CARMEN VENTER WORKSHOPS FOR CFP EXAMINATIONS 2014

Transcription

1 CARMEN VENTER WORKSHOPS FOR CFP EXAMINATIONS 2014 Page 1

2 MARITAL REGIMES MARRIAGE ACT 25 OF 1961 MATRIMONIAL PROPERTY ACT NOV 1984 (includes marriages between black people as of 2/12/88) 1. In Community of Property share all losses and profits Marital power abolished 1/11/ Equal authority over the joint estate. S15 (2 & 3) excludes certain transactions without the authority of the other. On dissolution of marriage estate is divided. On insolvency all assets form part of joint estate even where specifically excluded 2. Out of Community : with Accrual System: community of profit but not loss Automatically WITH accrual unless specifically excluded. (As of 1/11/1984) On entering marriage each party lists the value of their respective estates. Each spouse retains and builds up their own estate during marriage. On dissolution of marriage the accrual in each estate is calculated & spouse with smallest accrual has claim against the other without the Accrual system: no sharing of profit or losses Each spouse retains and builds up their own estate during marriage. On dissolution of marriage you take only what you brought into the marriage and what you have built up during marriage RECOGNITION OF CUSTOMARY MARRIAGES ACT 1998 If married before 15/11/2000 but marriage only registered ito Act after 15/11/2000:- ANC without accrual If married after 15/11/2000 and registered ito Act :- In Community of Property unless specifically entered into ANC Page 2

3 CIVIL UNIONS ACT 30 / 11/ 2006 voluntary union between 2 persons, 18 yrs or older, solemnised & registered either as a marriage or a civil partnership. Civil or marriage same legal consequences as Marriages Act 2 persons no gender reference so can be homosexual or heterosexual Definition of civil union: monogamous therefore no polygynous unions Automatically married in community of property unless specifically entered into ANC. ALL SPOUSE FOR LEGISLATIVE PURPOSES LONG TERM RELATIONSHIPS ANC excluding accrual Common Law Partners in permanent relationships regarded as spouse for SOME legislative purposes BUT. DOMESTIC PARTNERSHIP BILL 2008* NOT YET LEGISLATED Caters for same or opposite sex relationships Parties treated as ANC without accrual Provides for registered domestic partnerships: Will qualify for claims in terms of legislation for spouses rights. Provides for unregistered domestic partnerships: Will have to apply to court in order to benefit from legislation for spouses rights TENETS OF RELIGION If registered in SA : deemed to be IN COMMUNITY OF PROPERTY If not registered in SA : deemed to be OUT OF COMMUNITY WITHOUT THE ACCRUAL Regarded as spouse for SOME legislative purposes Page 3

4 WHY IS IT IMPORTANT TO UNDERSTAND OUR MARITAL REGIMES AND WHETHER A SPOUSE OR NOT? For: - Income Tax : passive income is split - Capital Gain : para 67 roll over - Estate duty: Sec 4q deduction - Maintenance of Surviving Spouse Act - Intestate Succession Act - Pension Fund Act - Donations (part of Income Tax Act) - The Wills Act - Insolvency Act Page 4

5 APPLICATION OF OUT OF COMMUNITY WITH THE ACCRUAL MR MRS STEP 1 STEP 2 Value of assets before marriage CPI Adjust [cpi now/cpi then x value of assets] = CURRENT VALUE OF ASSETS BEFORE MARRIAGE STEP 3 Total of all current assets during marriage STEP 4 LESS: assets excluded from joint estate [inheritance/legacy/donation] donation between spouses [not mortis causa] damages [ not patrimonial] Assets excluded from accrual as per the antenuptial contract debts / liabilities including income tax and cgt = CURRENT ASSETS STEP 5 LESS CPI Adjusted value = ACCRUAL VALUE STEP 6 Take the GREATER accrual less the SMALLEST accrual = Portion that spouse with smallest accrual receives from other spouse This accrual claim will be either: Sect 4IA deduction for Estate Duty purpose if the deceased spouse is the one that has to pay the accrual amount OR An asset under Deemed property for Estate Duty purpose if the deceased spouse is the one that receives the accrual amount Page 5

