by Vicky | 10, 06, 13 | Uncategorized
A common clause in wills is one where the testator declares that any bequest to a beneficiary is to be free of any community of property or profit and loss. In other words, the beneficiary’s spouse is not entitled to share in the inheritance. The rationale behind this marital exclusion clause is to ensure that only the beneficiary receives the benefit of the inheritance. Does this clause adequately protect the inheritance of a beneficiary married in community of property against any claim to such inheritance from the beneficiary’s spouse and the spouse’s creditors?
Protection from a Spouse
If two people get married in community of property, the legal effect is that the spouses’ separate estates are joined to form one joint estate. All assets which were owned separately by each spouse prior to the marriage become part of the joint estate. The same applies to liabilities. All assets acquired and liabilities incurred after the date of the marriage would therefore belong to the joint estate.
The Matrimonial Property Act (Act 88 of 1984) provides for certain exceptions to this rule by stating that the following assets and liabilities do not form part of a joint estate:
• Property donated or bequeathed to a beneficiary subject to the condition that it shall be excluded from the marriage in community of property
• Certain life insurance policies
• Delictual damages for non-patrimonial loss
• Delictual liabilities
Bequests in a will which are subject to a marital exclusion clause are therefore excluded from a joint estate and protected from a claim by the beneficiary’s spouse. If the marital exclusion clause is not inserted in a will, any bequest to a person married in community of property will form part of the joint estate and be shared with the beneficiary’s spouse.
Protection from Creditors
While the marital exclusion clause is effective against the spouse of the beneficiary married in community of property, is it effective against creditors of the beneficiary’s spouse? This question was considered in 2003 by the Supreme Court of Appeal (“SCA”) in the case of Du Plessis v Pienaar NO and Others. In that case the SCA held that when a joint estate is sequestrated, both spouses become insolvent debtors for the purposes of the Insolvency Act 24 of 1936. The spouses’ undivided interest in the joint estate as well as any separately owned property will be used to meet the claims of the creditors regardless of what the testator’s intentions may have been. It is submitted the same would apply even if there were no insolvency – creditors can claim any property belonging to either spouse.
In short, a marital exclusion clause in a testator’s will can protect an inheritance from a claim by the beneficiary’s spouse but not from a claim by any creditor of the joint estate.
For professional but personal advice and assistance with Antenuptial contracts, Post-nuptial contracts and wills, please contact us.
by Vicky | 24, 10, 12 | Uncategorized
ASSISTED DECISION MAKING
An adult with full contractual capacity is entitled to make decisions about his/her personal welfare, financial affairs and medical treatment. An adult who does not have full contractual capacity (whether through mental illness, intellectual disability, physical disability, head injury, an extended period of unconsciousness, stroke or extreme old age) requires assistance to make these decisions. This assistance is often provided by a curator appointed by the High Court.
Sometimes a person with full contractual capacity may not be able to do something personally (for example sign a document) because that person may, for example, be out of the country or not near the place where the act needs to be performed. In these cases, the person (“the principal”) can execute a power of attorney in favour of a third party (“the agent”), authorising the agent to perform the act on the principal’s behalf. The basic laws of agency apply to this relationship.
DEATH OR INSOLVENCY OF A PRINCIPAL
When a principal dies or is sequestrated as a result of insolvency, all powers of attorney executed by him/her lapse. It follows that the agent’s power to act in terms of the lapsed power of attorney also ceases on the principal’s death or insolvency. The rationale behind this is that, since the principal can no longer act personally, the agent can’t act on his/her behalf. The power to act on the principal’s behalf shifts on the principal’s death or insolvency from the principal to the Master of the High Court and thereafter, once Letters of Executorship (or Letters of Authority in the case of insolvency) are issued, to the principal’s executor or trustee respectively.
