From time to time we come across estates where the deceased enjoyed a fiduciary right over a certain asset. This has to be deal with in the Fiduciary Account part of the L&D and is, effectively, like a mini L&D on its own. Effectively, the deceased does own the asset, but is has to be transferred to already identified heirs upon his death.

What is a fideicommissum?

A fideicommissum, in short, is a legal term which originated in Roman law and which refers to a situation created when the owner of an asset transfers this asset to another person, subject to it being transferred from that person to yet another person at a later stage. In most instances a fideicommissum is created in a Will, according to which property is first bequeathed to the one person (known as the fiduciaries or bare dominium owner) and then, subsequently and upon a specific event, to someone else (known as the fideicommissarius or the sequential owner).

The rights of the fideicommissarius before the fulfilment of the fideicommissary condition, and unless otherwise specified when the fideicommissum was created, have always been less than clear. Traditionally the view was that the fideicommissarius only has an expectation (hope or spes) with regards the fideicommissary assets, but through current Appellate Division pronouncements it is now commonly accepted that the fideicommissarius has a personal right against the assets. Whether such right is vested or contingent remains uncertain. Upon the fulfilment of the fideicommissary condition, the assets can be claimed by the fideicommissarius as owner.

What is a fideicommissum residui?

A fideicommissum residue is a fideicommissum as described above with the exceptional condition that only whatever remains of it on the fulfilment of the fideicommissary condition is to go to the fideicommissarius[1] If the Will is silent as to what portion of the fiduciary assets must remain to be transferred to fideicommissarius, then common law is followed.  In terms of common law, first created in Roman legal rule and contained in Justinian’s 108th Novel, the fideicommissarius has an expectation (hope or spes) to eventually receive 25% of the value of the fideicommissary assets. That means that, during his lifetime, the fiduciary may alienate or donate 75% of the fiduciary assets as he pleases [2].  Any portion of the fiduciary assets remaining upon the fulfilment of the fideicommissary condition may be claimed by the fideicommissarius even if it is more than 25%, but the fiduciary’s obligation to restore the fiduciary assets to the fideicommissarius is only 25%. Furthermore the fiduciary only has to restore that value and not necessarily 25% of the original fiduciary assets [3].

Voet’s [4] interpretation of the obligation to restore is, in our courts, the accepted one: “Nor does it matter whether it be money which is still in the fiduciary’s possession or the actual goods comprised in and constituting the inheritance, or whether other property has been substituted in place of the latter; for if the fiduciary has purchased other goods out of the proceeds of what he has sold, he is not regarded as having diminished the patrimony in respect of what he has sold, but that which has been procured out of that money is transmitted as though an exchange of property had been effected.”

If the original fiduciary assets are no longer in the fiduciary’s possession at the time of the fulfilment of the fideicommissary condition, the value of the assets awarded to him in the Liquidation and Distribution account in the testator’s estate will be evidence of the amount for which the fiduciary is accountable [5] must be restored[6] to the fideicommissarius. Furthermore it is irrelevant with what this value is restored and thus it can be restored in cash, with alternative property and even with the fiduciary’s personal property.

Information required in LegalEase:

The names and dates of birth of the bare dominium holders. In our example B’s full names and date of birth.

The extent (fraction) to which the bare dominium holder owns the property. I.e. half-share, full share, etc.

The source (origin) and the date of inception of the fideicommissum.

The value of the asset at inception date.

The value of the asset as at the date of death of the fiduciary’s death which must be completed as the L&D value in the screen.

The yield, if not 12%, that SARS has agreed to for the calculation.

The calculation will be as follows:

Value of asset at the date of death – say R648 852.41

Age of the deceased at next birthday – say 29 years

Age of bare dominium at next birthday – say 43 years

Value of the asset at inception – say R36 000

Yield – say 12%

Calculation of the Value of the Right: Table A

Value of asset at date of death of fiduciary is R648 852.41

Bare dominium holder’s age next birthday is 43 years

Age factor in Table A is 7,94344

Yield is 12%

Value of the ceasing interest is therefore

(12%  X  R648 852.41  X  7,94344) = R618,494.23

In terms of the Estate Duty Act you may now do a further calculation and then take the lesser of the two calculations for Estate Duty purposes.

Value of the right is calculated as follows: Second Proviso to Sect 5(1)b of Estate Duty Act

Value of the asset at inception is R36 000

Age of deceased next birthday is 29 years

Age factor in Table A is 8,23737

Yield is 12%

Value of the right is therefore

(12%  X  R36 000  X  8,23737) = 35 585.44

Bare Dominium Calculation:

Inception Value of asset – R36 000.00

Less the value of the right – R35 585.44

Bare dominium = R414.56

Current value of the asset at date of death of deceased – R648 852.41

Less Bare dominium as per calculation above – R414.56

Value = R648 437.85

The lesser of the two figures is R618,494.23 and is used for Estate Duty Calculation purposes. This is the figure that is placed in the Estate Duty Calculation as to ceasing interest enjoyed by the deceased during his/ her lifetime.

Capturing this into the LegalEase© Program

Two scenarios are present here.

1) Where the heirs (or some of the heirs) in the current estate are also bare dominium owners of the fiduciary asset; and

2) Where outside parties are bare dominium owners of the fiduciary asset.

