terms, delatio refers to the moment when the estate commences, which means that a
beneficiary’s rights can become vested. The moment at which the rights become vested is known as
dies cedit. However, the rights only become enforceable and claimable, that is dies venit takes place,
once the liquidation and distribution account has been approved by the Master.

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• Types of wills
All wills must comply with the provisions of section 2(1) (a). This includes a single will, a joint will and
a mutual will.

A single will is a will in which one person makes his wishes known.

In a joint will two or more persons express their intentions in a single document? The joint will is used
mainly by spouses. After the death of one of the testators of a joint will, the wills are regarded as
separate wills, unless massing and the accompanying adiation have occurred. When a joint will is
executed, the formality requirements need only be complied with once.

A mutual will is one in which the testators bestow benefits on one another.

• Formalities during the execution of wills

Formality requirements

Section 2(1) (a) of the wills act provides that a will is valid only if it has been signed at the end thereof
by the testator or by somebody on his behalf. The testator or the person who signs on his behalf must
sign the will in the presence of at least two competent witnesses. The will can also, if the testator did
not make his signature in the presence of witnesses, be acknowledged by him or by the person who
signed on his behalf in the presence of the witnesses.

After the signing by the testator, the witnesses must attest the will in the presence of the testator, or
if a person signed on his behalf, in the presence of that person and the testator.

The witnesses must sign after the testator has signed

Section 1 provides that ‘sign’ also includes making an initial. ‘Sign’ in the case of the testator also
includes the making of a mark. If the testator makes a mark or someone else signs on his behalf, a
commissioner of oaths must certify that he has satisfied himself as to the identity of the testator and
that he is convinced that the will is that of the testator.

Condonation by the court

If the formality requirements are not complied with, the will is not valid. However, section 2(3) of the
Act empowers the court to condone the non-compliance with formality requirements.

See the several cases that have been cited in chapter 4 of the textbook.

Formalities for the amendment of wills

A testator may amend his will any time. Even where testators have made a joint will, one of the
testators may amend his will without the knowledge of the other. However, someone else cannot
amend the will without the permission of the testator.

When a will is being drafted, it often happens that the testator decides to make changes before the
will can be signed. In such a case there are no formal requirements. In practice, it often happens that
such changes are initialled.

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An existing will can also be amended. The testator or someone else on his behalf must confirm the
amendment with his signature. The confirmation must take place in the presence of two competent
witnesses who in turn must confirm the signature of the testator or the person signing on his behalf.

• Revocation of wills
General

Because a will comes into operation upon only the death of the testator, it may be revoked by the
testator at any time before his death. There are only two instances where the testator is bound by
earlier testamentary conditions, namely;

If two or more persons arranged massing by way of a joint will and after the death of the first dying
the survivor accepted the conditions, the survivor cannot revoke the provisions of the joint will, and

If an ante nuptial contract contained testamentary provisions, then one party cannot unilaterally
revoke the provisions of the ante nuptial contract in his will.

Explicit revocation

A will can be revoked explicitly by the execution of a later will, codicil, and revocation document or
ante nuptial contract. I all these cases there must be a properly executed document with an explicit
revocation clause in which the testator states his intention to revoke. The revocation of the first or
earlier will comes into effect at the time of signing of the later document.

A will can also be revoked explicitly if the testator, or someone on his behalf and acting on his
instructions, destroys the will.

Condonation by the court

If a testator explicitly revokes his will, there is no problem in practice. If it appears, however, that a
testator wanted to revoke his will but the manner in which he did so, does not fall within the ambit of
case law, the court may determine whether the will has been revoked

Implicit revocation

It may happen that a testator makes a later will containing provisions which are in conflict with the
provisions of an earlier will. If the testator leaves more than one will and there is no express revocation
in the later will or wills, the wills are read together as far as possible, and conflicting provisions are
reconciled as far as possible. If the wills cannot be reconciled, the later will is regarded as the valid
will.

If a testator bequeaths a legacy to a person and he alienates (sells) the object of the legacy, it is
accepted that he has revoked this provision of his will. Only assets found at the date of death can be
bequeathed.

Automatic lapsing due to divorce

A will does not expire automatically if the testator marries or if children are born after it has been
executed. Section 2B of the will act, however, makes provision for the revocation of certain
testamentary provisions should the testator’s existing marriage be dissolved by divorce or annulment.

Conditional and presumed revocation

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A testator may link the revocation of his will to a condition. The will is revoked only if the condition is
complied with.

If the testator bases the revocation of his will on a presumption, but the presumption which he makes
is wrong, the revocation will not be effective because the presumption is wrong.

• Formalities when a testator signs his will with his own signature
• One page will – signature of testator at the end is required with 2 or more competent
witnesses present at the same time. Witnessing is witnessing not the document or contents
but that the testator signature. A witness may not sign by making a mark.

• More than one page – all pages to be signed by testator and 2 or more competent witnesses.

