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A clever approach

20 September 2017Jonathan Faurie

As a general rule, business owners are always on a lookout for opportunities to diversify their business interests.

Being one of the largest economies on the African continent, South African business owners have traditionally been very active in this. Neighbouring countries are seen as low hanging fruits and often play host to a number of business interests owned by South African citizens.

But what does this mean for estate planning? 

An issue of land

Because of its close proximity to South Africa, and the shared history between the two countries, there is a certain amount of commonality when it comes to laws which govern Namibia and South Africa. In the past, agricultural land in Namibia has been a popular purchase among South African farmers.  

However, agricultural land is an issue. Mathys du Preez, a Certified Financial Planner (CFP) and GM: Affluent Market Distribution Salam Namibia, pointed out at the recently held Fiduciary Institute of Southern Africa (FISA) Annual Conference that South African farmers may not always hold the trump cards in Namibia. This has major estate planning issues.

The legal winding road

Du Preez pointed out that there are two Acts to consider when considering the purchase of agricultural land in Namibia.

The first act is the Subdivision of Agricultural Land Act 1970, an Act which was repealed in South Africa in 1998. The effect of this act is that agricultural land cannot be bequeathed to multiple heirs, unless Minister of Agriculture has given consent in terms of the Act.

This may seem simple enough, until we consider the second Act.

The second Act is the Commercial Land Reform Act of 1995. Section 17(1) of the Act grants the State a “preferent” (sic) right to acquire agricultural land, whenever the owner of such land intends to vacate the land. Bequeathing the land to a person other than the State can only legally happen if the Minister issues a waiver certificate.

“There was a time when this was not an issue provided that the piece of land formed part of a deceased estate. However, this was changed in 2014 so that now, even to inherit agricultural land from a deceased estate, the executor must first apply for and receive a waiver certificate from the Minister,” said Du Preez.

Taxation of deceased estates

In addition to the above concerns, there are also taxation implications that need to be taken into account when it comes to deceased estates.

“If solvent, and there are ascertained beneficiaries entitled to income that accrues to the executor after death, the income is directly taxed in hands of beneficiary. Attributable expenditure is likewise allocated to the beneficiary,” said Du Preez. 

He added that if there is no ascertained beneficiary, the executor is taxable on behalf of the estate as an unmarried person. Assessed losses of the deceased are not carried over to the estate, nor are estate losses carried over to a beneficiary.

The advice angle

Estate planning can become a messy and convoluted business if a client undertakes it without professional advice from an adviser or a CFP who are better qualified to navigate this process.

A client may at times not be fully appreciative of this process. Because even though an adviser and a CFP may be qualified enough to provide proper estate planning in the South African process, they may not know all the rules and regulations pertaining to estate planning in international jurisdictions.

There has been a lot of concern about the impending Retail Distribution Review (RDR) and how clients will have to pay for ongoing advice. Realistically, a client does not want to deal with the above challenges and will happily pay good money for an adviser or a CFP to guide them through this process.

Editor’s Thoughts:
This is just another example of how an adviser’s skills and knowledge is worth its weight in gold. Are your clients appreciative of this? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.

Comments

Added by David Thomson, 20 Sep 2017
Thank you for the article. Of course the Subdivision of Agricultural Land Act was not repealed entirely & is still on our statute books. Sec 3 does not permit the subdivision of this land without the consent of the Minister. The other Act referred to does not apply in SA.
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