WHERE HEIRS IN THE ESTATE ARE BARE DOMINIUM HOLDERS AS WELL AS NORMAL HEIRS:

Highlight the estate that has the fiduciary, open the file and click on tab labeled Heirs. An easy way to get there is to click on the button with the blue blocks on next to the “Next” button. Select “Heirs” from the list. Click on Insert to add the heir and complete his/her details in tab 1. In particular his/her gender and date of birth as this is required to locate the factor to be used in Table A.

On the 3rd tab of the above screen you would, as per usual, indicate what the heir gets IN THIS ESTATE besides the bare dominium portion.

Now go to tab 4. Toward the middle of the screen, the question that is asked is: “Is this an ultimate beneficiary from a previous estate?” and a check box is shown. Place a check therein. The question next to the check box requests the fractional portion to which the heir is bare dominium holder. Fill this in.

NOTE: Trusts and other legal entities do not require this information as Table B will be used for the calculation with a fixed period of 50 years in the case of a trust.

Click the OK button to return to the screen that lists the beneficiaries and load the rest of the bare dominium holders accordingly.

Once you have completed this step, you must now load the asset(s) to which the bare dominium owner hold rights to and to which the deceased owned fiduciary rights. For this example these assets are loaded under movables, but the same principle applies to immovable property. Claims in favour of the estate (like investment accounts) to which the deceased held a fiduciary right must be added as MOVABLE assets as the claims screen does NOT make provision for fiduciary rights.

Insert the information as shown in the screen. Bear in mind that this asset DOES NOT reflect on the Liquidation and Distribution Account, but is reflected on the Estate Duty Addendum as a ceasing interest. DO award the shares as this is an asset in the fiduciary account of this estate. Once you have completed entering the data as required, click on the Estate Duty (2) Tab toward the top of the screen. You will now note the following screen.

Note the loading of the data. Place a tick on the check box that has the question: Did the deceased hold fiduciary right to this asset? Complete the date on which the right was created. Complete the original value of the asset as reflected in the previous estate. Select the ultimate beneficiaries by clicking on the grey button marked “Heirs”. Highlight the heir(s) who own the bare dominium over the asset you are currently loading. If the bare dominium holders are natural people, click on Table A to calculate the value of the ceasing interest. If the bare dominium holder is a trust, complete 50 years in the relevant block and click on Table B. Complete the origin of the usufruct in the clear box provided. Keep it short as the description completed here goes on the Estate Duty Return and SARS didn’t leave much space for this. NOTE: The same heirs selected will also appear in the field pertaining to a usufruct being created in this estate. This is simply because the program uses the same field in both instances and will NOT influence the calculation since the relevant box is not ticked. Click on the OK button and you will be returned to the list of movables for that estate. The asset is now loaded onto the program as a ceasing usufruct. This results in the creation of an Estate Duty Addendum as part of your Liquidation and Distribution Account, which will look like this:

NOTE: If the estate is dutiable the duty will be apportioned between the estate and the bare dominium holders.

WHERE THE BARE DOMINIUM HOLDERS ARE NOT HEIRS IN THIS ESTATE:

For these matters, one would simply load the beneficiary under the heirs tab, in the same manner as indicated above. The only difference would be that they will not be allocated any inheritance from the estate itself. In other words, they will be loaded as being a beneficiary from a previous estate and the 3rd tab of the heirs screen will stay blank as they don’t inherit anything in this estate other than the bare dominium. The system will automatically pick them up as being bare dominium holders.

FIDUCIARY LIABILITIES:

The program will automatically:

  1. Charge 3.5% in executor’s remuneration on the total fiduciary assets.
  2. Automatically apportion the Master’s fee between the normal account and the fiduciary asset account.
  3. Apportion and write back any estate duty incurred by the fiduciary asset account.

All other liabilities incurred by the fiduciary assets must be loaded and liabilities in the estate and users must tick the box next to “Is this debt related to a fiduciary asset?”.

All income and expenditure in the cashbook must simply be linked to the fiduciary asset on tab 2 in order to appear in the income and expenditure part of the fiduciary account.

It will be necessary to account to the fiduciary heirs on final distribution like you do for the normal heirs. Thus we have created a separate Final Distribution Statement for the fiduciary account which will only include capital and income/expenses relating to these assets. However, as it should be, their capital and income/expenses will be combined with those of the other heirs on the Cash Recon on Final Dist date so that you can reconcile all cash in the estate on one report.

Compiled by:

SANDY BARNES

BARNES & VAN VUUREN

16 February 2010


[1] Voet 36.1.54 and Brown v Richard 2 SC 317.

[2] Novel 108 Ch 1; Grotius 2.20.13; Voet 36.1.54; McCarthy v Newton 4 S 64; Ex parte Berrange 1938 WLD

[3] Vide Ex parte Berrange 1938 WLD; Schlemmer v Viljoen 1958 (2) SA 280 (T); Firebrace v Master 1960 (2) SA 368 (E).

[4] 36.1.54 (McGregor’s translation)

[5] See MeyerowitzAdministration of Estates and Estate Duty.

[6] Boast v The Master 1952 (1) SA 344 (N)


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