• Competent witness – is any person over the age of 14 whom is competent to give evidence in
court. Must be able to “sign” must be 14 years or older, must be able to write and competent
to give evidence in court.

• Attestation clause – is a clause that appears at the end of a will which is declared that all
parties were present and signed will in each other’s presence.

• Only a testator can sign will by making a “mark” – thumbprint or cross

Formalities when testator makes a mark – commissioner of oath should be present

a) Certificate is to be attached when the testator sign with a mark of when another
person signs on behalf of testator.

b) testator signing with a mark the will must comply with section 2(1)(a)(v) –
commissioner of oath must append certificate to a will

c) Content of certificate – commissioner of oath certifies he has satisfied himself as to

the identity of the testator, that the will so signed is the will of the testator. Certificate
may be appended anywhere to the will.

The power of the court to order the master to accept a document as a valid will:

The court can order the master to accept a will as being valid although it does not comply with all the
formalities for the execution of a will, as long as the court is satisfied the document was drafted or
executed by a person who has died in the meantime and intended the document to his or her will.

Section 2A:

If a court is satisfied that a testator has –

• made a written indication on his will or before his death caused such indicating to be made

• performed any other act with regard it his will or before his death caused such act to be
performed which is apparent from the face of the will or

Drafted another document or before his death caused such document to be drafted.

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• Types of bequests
The general rule is that a testator may dispose of his estate, or part of it, as he deems fit, which means
that he has freedom of testation. There are limits to freedom of testation. The provisions in a will must
not be impossible to execute, vague, unclear or against the public interest.

Legacy and inheritance

A specific asset bequeathed to a beneficiary is referee to as a legacy. The beneficiary is referred to as

a legatee. Beneficiaries who inherit the residue are the heirs.

The reason for this distinction is that after all creditors have been paid, the legatees must first receive
their share and only if something remains will it be divided among the heirs.

A legacy can take any form, provided that, it is a specified or ascertainable asset or sum of money.

Conditional and dies provisions

A testator is free to subject a bequest to a dies or condition. A condition is an uncertain future event,
while a ‘dies’ is a certain future event.

Modal clauses

A testator is free to encumber a bequest with a liability. The beneficiary is then expected to do
something or to deliver something. The beneficiary receives his vested right immediately but subject
to the accompanying condition.

Direct substitution

If the testator foresees that any one of the beneficiaries cannot or will not accept certain benefits,
because the beneficiary may predecease him or may repudiate the bequest, he can make provision
for alternative beneficiaries.

Usufruct

A usufruct is created when a testator gives a right to the income of a specific asset to a person and the
right of ownership (bare dominium) to someone else. The holder of the bare dominium is he eventual
owner of the asset. The usufructuary never becomes the owner of the asset.

• The right of beneficiaries to inherit

An estate commences upon the testator’s death. The beneficiaries will then be determined according
to the provisions of the will or in accordance with the law of intestate succession.

Adiation and repudiation

No heir or legatee can be forced to accept a benefit. At the death of the testator a beneficiary must
decide whether to accept the benefit or not. If the beneficiary decides to accept the benefit, he
acquires a legal claim against the executor of the estate for performance of the stipulations of the will,
or to carry out the rules of the law of intestate succession.

If a beneficiary adiates it means that he accepts the benefit.

If a beneficiary does not accept the bequest, it means that he renounces (repudiates).

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Once the choice has been exercised, it is final. It is usually presumed that beneficiaries will accept their
benefits.

Competent beneficiaries

A person does not have to attain a certain age before he can inherit. Unborn persons can also be
nominated as potential heirs. A person must, however, be indicated as a beneficiary in terms of the
rules of intestate succession or by the testator.

Certain persons may, although they have been nominated as beneficiaries by will or in terms of the
rules of the intestate succession, be incompetent to inherit, by common law or by statutory rules.

Unworthy persons

The mere fact that a person has a poor or dubious character does not make him incompetent to
inherit. There are, however, certain actions on the part of a nominated heir towards the testator which
may have the effect that he does not inherit. A person, who, for example, causes the death of the
testator either deliberately or negligently, is not capable of inheriting from the testator. If someone
causes the death of a person who is a close relative of the testator, he will also be unworthy to inherit
from the testator. Any person, who, by inheriting, would be enriched by his own crime, is unworthy
to inherit.

Persons participating in the execution process

A number of persons are involved in the execution of a will. The purpose of the formality requirements
during the execution of wills is to prevent fraud. Persons such as witnesses, the person who signs on
behalf of the testator, the person who writes the will in his own handwriting and their spouses, cannot
inherit in terms of the conditions of that will.

The court may declare a person or his/her spouse competent to inherit if the court is convinced that
the person or his spouse did not improperly influence the testator. Witnesses will be competent to
inherit if there were other witnesses who signed and if such other witnesses do not receive benefits.

