Question: My life partner of many years passed away last week. We never got around to drawing up a will. What happens now?

Answer: If someone passes away in South Africa and does not have a will, the rules of intestate succession come into play, with the deceased assets distributed according to a formula. The assets would typically be distributed in the following order:

• The spouse of the deceased;
• The descendants of the deceased;
• The parents, if the deceased died without surviving spouse or descendants;
• The siblings of the deceased if one or both parents are predeceased.

The challenge you have is to have yourself recognised as a spouse for inheritance purposes. I would recommend you consult a lawyer who specialises in wrapping up estates, so the necessary proof that you were life partners may be assembled.

If you are cohabiting with someone or in a life partnership, I urge you to have a cohabitation agreement drawn up where you mention you each have a reciprocal duty of support to each other; or name each other in your wills and state you are in a long-term relationship with a reciprocal duty of support.

This should be sufficient to have your relationship classed as a marriage in community of property and have all advantages of estate duty and capital gains tax rollover applied to your estate.

There are significant cash flow benefits if you do this.

Estate duty

If a spouse passes away and bequeaths all assets to the surviving spouse, any estate duty payable on assets will be postponed until the death of the second spouse.

For example, if a spouse bequeathed net assets to the value of R5-million to the surviving spouse, the estate duty of R1-million would only have to be paid when the second spouse passes away. However, if it was not bequeathed to the spouse, the R1-million would be payable immediately.

If there was no will and the deceased also had three children, in terms of intestate succession, the spouse and each of the children would inherit 25% of the estate – i.e. R1.25-million each. Now the assets that the children inherit will not qualify for the spouse concession, so the 20% estate duty would have to be paid on their share. An amount of R750,000 in estate duty would therefore be payable immediately.

Capital gains tax

When someone dies, capital gains tax must be paid as if the deceased had sold up all of his or her possessions the day before. These amounts can be large and play havoc with a surviving family’s cash flow.

If the deceased spouse bequeathed all of his or her assets to the surviving spouse, capital gains tax will only be payable when the surviving spouse dies. This can be a massive relief when it comes to managing cash flow.

Going forward

There are distinct advantages to bequeathing assets to a spouse.  

If you are cohabiting or in a life partnership, it is important to get the paperwork sorted out ASAP. DM

Kenny Meiring is an independent financial adviser. Contact him on 082 856 0348 or at financialwellnesscoach.co.za. Send your questions to kenny.meiring@sfpadvice.co.za

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R29.