Usufructs and the Calculation of Transfer Duty – Conveyancing News

Introduction

The definition of a usufruct is a legal right given by an owner to someone who is not the owner, to use the owner’s property for a certain period, usually for the remainder of that person’s life.

Rights and Obligations of a Usufructuary

While the usufructuary can rent the property out, they are not allowed to sell it or bequeath it to another party.

The usufructuary also has obligations and responsibilities in regard to the property. He/she should ensure that the property is not damaged or altered in any way and at the end of the stipulated period, the usufructuary must hand the property back over to the rightful owner or heirs.

The usufruct must be used for its intended purposes, and the usufructuary is legally bound to act as a diligent owner that may not misuse the property. The usufructuary is also responsible for paying the property rates and general day-to-day costs of maintaining it. He or she is not obliged to do any extensive repairs that result from normal wear and tear or daily use. While there is no obligation for the usufructuary to insure the home against storm, fire or other such damage, it is advisable and in his/her own interest to do so.

In summary:

• can utilize the property personally;
• can rent out the asset;
• must maintain the asset;
• must pay the rates and taxes, water and electricity and levies on fixed property.

Rights and Obligations of the Bare Dominium holder

Can expect that the Usufructuary maintain the asset.

Is responsible for short term insurance but may arrange with the usufructuary to pay the insurance premiums.

How is a Usufruct calculated?

Example

Man died and bequeathed his fixed property to his son (Aged 31 years) subject to a usufruct in favour of his wife (Aged 54 years).

Calculation of value of usufruct at creation of usufruct: Value of fixed property at creation of the usufruct	R 800 000.00
Age of wife at next birthday	55 years
Factor (Female)	7.69355
Value of usufruct thus: 800 000.00 X 12% X 7.69355(Section 4q rebate)	R 738 580.80
Value of bare dominium (Value of fixed property less value of usufruct) R 800 000.00 – R 738 580.80 =	R 61 419.20
WIFE DIED 9 YEARS LATER AT THE AGE OF 63 YEARS.
Son is now 40 years old.
Calculate the value of the usufruct which devolves upon the son for estate duty purposes:
The value of the property at present:	R 1 000 000.00
Age of son next birthday = 41 years Factor (Male) 8.01067 Value of usufruct which passes over to son: 1 000 000.00 X 12% X 8.01067 = (Possible dutiable amount)	R 961 280.40
Calculation of the value of the usufruct in terms of the second saving clause of Section 5(1)(b) of the Estate Duty Act:
Value of the property at termination of the usufruct, less value of bare dominium at creation of the usufruct, thus: R 1 000 000.00 less R 61 419.00 = (Possible dutiable amount)	R 938 580.80
The lower value is accepted, namely	R 938 580.80
EXAMPLE: ESTATE DUTY ADDENDUM
Total assets as per Liquidation account	R 4 000 000.00
Less: Total liabilities	R 160 000.00 R 3 840 000.00
Add: Value of usufruct as calculated above in terms of Section (Art 5(1)(b) of the Estate Duty Act Net value of the estate Less: Section 4A rebate Net dutiable estate Estate Duty payable: R 1 278 580.80 X 20%	R 938 580.00 R 4 778 580.00 R 3 500 000.00 R 1 278 580.00 R255 716.16

ESTATE DUTY IS PAYABLE AS FOLLOWS:
The bare dominium holder:
938 580.80       X 255 716.16 = 4 778 580.80                1	R 50 226.27
The estate:
3 840 000.00    X 255 716.16 = 4 778 580.80            1	R 205 489-89 R 255 716-16

Calculations for the purposes of the valuation of annuities or of fiduciary, usufructuary or other limited interests in property in the estate of any person who died or dies on or after 1 April 1977 shall be made in accordance with the following Table

THE EXPECTATION OF LIFE AND THE PRESENT VALUE OF R 1 PER ANNUM FOR LIFE CAPITALIZED AT 12 PER SENT OVER THE EXPECTATION OF LIFE OF MALES AND FEMALES OF VARIOUS AGES.