Illegitimate and adopted children

Illegitimate and adopted children are capable intestate heirs. Similarly, there is nothing which
prevents a testator from nominating his illegitimate or adopted children as testamentary
beneficiaries. There is also nothing to prevent the testator from disinheriting them.

There is, however, a rule of interpretation which provides that should doubt exist as to whether the
testator intended to include adopted or illegitimate children, they should be regarded as children of
the testator.

• Massing
Massing occurs when two or more persons execute a joint will in which each person adds a part or the
whole of his estate to that of the other and they jointly dispose of it. In the legal rules for the
interpretation of wills, there is a presumption against massing and therefore the wording of the will
must leave no room for doubt. Secondly, massing occurs only once the survivor has adiated the joint
will.

Two types of massing can occur, namely statutory massing or common law massing.

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Statutory massing

Statutory massing occurs when:

• A joint will nominates ultimate beneficiaries in respect of the joint property;

• The surviving testator(s) receives a limited right over the massed property and the surviving
testator(s) adiates the benefit.

The consequence of massing is that the survivor(s) is/are bound by the provisions of the joint estate
after adiation and that he/she/they cannot make another will which disposes of the massed assets in
a different manner than that provided for in the joint will.

In the case of common law massing, the surviving party/parties need not necessarily obtain a limited
interest, and full ownership of estate assets can be made over to survivors.

After massing has occurred, the survivor loses his rights in the assets which he contributed to the
massed estate. He cannot reclaim these assets in the future and cannot dispose of them. In the event
of his insolvency these assets will not be available for attachment by his creditors. The limited interest
which he receives as a consequence of the massing does, however, form part of his estate.

• Accrual (ius accrescendi)

When a person drafts his will, he must make provision for the possibility that certain beneficiaries
cannot or will not accept their benefits. In such cases the testator can make provision for substitution.
Section 1(6) of the Intestate Succession Act and section 2C (1) of the

Wills Act make provision for the statutory accrual of a benefit from a descendant to the surviving
spouse in certain cases. It can nevertheless happen that the award of a legacy or the inheritance
cannot be executed. Co-heirs or co-legatees can in certain cases have the right to share proportionally
in the unclaimed benefits of a co-beneficiary who cannot or will not inherit.

• Interpretation of wills
A testator’s will come into operation at his death. The executor must award benefits to the legatees
and heirs in terms of the provisions of the will. The will must therefore be interpreted in order to
establish the intentions of the testator. It may happen that doubts arise and there may be differences
of opinion as to the precise intentions of the testator.

The true intentions of the testator are determined in the first place by looking at the meaning of the
words in the will. As far as possible, words are interpreted as having their normal everyday meaning.
The scheme of the will in its entirety is of importance here.

• The will
General

After the death of the testator, when his wishes must be complied with, he is no longer there to say
exactly what should happen with his assets; if he made a will, he is also no longer there to explain

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what he really meant certain words to convey. The testator’s intentions are then determined by
interpreting the words in the will according to their ordinary meaning

No two wills should be identical, since a will is a document in which a specific testator makes his
specific wishes known. There are nevertheless certain general guidelines that can be laid down for
drafting a will. The following outline must be read together with the formality requirements discussed
above.

The following provisions are normally found in a will;

 Preamble

 Revocation clause

 Executor

 Trustees/guardians

 Heirs and legatees

 Simultaneous deaths

 Amendment clause

 Attestation clause

 Signature.

See your prescribed textbook for an explanation of each of the above elements.

Additional information

Find the recommended information listed.

https://www.expatica.com/za/finance/taxes/wills-inheritance-tax-
and-law-of-succession-in-south-africa-949392/

Case study/Caselet

Apply what you have learnt to the case study presented.

Mercy and Forgiveness are siblings. In his will, Forgiveness appointed

his sister Mercy to inherit his whole estate. In her will, Mercy appointed
her husband Peace, to be her heir. Mercy and Forgiveness are killed in
the same car accident, and no evidence exists as to whom died first.
Forgiveness leaves behind both his parents. Mercy leaves behind her
parents and her husband, Peace.

Who will inherit Mercy and Forgiveness's respective estates? Briefly

explain your answer.

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Example
Examples of how to perform a calculation or activity with the solution
/ appropriate response.

See your prescribed textbook for examples of a will.

Examples are on pages: 77 – 80.

Practice

Practice the skills you have learned.

6 Simple will: Example 4.13.2 – Page 77

7 Will with testamentary trust – Page 78

Reading

Read the section(s) of the prescribed text listed.

- Witness and attestation - Page 52

- Formalities during the execution of wills – Page 54

- Types of bequests – Page 65

- Revocation of wills – Page 61

- The right of beneficiaries to inherit – Page 70

Study group / Online forum discussion

Discuss the topic in your study group or online forum.

"I leave my house to my children." The testator had three children, A,

Band C, but A died before the testator had made his will. A leaves
behind a child, D.

Discuss who will inherit the house.