6 LIFE INSURANCE AND APPLICATIONS FOR ACCRUAL PURPOSES. ON DEATH POLICY STATUS INCLUDED IN ACCRUAL EXCLUDED FROM ACCRUAL POLICY PAYABLE TO ESTATE YES FULL RISK VALUE OWNED BY LIFE ASSURED LIFE ASSURED DECEASED POLICY PAYABLE TO SPOUSE OR YES FULL RISK VALUE ANY OTHER 3 RD PARTY OWNED BY LIFE ASSURED LIFE ASSURED DECEASED POLICY PAYABLE TO SPOUSE OWNED BY SPOUSE LIFE ASSURED DECEASED YES FULL RISK VALUE IN THE ACCRUAL OF THE OWNER /SURVIVOR SPOUSE (NOT POLICY WITH/OUT BENEFICIARY OWNED BY DECEASED ON LIFE OF ANOTHER DECEASED) YES CASH VALUE ONLY ON DIVORCE FOR EASE USE MR AND MRS POLICY STATUS INCLUDED IN ACCRUAL EXCLUDED FROM ACCRUAL POLICY PAYABLE TO ESTATE ONLY IF CASH VALUE INCLUDE TOTALLY IF NO CASH VALUE OWNED BY MR SPOUSE ON MR S CASH VALUE FOR OWNER MR SPOUSE S LIFE POLICY PAYABLE TO MRS SPOUSE OR ANY OTHER 3 RD PARTY OWNED BY MR SPOUSE ON HIS OWN LIFE POLICY PAYABLE TO MRS SPOUSE OWNED BY MRS SPOUSE ON LIFE OF MR SPOUSE POLICY WITH/OUT BENEFICIARY OWNED BY MR SPOUSE ON LIFE OF ANOTHER RETIREMENT ANNUITIES, PENSION & PROVIDEND FUNDS AND PRESERVATION FUNDS ONLY IF CASH VALUE INCLUDE CASH VALUE FOR OWNER MR ONLY IF CASH VALU E INCLUDE CASH VALUE IN THE ACCRUAL OF THE OWNER SPOUSE MRS ONLY IF CASH VALUE INCLUDE CASH VALUE INCLUDE IN MEMBER S RESPECTIVE ACCRUAL THE CASH VALUE OF THE FUND TOTALLY IF NO CASH VALUE TOTALLY IF NO CASH VALUE TOTALLY IF NO CASH VALUE NOTE: OPINIONS DO DIFFER WITH REGARDS TO INCLUSIONS OF POLICIES WITH REGARDS TO ACCRUAL. Page 6

7 Examples for practice Example 1 Accrual Calculation Mr & Mrs Verster are married out of community of property, with the inclusion of the accrual system. They were married in The initial value of Mr & Mrs Verster s respective estates was R & R At the dissolution of the marriage in 2013, Mr & Mrs Verster s estates amounted to R & R respectively. In 2000, Mrs Verster received a donation from her brother of R She has debts of R Mr Verster s estate includes assets of R which are excluded in terms of the antenuptial contract. He has debts of R The CPI in 1992 was 40 and in 2013 was 120. Calculate the accrual claim and show all the calculations in full. Page 7

8 Example 2 Accrual Calculation In 1995 Mr & Mrs Saad were married out of community of property with the inclusion of the accrual system. The market value of Mr Saad s assets at the time of his death in 2009 amounted to R An amount of R was outstanding on a property he owned which was secured by way of a mortgage bond over that asset. The value of his assets when he got married, all of which had been excluded from the accrual system, had a current value of R Mrs Saad s assets were valued at R at the time of her husband s death & her liabilities amounted to R Her father had died several years previously & had bequeathed assets with a (current) value of R to her which form part of her assets of R Her father stipulated in the will that his bequest was not to be part of a joint estate or accrual system. The (current) value of her assets when she got married, which were also excluded from the accrual system, amounted to R You have been asked by the executor to calculate any accrual claim and show all your calculations Page 8

9 Example 3 Accrual Calculation Mr & Mrs Lamola are married out of community of property & have made the accrual system applicable to their marriage. Mr Lamola s liabilities exceeded his assets by R5 000 when they got married. Mrs Lamola s net assets when they got married were worth R Upon Mr Lamola s death his net estate is worth R & his widow s net estate is worth R Without making any adjustments for the difference in the consumer price index, what claims arises in terms of the Matrimonial Properties Act No 88 of 1984, if any, on Mr Lamola s death Page 9

10 Example 4 Accrual Calculation Tom and Jane married in 1994 with ANC including accrual. CPI then was 3.4 and is now 9.8. Tom, at time of marriage had a debt of R and Jane had assets of R Their current situation:. TOM ASSETS AND LIABILITIES PRIMARY RESIDENCE MOTOR VEHICLE ARTWORKS BUSINESS EQUITY INTEREST BOND DEBT CREDIT CARD DEBT INCOME TAX NOT PAID GROUP LIFE COVER APPROVED PENSION FUND VALUE GROUP LIFE COVER UN-APPROVED LIFE POLICY PAYABLE TO JANE LIFE POLICY CEDED TO BANK POLICY PAYABLE TO BUSINESS PARTNER KEYMAN POLICY ON HIS LIFE POLICY OWNED BY TOM ON THE LIFE OF BOBBY. CASH VALUE OF LIFE COVER OF INVESTMENT POLICY HIS WIFE IS THE BENEFICIARY DONATION TO JANE NOT YET PAID JANE ASSETS AND LIABILITIES HOLIDAY HOME INHERITED FROM DAD PRIOR TO MARRIAGE UNITS INHERITED BY MOM AFTER MARRIAGE. SHE CASHED IN THE UNITS AND BOUGHT A HOUSE FOR RENTAL INCOME MOTOR VEHICLE JEWELLERY ENDOWMENT DONATED BY TOM RETIREMENT ANNUITY FUND VALUE CREDIT CARDS LIFE POLICY OWNED BY JANE ON TOMS LIFE Assume that in the event of a disposal for CGT Tom would have a capital gain tax of R and Jane R Page 10

11 They are both concerned that in the event of a death they may not have sufficient capital sum to meet a claim. Please calculate and show them the amount and who the claim will be against. After calculating the above in the event of death, they ask what would be different if they divorced? Page 11