TSC Case Study 10: When Love is Blind

The Transaction Support Centre (TSC) has been operational since July 2018 and since then has seen over 1320 clients with various property-related issues. The most common issue relates to problems with title deeds.  This case study is also available on 71point4’s website.  

Phelisa is a 37-year-old single female, who approached the TSC in October 2020 for assistance with a deceased estate.

For the first 16 years of her life Phelisa was the only child of an unmarried mother. Her mother received a serviced site in Khayelitsha from government in 1997 and a few years later a subsidy was approved for a top structure.  Phelisa and her mother lived in the house for over a decade, during which time Mr M entered the picture.

Mr M, also the recipient of a subsidised property, lived next door to Phelisa and her mother. A romance developed between the neighbours. They had a child together, and when Phelisa was 25 years old, they eventually married.  The new family of father, mother, daughter and son lived together in the neighbouring properties until Phelisa’s mother passed away in 2018, followed shortly thereafter by Mr M in 2020. Neither left a will.

In the minds of Phelisa and her half-brother, it was obvious what should happen to these two properties: Phelisa should keep the property that was her mother’s before she met Mr M, while her half-brother should keep the next-door property that was his father’s prior to the marriage.  Had Mr and Mrs M obtained prudent legal advice about providing for their heirs and executed wills, this may well have been the outcome.  But herein lie the perils of dying intestate – because there was no will the siblings face a laborious and expensive process to obtain ownership of their respective properties.

The moment the neighbours married (a marriage in community of property), both properties became assets in a joint estate with each spouse effectively acquiring half of the other spouse’s property from date of marriage, regardless of the fact that their names were never formally added to the title deeds. Phelisa’s mother’s property is valued at R244 000, while her husband’s is valued at R382 000. The value of joint estate is therefore R626 000, and the value of each spouse’s estate prior to their deaths (assuming there are no other assets) is R313 000.

Figure 1: The joint estates

Phelisa took the initiative when her mother passed away to report the estate at the Masters Office. Blissfully unaware of the implications of marriages in community of property, she only reported her mother’s property valued at R244 000. She should, in fact, have reported her mother’s half share in the combined estate, which is valued at R313 000. While this might seem somewhat inconsequential, it is, in fact material. The small estates threshold as set out in S18(3) of the Administration of Estates Act is R250 000. Estates below this threshold can be wound up by way of a less expensive process in which the Master of the High Court can issue a letter of authority, allowing an appointed representative to administer the estate. Once a Masters Representative is appointed, it is simple to transfer a property to heirs without there having to be a formal winding up of that estate. In contrast, estates valued above the R250 000 threshold must follow a formal winding up process, which carries a hefty fee of 3.5% of the estate value as well as a laborious process through the Masters Office that will take months, if not years, to complete. In the case of Phelisa’s mother’s estate, the fee would be R12 500.

A further complication with this estate arises because neither Phelisa’s mother or her step-father had a will. While in the minds of Phelisa and her brother, the mother’s property should go to Phelisa, this is not what the law says. The valid intestate heirs of Phelisa’s mother are Phelisa, her half-brother and Mr M. Because Mr M was the surviving spouse, in line with the laws of intestate succession he or his estate would get the first R250 000 of Phelisa’s mother’s estate with the remaining R63 000 split equally between Phelisa and her half-brother. The net effect is that rather than receiving a property valued at R244 000, Phelisa receives R31 500, less her share of the expenses associated with winding up the estate.

Beyond this, Mr M’s estate also falls over the S18(3) threshold and must too be formally wound up, incurring a further fee of 3.5% of Mr M’s estate – approximately R22 500 – and another laborious and slow process through the Masters Office.

Process aside, the only valid intestate heir of Mr M is Phelisa’s half-brother (Phelisa is not Mr M’s biological child), meaning he is the only person entitled to inherit Mr M’s estate, comprising both properties to the value of R563 000 (R313 000 from Mr M’s half-share in the joint estate and the R250 000 he inherited from his wife’s estate).

Phelisa must now rely solely on the kindness of her half-brother to make good by her – a precarious position for someone who has lived in a property for over 20 years and who assumed the property would be hers one day.

Figure 2: How the estates of Phelisa’s mother and step-father are dealt with

What is the lesson in this story? Dying intestate can be a nightmare for the heirs left behind, who must try to both navigate the complexities of the Masters Office (an infinitely more complex process where there is no will) and come up with the funds to wind up a deceased estate and secure ownership of a property. A will can help avoid many of these problems and, critically, ensure that the intended wishes of the deceased as to who should inherit his / her estate are upheld.

While it is not common practice in many areas for people to have wills, a number of TSC clients have requested assistance in drafting a will. Still, many are not aware of the ramifications for heirs of dying intestate. A lot more work needs to be done to shift mindsets about the importance of having a will and to enable property owners who want to draft a will to do so.