Video / audio

Access and watch/listen to the video/audio clip listed.

https://www.youtube.com/watch?v=94sFLnrBfIU

• Conclusion
It must be borne in mind that the right to claim an inheritance or legacy vests in the beneficiaries upon
the death of the person from whose estate the inheritance or legacy is claimable. On the contrary, the
Common Law position is divergent in that an heir or legatee cannot be said to acquire ownership of
an asset in a deceased estate immediately on the death of the deceased. The
assets in a deceased estate all vest in the estate as an entity that is separate from that of an heir or
legatee, unless there are special testamentary provisions which provide otherwise.

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Revision questions

Revision questions
Complete the compulsory revision questions at the end of each unit.
 Explain what is testate succession?
 What is an implicit revocation of a will?
 Describe conditions that may give rise to an automatic lapsing of a will.
 What are the requirements for the revival of a revoked will?
 What does the term legatee mean?

• Self –check activity

Self-check activity
Check your progress by completing the self-check activity.
 Discuss the different types of wills.
 What is the difference between a will and codicil?
 In what ways may a will be revoked?
 Describe what type of an agreement is a pactum de non
succedendo and how valid is it?
 Briefly describe what limited interest is?

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Study Unit 14: Estate Duty

The purpose of this study unit is to provide clear knowledge and details of
estate duty payable on all assets of whatsoever kind which constitute property
Purpose and deemed property as part of the property in the estate as defined.

By the end of this unit, you will be able to:

Learning a) Explain the relevant rules regarding estate duty

Outcomes b) describe the valuation of property
c) Identify which property should be deemed as property
d) Explain rebates and reductions from estate duty

Time It will take you 8 hours to make your way through this unit.

Important terms Donatio Donation that materialises only if the donor dies.
and definitions mortis causa

Fiduciary An amount by which the deductions allowed under s 11

right exceeds the income from which they are deducted (s
20(2)).

Usufruct Right to make full use of an asset without ownership.

Bare Ownership of property without the right of use it.

dominium

• Introduction
• What is an Estate Duty?
Estate Duty is payable on the estate of every person who dies and whose nett estate is in excess of
R3.5 million. It is charged at the rate of 20%.

Estate duty is levied on property of residents and South African property of non-residents less
allowable deductions. The duty is levied on the dutiable value of an estate at a rate of 20% on the first
R30 million and at a rate of 25% above R30 million. A basic deduction of R3.5 million is allowed in the
determination of an estate’s liability for estate duty, as well as deductions for liabilities, bequests to
public benefit organisations and property accruing to surviving spouses (SARS).

In South Africa estate duty is levied in terms of the Estate Duty Act 45 of 1955, as amended. In the
case of a person who died while ordinarily resident in South Africa, it is levied on all assets of
whatsoever kind owned by him which constitute property and property deemed to be property in his
estate, as defined in the Act. In the case of a person not ordinarily resident in South Africa, certain
property (mostly foreign property and rights not enforceable in South Africa) is excluded from his
South African estate for estate duty purposes (De Clercq et al, 2017).

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The total value of the estate is determined by adding the value of all the property and property
deemed to be property. This total is referred to as gross value of the estate. The gross value of the
estate is reduced by all the deductions allowed by the Act. The result is referred to as the net value of
the estate. The value of the net estate can then be reduced by a rebate of at least R3.5 million in all
estates where a person died on or after 1 MARCH 2010. The remainder is known as the dutiable
amount of the estate. Estate duty is levied thereon at a uniform rate of 20% (De Clercq et al, 2017).

Once you have studied this section, you should be able to explain various regulations applicable to
estate duty and the calculation thereon.

In this study unit, we will cover:

• Definition of estate duty

• Who is responsible to pay estate duty?
• When is estate duty due?
• Property
• Property deemed to be property
• Allowable deductions
• Section 4A rebate
• Marriages in community of property
• Administration of the Act

It will take you 8 hours to make you way through this study unit.

• Who is responsible for payment of Estate Duty?

In general, the estate is liable for Estate Duty and it shall be paid by the executor. Where a policy was
paid to a beneficiary directly, the beneficiary is liable for the proportionate share of the Estate Duty
payable.

• When is Estate Duty due?

Estate Duty is due within 1 year of date of death or 30 days from date of assessment, if assessment is
issued within 1 year of date of death. Currently, interest is levied at 6% p.a. on late payments (SARS).

5.14.5Property
In the Act, property is defined as ‘any right in or to property, movable or immovable, corporeal or
incorporeal’.

Property includes a large variety of asses and interest, including fixed property, motor vehicles,
furniture and household effects, shares, shares, fixed deposits and other cash investments, works of
art and jewellery.

Limited interests

Usufructs, fiduciary rights and certain annuities are also part of the property in a deceased estate.

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Certain annuities, including annuities charged upon properly, are also regarded as property. An
annuity is a fixed sum of money which is payable annually, but may also be paid at other intervals, for
example weekly, monthly, quarterly or half yearly.

