Question

My life partner of many years passed away last week. We never got around to drawing up a will.  What happens now?

Answer

If someone passes away in South Africa and does not have a will, the rules of intestate succession come to play where the deceased assets are distributed according to a formula.  The deceased ‘s assets would typically be distributed in the following order:

• The spouse of the deceased
• The descendants of the deceased
• The parents of the deceased if the deceased died without surviving spouse or descendants
• The siblings of the deceased if one or both parents are predeceased.

The challenge that you have is to have yourself recognized as a spouse for inheritance purposes.  I would recommend that you consult a lawyer who specialises in the wrapping up of estates so that the necessary proof that you were life partners may be assembled.

If you are cohabiting with someone or are in a life partnership, I urge you to

• have a cohabitation agreement drawn up where you mention that you each have a reciprocal duty of support to each other.

or

• name each other in your wills and state that you are in a long-term relationship with a reciprocal duty of support.

This should be sufficient to have your relationship classed as a marriage in community of property and have all the advantages of the estate duty and CGT rollover applied to your estate.

There are significant cashflow benefits if you do this:

Estate duty

If a spouse passes away and bequeaths all his or her assets to the surviving spouse, any estate duty that is payable on these assets will be postponed until the death of the second dying spouse. 

For example, if a spouse bequeathed net assets to the value of R5 million to the surviving spouse, the estate duty of R1m million would only have to be paid when the second spouse passes away.  However, if it was not bequeathed to the spouse, the R1 million would be payable immediately.

If there was no will and the deceased also had 3 children.  In terms of intestate succession, the spouse and each of the children would inherit 25% of the estate – ie R1.25m each.  Now the assets that the children inherit will not qualify for the spouse concession so the 20% estate duty would have to be paid on their share.  An amount of R750 000 in estate duty would therefore be payable immediately.

Capital Gains Tax

When someone dies, capital gains tax will have to be paid as if the deceased had sold up all his or her possessions the day before he or she died.  These amounts can be particularly large and can really play havoc to the surviving family’s cash flow.

If the deceased spouse bequeathed all his or her assets to the surviving spouse then this capital gains tax will only be payable when the surviving spouse dies.  This can be a massive relief when it comes to managing cash flow.

Going forward

As you can see, there are distinct advantages to bequeathing your assets to your spouse.  If you are cohabiting with someone or are in a life partnership, it is important that you get the necessary paperwork sorted out as soon as possible.