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Massing and Donations Tax

  • 21 June 2017
  • 8687
  •  Liberty & CertiSure
  •  certisure

In cases such as these, you may come across a will in terms of which spouses married in community of property “mass” their estates or parts of their estates.  In such instances you need to understand what is meant by “massing” and what the practical and tax consequences of massing are.

So, what is massing?

The separate estates of the spouses are merged and consolidated into one massed estate upon the death of the first- dying spouse. This means that any two persons under a joint will may mass either their separate estates or some of their assets. 

Should clients wish to incorporate massing as part of their Estate Planning, it must be clearly provided for in the estate and in terms of the joint Will.

The survivor usually receives a benefit in the form of a limited right or may enjoy a life interest from the massed estate. The limited right may be in the form of a usufruct, fiduciary interest, annuity or any other limited right.

So in short, a massed estate is an estate formed out of the separate estates of a person who has just died and a person who is still alive, by making provision for massing in their joint Will.

When a death occurs:

  • the survivor must elect whether he accepts the benefits which he is entitled to in terms of their joint will; or 
  • whether he gives up ownership of his share in the massed property.

Should the survivor decide not to accept the benefits under the joint will, he will retain ownership and control of his own estate, in which event massing will not occur.

In other words, the survivor will have a choice to abide by the massing instruction of the joint Will, or decline the massing instruction in the joint Will.

Should the survivor elect to decline the massing effect created by the joint Will, the estate of the first-dying party will then be wound up in accordance with the joint will (as far as possible), without taking the assets of the survivor into account.

Example of a “massing clause” in a will:

Special Bequest

“We direct that for the purposes of this bequest our community estate shall be massed and dealt with as one whole. We bequeath our Karoo Farm property together with all the livestock in equal shares to the Testatrix's sons A and B, subject to the lifelong usufruct of the survivor of us and free from the obligation to furnish security”.

Let’s take a look at the following example:

  • Peter and Britney are married in community of property;
  • They have massed their joint estate in terms of their joint Will, with the farm devolving upon their children subject to the survivor having usufruct over the said property;
  • Peter dies first;
  • Britney accepts the provisions of the Will.

One must understand that Britney disposes of her one half of the joint estate and in return receives consideration in the form of a usufruct over the  property. If the value of the usufruct is less than her one half of the joint estate, then the amount in excess of the value of the usufruct will be a deemed donation in terms of section 58 of the Income Tax Act.

Complex financial plans more often than not lead to negative tax consequences when they are least expected, with negative results for family members. It is up to your financial adviser, together with other qualified professionals to tailor make a plan that meets your needs with as little disruption  as possible. 

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