If an annuity is charged upon property, it implies that the payment of the annuity is connected with a
specific asset or entity.

Ordinary place of residence

A person’s ordinary place of residence must be determined in accordance with the underlying
circumstances. To be ordinarily resident in a country implies at least a fixed address where the person
concerned must be regularly resident from time to time. If a person has residence in more than one
country, he is ordinarily resident in the country where he has his most fixed or regular place of
residence. A person is not necessarily ordinarily resident in his country of origin. (De Clercq et al, 2017)

All property and property deemed to be property of a person who is ordinarily resident in the Republic
forms part of his estate and is subject to estate duty in the Republic.

A person who does not ordinarily reside in the Republic but who owns property in the Republic is in
principle, only liable for South African estate duty on his South African property.

5.9.11Property deemed to be property

The expression was created by the legislature to include rights and assets which are not normally
regarded as a person’s property in the definition of property foe estate duty purposes. Normally
property will include all items that existed at the time of death, whereas deemed property refers to
all the items that originated after the time of death (e.g. insurance policies that get paid out).

Insurance policies

The proceeds of a policy are only property which is deemed to be property if it was taken out on the
life of the deceased. If the deceased was the owner of a policy on someone else’s life, only its
surrender must be included as property in his estate in terms of section 3(2).

When a life insurance policy is paid out, the value of the pay-out is included in the value of the
deceased’s estate and it could therefore impact the amount on which the estate duty is levied.

There are certain exemptions, such as:

 When the policy falls outside of the estate in terms of an antenuptial contract.

 When the policy had been implemented and paid for by a business partner and the proceeds
are then paid to the business partner on the death of the individual whose life had been
insured.

 When the policy was not taken out by the deceased individual and will not be used to benefit
a family member or business associate of the deceased.

The life insurance policies referred to above include policies where a spouse or child is nominated as
a beneficiary, buy-and-sell policies, and key-person policies that conform to the conditions as set out
in the Act. It is important to note that endowment policies (local and offshore) that do not pay out on
the death of a life assured, but that are owned or part-owned by a deceased policyholder, will be
subject to estate duty.

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The surrender value of the policy must be included as property in the deceased estate.

Exempt donations

According to section 3(3)(b) any assets donated by the deceased in terms of a donation which is
excluded from donations tax in terms of section 56(1)(c) or (d) of the Income Tax Act are deemed to
be property if such assets were not previously included in the estate.

Accrual claims

An accrual claim that the estate of a deceased has against the surviving spouse is property deemed to
be property in the deceased’s estate. (De Clercq et al, 2017)

5.9.12Allowable deductions
When all property and property deemed to be property has been included in an estate, and its value
established, it comprises the total value of the estate, also referred to as the gross estate. In order to
determine the net estate, all the deductions which are allowed in terms of section 4 are subtracted
from the gross estate. These deductions include the following;

Funeral – tombstone and deathbed expenses

As much of the funeral, tombstones and deathbed expenses as the Commissioner considers fair and
reasonable is allowed as a deduction. This deduction includes the medical expenses incurred in the
deceased’s last illness as well as the costs of a hearse and other funeral expenses. Note, however, that
the Commissioner does not allow the cost of wreaths, flowers and obituary notices for estate duty
purposes.

Debts owed in the Republic

All properly proven debts which a deceased owes to persons who have their ordinary residence in the
Republic are deductible from the gross estate. The deceased’s income tax liability for the period up to
death is included in this category.

Costs of administration and liquidation

All costs in connection with the administration of the estate, which have been incurred by the executor
and allowed by the Master, can be deducted from the estate.

Requirements of the Master and the Commissioner

Expenses incurred during the administration of an estate in order to comply with the requirements of
the Master and/or Commissioner, qualify as a deduction in terms of section 4(d). Items such as the
cost of valuing estate property, legal costs in disputes with the Commissioner, the cost of providing
security and fees paid to professional persons such as accountants and attorneys are covered by this
section.

Foreign assets and rights

If a person, who had his ordinary place of residence in the Republic, dies, the estate of that person
consists of all his property, irrespective of where it is situated.

Foreign debt

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Amounts owing to persons who ordinarily reside outside the Republic, are only deductible to the
extent that the value of the estate’s non-dutiable foreign assets are insufficient to settle such debts.

Limited interests received as a gift

The value of certain limited interests can be deducted from the gross estate, provided the deceased
received those interests by way of a donation and the interests revert to the donor at the death of the
done.

Bequests to certain institutions

A deduction is allowed in respect of property included in the estate and which accrues to any public
benefit organization which is exempt from income tax in terms of the Income Tax Act.