INCAPACITY OF A PRINCIPAL
What happens, however, if, after executing a power of attorney in favour of an agent but before death or insolvency, a principal becomes incapacitated in such a way that the principal can no longer make his/her own decisions? Do the powers of attorney executed by that principal (and the agent’s authority to act on his/her behalf) lapse?
The South African Law Reform Commission has looked into this issue and our law appears to be that a power of attorney terminates on the incapacity of the principal from whatever cause. In other words, when a principal is no longer able to perform the act in question himself, his agent can no longer do it for him. In short, a power of attorney lapses as soon as the principal loses the capacity to act.
Other than potentially being discrimination on the basis of disability (which is unconstitutional), the lapsing of a power of attorney can create tremendous problems for parties relying on the power of attorney, for example the agent and a bank. If someone does not know the principal personally (and whether the principal has full contractual capacity), how can that person place reliance on a power of attorney presented by an agent?
PROPOSED SOLUTIONS
In the case of a principal’s death or insolvency, the problem of dealing with his/her estate is easily resolved by having an executor or trustee appointed by the Master of the High Court. In other cases of incapacity, however, the situation is not so simple. One accepted procedure is for affected parties to apply to the High Court for the appointment of a curator to manage the principal’s affairs. This procedure is expensive, complicated, publicises the principal’s mental incapacity, humiliates the principal, and deprives him/her of a say in the choice of curator. However, the alternative, namely leaving the principal’s life and affairs in limbo until s/he dies, is also unsatisfactory.
Two proposed solutions to this problem are:
1. an “enduring power of attorney” which states explicitly that the power of attorney is to remain valid despite a diminution of capacity which a principal may experience in the future; or
2. a “conditional power of attorney” which is signed by a principal when s/he has full contractual capacity but which only comes into force when the principal no longer has that capacity.
It is debatable whether either of these powers of attorney will be accepted in our law because our law of agency is founded on the principle that an agent cannot do that which his principal has no capacity to do himself. Many agents have continued to behave as if a power of attorney granted by a principal who has subsequently lost full contractual capacity, is still valid and have unwittingly exposed themselves to personal liability for any losses which may be incurred by a third party as a result of transactions concluded through the void power of attorney.
CONCLUSION
The current situation in our law regarding the lapsing of powers of attorney on incapacity of the principal needs to be remedied. Until then, agents should ensure that they are entitled to rely on a power of attorney before doing so.
by Vicky | 06, 09, 12 | Conveyancing, Uncategorized
Is a seller at risk for liability for commission to two agents?
The Supreme Court of Appeal (“SCA”) case of Wakefields Real Estate v Attree (666/10) [2011] ZASCA 160 raises concerns regarding a seller’s liability for estate agents commission to more than one estate agent.
In this case, a purchaser was introduced to a property by the First Agent. After viewing the property, the Purchaser advised the First Agent that for financial reasons, she could not purchase the property. The First Agent did not contact the purchaser further. A few months later, the Sellers reduced their asking price. A Second Agent, who fortuitously learned that the purchaser “loved the house” and heard that the Seller had reduced the asking price, contacted the purchaser and arranged a further viewing. The Second Agent subsequently negotiated and concluded the sale and was paid commission.
The First Agent sued the Seller for commission, alleging that she had been the effective cause of the sale. The claim was dismissed as the court found that the cumulative effect of various factors outweighed the initial introduction by the First Agent.
The First Agent took the matter on appeal to the SCA. The SCA reversed the decision. It held that, but for the actions of the First Agent, the Purchaser would not have been aware of the property and the sale would not have been concluded. The Seller was held to be liable to pay commission to both the First Agent and the Second Agent.
This case illustrates that the onus is on the seller to protect him/herself against the risk of liability for commission to more than one estate agent. Sellers do not necessarily know which estate agent first introduced a particular purchaser to their property. Ideally they should obtain a warranty from the purchaser that they were only introduced by the agent in question and an indemnity against any claim brought by another agent. If in doubt, sellers should seek legal assistance prior to concluding the sale to minimize this risk.