Age next birthday	Male Expectation of life	Female Expectation of life	Male Present value of R1 per annum for life	Female Present value of R1 per annum for life		Age
0	64,74	72,36	8,32791	8,33105	0
1	65,37	72,74	8,32828	8,33114	1
2	64,50	71,87	8,32776	8,33091	2
3	63,57	70,93	8,32714	8,33064	3
4	62,63	69,97	8,32644	8,33033	4
5	61,69	69,02	8,32567	8,32999	5
6	60,74	68,06	8,32480	8,32961	6
7	59,78	67,09	8,32381	8,32918	7
8	58,81	66,11	8,32271	8,32869	8
9	57,83	65,14	8,32146	8,32815	9
10	56,85	64,15	8,32007	8,32753	10
11	55,86	63,16	8,31849	8,32684	11
12	54,87	62,18	8,31673	8,32608	12
13	53,90	61,19	8,31480	8,32522	13
14	52,93	60,21	8,31265	8,32427	14
15	51,98	59,23	8,31029	8,32320	15
16	51,04	58,26	8,30770	8,32203	16
17	50,12	57,29	8,30489	8,32071	17
18	49,21	56,33	8,30180	8,31926	18
19	48,31	55,37	8,29841	8,31764	19
20	47,42	54,41	8,29471	8,31584	20
21	46,53	53,45	8,29061	8,31383	21
22	45,65	52,50	8,28613	8,31161	22
23	44,77	51,54	8,28117	8,30912	23
24	43,88	50,58	8,27564	8,30633	24
25	43,00	49,63	8,26959	8,30326	25
26	42,10	48,67	8,26274	8,29981	26
27	41,20	47,71	8,25516	8,29595	27
28	40,30	46,76	8,24677	8,29171	28
29	39,39	45,81	8,23737	8,28697	29
30	38,48	44,86	8,22694	8,28170	30
31	37,57	43,91	8,21538	8,27583	31
32	36,66	42,96	8,20257	8,26930	32
33	35,75	42,02	8,18836	8,26210	33
34	34,84	41,07	8,17262	8,25400	34
35	33,94	40,13	8,15536	8,24509	35
36	33,05	39,19	8,13647	8,23517	36
37	32,16	38,26	8,11558	8,22426	37
38	31,28	37,32	8,09274	8,21199	38
39	30,41	36,40	8,06781	8,19866	39
40	29,54	35,48	8,04030	8,18386	40
41	28,69	34,57	8,01067	8,16762	41
42	27,85	33,67	7,97844	8,14983	42
43	27,02	32,77	7,94344	8,13012	43
44	26,20	31,89	7,90547	8,10881	44
45	25,38	31,01	7,86380	8,08527	45
46	24,58	30,14	7,81924	8,05956	46
47	23,79	29,27	7,77109	8,03119	47
48	23,00	28,41	7,71843	8,00026	48
49	22,23	27,55	7,66236	7,96617	49
50	21,47	26,71	7,60201	7,92950	50
51	20,72	25,88	7,53713	7,88967	51
52	19,98	25,06	7,46748	7,84646	52
53	19,26	24,25	7,39387	7,79965	53
54	18,56	23,44	7,31631	7,74834	54
55	17,86	22,65	7,23234	7,69355	55
56	17,18	21,86	7,14414	7,63363	56
57	16,52	21,08	7,05178	7,56896	57
58	15,86	20,31	6,95225	7,49927	58
59	15,23	19,54	6,85004	7,42321	59
60	14,61	18,78	6,74206	7,34135	60
61	14,01	18,04	6,63010	7,25457	61
62	13,42	17,30	6,51232	7,16020	62
63	12,86	16,58	6,39301	7,06046	63
64	12,31	15,88	6,26822	6,95537	64
65	11,77	15,18	6,13789	6,84161	65
66	11,26	14,51	6,00726	6,72393	66
67	10,76	13,85	5,87165	6,59893	67
68	10,28	13,20	5,73403	6,46635	68
69	9,81	12,57	5,59182	6,32818	69
70	9,37	11,96	5,45165	6,18466	70
71	8,94	11,37	5,30775	6,03607	71
72	8,54	10,80	5,16744	5,88278	72
73	8,15	10,24	5,02437	5,72222	73
74	7,77	9,70	4,87876	5,55743	74
75	7,41	9,18	4,73490	5,38893	75
76	7,07	8,68	4,59354	5,21727	76
77	6,73	8,21	4,44663	5,04679	77
78	6,41	7,75	4,30309	3,87092	78
79	6,10	7,31	4,15898	4,69389	79
80	5,82	6,89	4,02440	4,51647	80
81	5,55	6,50	3,89051	4,34399	81
82	5,31	6,13	3,76802	4,17315	82
83	5,09	5,78	3,65276	4,00482	83
84	4,89	5,45	3,54546	3,83988	84
85	4,72	5,14	3,45232	3,67921	85
86	4,57	4,85	3,36864	3,52371	86
87	4,45	4,58	3,30066	3,37426	87
88	4,36	4,33	3,24907	3,23175	88
89	4,32	4,11	3,22597	3,10296	89
90	4,30	3,92	3,21438	2,98912	90

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