Apart from these institutions, any amount, property or benefit which accrues to the state or any local
authority within the Republic as a result of the death of the deceased, is deductible from the estate
for estate duty purposes. (De Clercq et al, 2017)

Improvements made by beneficiaries

If the value of any property included in the estate has been enhanced by improvements made at the
expense of the person to whom the property accrues upon the death of the deceased, the amount by
which such property’s value has been increased by the improvements, is deductible from the
deceased’s estate, provided that the improvements were made during the deceased’s lifetime and
with his permission.

Improvements to property subject to a limited interest

If a deceased’s estate includes a fiduciary interest, usufruct or other similar right, and the value of
such right was increased as a result of improvements made to the property concerned, the amount
by which the value of the right has been increased as a result thereof, is deductible from the
deceased’s estate. The person to whom the right accrues upon the death of the deceased must have
been responsible for the cost of the improvements and the improvements made must have been
during the deceased’s lifetime and with his permission.

Accrual claims

If the surviving spouse has an accrual claim against the deceased estate in terms of the Matrimonial
Property Act, the amount thereof is deductible from the deceased state for estate duty purposes.

Limited interest created by a predeceased spouse

If a deceased estate includes a usufruct, other similar right, or an annuity charge upon property, and
if such right was created by a predeceased spouse, the value thereof can be deducted from the
deceased’s estate.

Books and works of art lent to the state

If an estate includes books, paintings, sculptures or other works of art, their value can be deducted
from the estate if the deceased lent the articles mentioned to the state or any local authority in the
Republic for a period of at least 30 years in terms of a notarial deed, and the deceased died within
that period.

Amounts which accrue to the surviving spouse

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The value of any property in an estate for estate duty purposes and which accrues to the surviving
spouse is deductible. It is a comprehensive deduction and not limited only to property which the
deceased bequeathed to his spouse in his will. It includes for example, usufructs, fiduciary rights and
annuities which accrued to the surviving spouse. The deduction also applies to the proceeds of a policy
on the deceased’s life which accrues to the surviving spouse, whether in terms of the will or as a result
of a cession of the policy.

5.9.13Section 4A rebate
In terms of section 4A a rebate of at least R3.5 million can be deducted from the net estate. This rebate
applies to all deceased estates and means that all estates under R3.5 million are exempt from estate
duty. An amendment to Section 4A now allows for an automatic transfer of the unused portion of the
R3.5 million rebates in the estate of the first dying spouse to the estate of surviving spouse. The
executor of the second dying spouse would have to take into account any portion of the R3.5 million
originally claimed by the first dying spouse.

General

The executor of an estate, in his capacity as executor, is responsible for the payment of all the estate
duty in connection with the estate concerned. This includes the payment of estate duty on certain
categories of assets which is recoverable from other persons. The executor has the right to recover
the estate duty payable by other persons from such person. Persons become liable for estate duty if
certain property or deemed property accrues to them.

The abovementioned types of property and deemed property are the only types where the estate
duty is apportioned to and payable by the beneficiaries. The estate duty on all other types of property
is payable by the estate and no beneficiary is liable for it. If an estate includes property, the duty on
which is recoverable from other persons, the duty must be apportioned in order to ascertain each
one’s liability (De Clercq et al, 2017).

Example

Examples of how to perform a calculation or activity with the solution

/ appropriate response.

Fly Night, who has always been ordinarily resident in South Africa,
died on 31 January 2020 at the age of 40. The following details were
obtained from the executor:

Assets: R

1. A 100% interest in a close corporation. The auditors’ 1 500 000

valuation thereof on
date of death:
He inherited the interest in the close corporation from his father in 1990.
The executor had an offer for R2 000 000 to purchase the business.
2. A RSA residence valued at: 520 000
3. Flat in London. He inherited this flat from his aunt. His aunt has never been 1 900 000
a resident of South Africa.

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 Bare dominium in a farm in the Natal Midlands. At the time of his death
he owned the bare dominium in this farm. His sister has a usufructuary
interest in this farm for the rest of her life. The market value of the farm on
the date of Fly Night’s death was R2 200 000. The value of the usufruct is R1
470 172 for estate duty purposes.
 Motor cars, furniture, etc. valued at: 420 500
 Paintings and sculptures valued at: 900 000
In January 2010 he said to his mother that if he died, she could have all his
sculptures and paintings, as his health suddenly started deteriorating. She
did not have a chance to remove it from his house.
 Cash on call 380 000

Liabilities:

1. Death bed and funeral expenses 20 500

2. Other liabilities, including executor’s and Master’s fee 80 000
3. SARS for Income Tax (Capital Gains Tax included) to date of death 120 000

His last will and testament that was signed on 31 December 2017, provided for the following:

1) The paintings and sculptures are bequeathed to his mother.

a) The interest in the close corporation was bequeathed to his sister.
b) The flat in London was bequeathed to his brother.
c) The bare dominium in the farm was bequeathed to his sister.
d) A cash amount of R100 000 to an approved public benefit organisation for the prevention of
Cancer.

