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HA
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ROMOTI
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US ARTICLE
Massing
and Donations Tax
ESTATE PLANNING CAN BE A RATHER SIMPLE EXER-
CISE WHERE THE FIRST DYING SPOUSE BEQUEATHS
HIS ENTIRE ESTATE TO THE LAST DYING, OR IT MAY BE
MORE COMPLEX, ESPECIALLY WHEN DEALING WITH THE
FARMING COMMUNITY.
LUCAS COETSEE
LIBERTY LEGAL SPECIALIST
I
n cases such as these, you may
come across a will in terms of
which spouses married in com
munity of property “mass” their
estates or parts of their estates. In
such instances you need to under
stand what is meant by “massing”
and what the practical and tax
consequences of massing are.
WHAT IS MASSING?
The separate estates of the spouses
are merged and consolidated into
one massed estate upon the death
of the first-dying spouse. This
means that any two persons under
a joint will may mass either their
separate estates or some of their
assets.
Should clients wish to incor
porate massing as part of their
estate planning, it must be clearly
provided for in the estate and in
terms of the joint will.
The survivor usually receives
a benefit in the form of a limited
right or may enjoy a life interest
from the massed estate.
The limited right may be in
the form of a usufruct, fiduciary
38
interest, annuity or any other limi
ted right.
So in short, a massed estate
is an estate formed out of the
separate estates of a person who
has just died and a person who is
still alive, by making provision for
massing in their joint will.
When a death occurs:
• the survivor must elect whether
he accepts the benefits which
he is entitled to in terms of
their joint will; or
• whether he gives up owner
ship of his share in the massed
property.
Should the survivor decide not to
accept the benefits under the joint
will, he will retain ownership and
control of his own estate, in which
event massing will not occur.
In other words, the survivor
will have a choice to abide by
the massing instruction of the
joint will, or decline the massing
instruction in the joint will.
Should the survivor elect to
decline the massing effect created
by the joint will, the estate of
the first-dying party will then be
wound up in accordance with
the joint will (as far as possible),
without taking the assets of the
survivor into account.
Example of a “massing clause”
in a will.
JUN/JUL 2017 • SENWES Scenario
SPECIAL BEQUEST
“We direct that for the purposes
of this bequest, our community
estate shall be massed and dealt
with as one whole. We bequeath
our Karoo Farm property togeth
er with all the livestock in equal
shares to the Testatrix's sons A and
B, subject to the lifelong usufruct
of the survivor of us and free from
the obligation to furnish security”.
Let’s take a look at the following
example:
• Peter and Britney are married
in community of property;
• They have massed their joint
estate in terms of their joint
will, with the farm devolving
upon their children subject to
the survivor having usufruct
over the said property;
• Peter dies first;
• Britney accepts the provisions
of the will.
One must understand that
Britney disposes of her one half
of the joint estate and in return
receives consideration in the form
of a usufruct over the property.
If the value of the usufruct is less
than her one half of the joint
estate, then the amount in excess
of the value of the usufruct will
be a deemed donation in terms of
section 58 of the Income Tax Act.
Complex financial plans more
often than not lead to negative
tax consequences when they are
least expected, with negative
results for family members. It
is up to your financial adviser,
together with other qualified pro
fessionals, to tailor-make a plan
that meets your needs with as lit
tle disruption as possible.