You are required to calculate the Estate Duty and Donations Tax (if any) due in respect of the above.
Round off your answer to the nearest Rand.

Suggested Solution:

Calculation of the dutiable amount and Estate Duty payable:

R
c) Property at the date of death and
property deemed to be property 1 500 000
Interest in close corporation
(Use auditors’ valuation - section 5(1)(f) bis) 520 000
Residence 1 900 000
Flat in London
Bare dominium in the Natal Midlands farm:
Fair market value R1 540 000 (R2 200 000 x 70%) – refer to note 1 69 828
Less: Usufruct (1 470 172) 420 500
Motor cars, furniture, etc. 900 000
Paintings and sculptures - section 3(3)(b) – refer to note 2 380 000
Cash on call 5 690 328
Total value of property

d) Deductions:
Flat in London (no deduction because section 4(e) applies only to 0
immigrants in respect of foreign property) (20 500)
Death bed and funeral expenses - section 4(a)
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Debts due by the deceased - section 4(b)

 Other liabilities (80 000)
 SARS (120 000)
Charitable bequeaths - section 4(h) (100 000)
Total deductions (320 500)

Net value of the estate

5 369 828
Less: section 4A deduction
(3 500 000)
Dutiable amount
1 869 828
Estate Duty = 20% x R1 869 828
373 966
Notes:

6 Note that immovable property on which bona fide farming is being carried on in the Republic, must
be valued at 70% of the open market value (the fair market value) (refer to sections 1, 5(1)(g) and
5(1A) of the Estate Duty Act).

7 The donation to his mother is a donatio mortis causa and is exempt from donations tax – section
56(1)(c) of the Income Tax Act. In terms of section 3(3)(b) of the Estate Duty Act:

Donations made in terms of section 56(1)(d), that were exempt from donations tax, as the donees did
not receive benefits until the death of the donor and property donated under a donatio mortis causa
(section 56(1)(c)), are deemed to be property of the deceased, if that property were not otherwise
included in the property of the estate for the purposes of the Estate Duty Act.

5.9.14Marriages in community of property

When one of two spouses who were married in community of property dies, the whole joint estate is
administered by the executor. The executor’s remuneration is levied on the value of the joint estate.
However, estate duty is only levied on the deceased person’s half of the joint estate. The other half of
the joint estate will only become liable for estate duty when the surviving spouse dies. Consequently,
the value of the net joint estate must be halved upon the death of the first dying spouse since only
half of the net joint estate is taxed.

5.9.15 Administration of the Act

The Commissioner for SARS is responsible for administering the Estate Duty Act. However, SARS has
delegated its powers and authority to the Master of the High court. There are 14 Masters of the High
Court offices in South Africa (Pretoria, Bloemfontein, Kimberley, Cape Town, Port Elizabeth,
Grahamstown, Durban, Pietermaritzburg, Polokwane, Bisho, Johannesburg, Mmtata, Thohoyandou,
and Mafikeng).

SARS remains responsible for collecting the Estate Duty.

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Additional information

Find the recommended information listed.

https://www.sars.gov.za/TaxTypes/EstateDuty/Pages/default.aspx

https://businesstech.co.za/news/business/320649/everything-youll-
ever-need-to-know-about-death-and-taxes-in-south-africa/

https://www.sataxguide.co.za/estate-duty/

Case study/Caselet

Apply what you have learnt to the case study presented.

South Africans are increasingly building up estates offshore. The

question is that, what are the estate duty consequences in SA when
they die?

Consider this scenario. Mr A dies. He has a flat in the UK worth R5m

and a bank account worth R500,000. His estate in SA is only worth R2m.
He leaves everything to his children.

You are required to discuss and evaluate the estate duty consequences
in South Africa.

Practice

Practice the skills you have learned.

 Example 1: Section 4A rebate – Page 167

 Value of right (usufruct) – Page 157
 Apportionment of estate duty – Page 173
 Calculation of estate duty – Page 177

Reading

Read the section(s) of the prescribed text listed.

 Property deemed to be property – Page 150

 The valuation property – Page 153
 Allowable deductions – Page 161
 Section 4A rebate – Page 167
 Rebates and deductions from estate duty – Page 169

Study group / Online forum discussion

Discuss the topic in your study group or online forum.

Critically discuss and evaluate the valuation of property as a significant

factor in determining the actual value of the estate.

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Think point

Reflect, analyse and discuss, journal or blog about the idea(s).

Effective estate planning to limit estate duty – See blog below and
critically analyse the content thereon:

https://www.moneyweb.co.za/financial-advisor-views/effective-
estate-planning-to-limit-estate-duty/

Video / audio

Access and watch/listen to the video/audio clip listed.

https://www.youtube.com/watch?v=i4GcU1ZtT8w

https://www.youtube.com/watch?v=9mkAAHPx1No

https://www.youtube.com/watch?v=O9ze074B6WQ

5.9.16 Conclusion
In South Africa, like in most countries, death and taxes go together in the form of inheritance taxes.
These are taxes that the deceased estate has to pay, in addition to the personal tax of the deceased
person for their final tax year. The personal tax is levied on the income the deceased person received
before their death, during the course of the tax year, whereas the inheritance taxes are levied on what
they leave behind in their Will.

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5.9.17 Revision questions

Revision questions
Complete the compulsory revision questions at the end of each unit.
 What is an estate duty?
 Describe when an estate duty is payable.
 Describe types of properties that are classified as deemed property for estate duty
purposes.
 Explain the treatment of transfer duty in terms of section 16(a).

5.9.18 Self –check activity

Self-check activity
Check your progress by completing the self-check activity.
e) Briefly explain which benefits and funds are exempt from
estate duty.
f) What are the four factors that will ensure effective
administration of deceased estates?
g) Briefly discuss the valuation of bare dominium.
h) What is the key provision of section 4A rebate?
i) Explain the determination of the estate duty for spouses
married in community of property.

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6 REFERENCES

De Clercq B, Evans RG, Abrie W, Graham CR, Insolvent Estates, 8th edition; LexisNexis; 2014
(reprinted 2017).
De Clercq B, Schoeman-Malan MC, de W van der Spuy P, Deceased Estates, 11th edition;
LexisNexis; 2017.
https://www.daniepotgieterattorneys.co.za/voluntary-sequestration/sequestration-
questions/#general-questions%20 (accessed on 04 January 2020).
https://gimmenotes.co.za/wp-content/uploads/2016/12/MRL3701-M-Notes.pdf (accessed on 17
January 2020).
http://www.honeyattorneys.co.za/article/15/INSOLVENT-ESTATES-IN-A-NUT-SHELL (accessed on
16 January 2020).
https://www.stowellestate.co.za/faq/21-3-what-is-a-danger-of-contribution.html (accessed on 19
January 2020).
https://www.grocotts.co.za/2017/11/13/administration-of-deceased-estates/ (accessed on 16
January 2020).
https://www.begbies-traynorgroup.com/articles/insolvency/what-is-an-insolvent-estate
(accessed on 20 January 2020).
https://www.veliletintocape.co.za/Legal-Articles/entryid/379/estate-planning-types-of-estates-
and-their-differences (accessed on 16 January 2020).
https://www.nvrlaw.co.za/NewsResources/NewsArticle.aspx?ArticleID=2518 (accessed on 16
January 2020).
https://www.justice.gov.za/legislation/acts/1984-088.pdf (accessed on 30 December 2020).
https://randles.co.za/2018/06/04/the-current-position-on-matrimonial-property-law-in-south-
africa/(accessed on 16 January 2020).
https://www.schoemanlaw.co.za/wp-content/uploads/2016/02/Who-inherits-if-there-is-no-
will.docx.pdf (accessed on 15 January 2020).
https://funeralguide.co.za/what-to-do-when-someone-dies/dying-without-a-will/
www.gimmenotes.co.za (accessed on 15 January 2020).
https://www.expatica.com/za/finance/taxes/wills-inheritance-tax-and-law-of-succession-in-
south-africa-949392/ (accessed on 11 January 2020).
https://www.sars.gov.za/TaxTypes/EstateDuty/Pages/default.aspx (accessed on 19 December
2020).
https://businesstech.co.za/news/business/320649/everything-youll-ever-need-to-know-about-
death-and-taxes-in-south-africa/ (accessed on 29 December 2020).
https://www.sataxguide.co.za/estate-duty/ (accessed on 28 December 2020).
https://www.moneyweb.co.za/financial-advisor-views/effective-estate-planning-to-limit-estate-
duty/(accessed on 06 January 2020)
https://www.youtube.com/watch?v=LcNe8hKJApY (accessed on 17 January 2020).
https://www.youtube.com/watch?v=_swuI3vBXqk (accessed on 17 January 2020).
https://www.youtube.com/watch?v=JkV3T1cAFcs (accessed on 17 January 2020).
https://www.youtube.com/watch?v=i4GcU1ZtT8w (accessed on 16 January 2020).
https://www.youtube.com/watch?v=K7sk-qEk1mQ (accessed on 20 January 2020).
https://www.youtube.com/watch?v=SPoNgn1yyqk (accessed on 16 January 2020).
https://www.youtube.com/watch?v=tavWZ0Gyjqo (accessed on 16 January 2020).
https://www.youtube.com/watch?v=94sFLnrBfIU (accessed on 15 January 2020).
https://www.youtube.com/watch?v=CbUx1c_HP_4 (accessed on 15 January 2020).
https://www.youtube.com/watch?v=mEG2U2llEYw (accessed on 15 January 2020).
https://www.youtube.com/watch?v=9mkAAHPx1No (accessed on 15 January 2020).
https://www.youtube.com/watch?v=O9ze074B6WQ (accessed on 13 January 2020

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