Should you consider massing your estate?

A term often encountered in estate planning but generally not always that well understood, is the “massing” of estates. In this article we take a look at what is meant by “massing” and when it makes sense to use massing in estate planning.

There are two types of massing, namely statutory massing and common law massing. For purposes of this article, we will focus on the more commonly recognised statutory massing, although common law massing also has its place in estate planning.

Statutory estate massing is provided for in section 37 of the Administration of Estates Act 66 of 1965 (“Act”). According to the Act, massing occurs when two or more people join together their entire separate estates, or a portion thereof (i.e., mass their estates), and bequeath the massed estate to an heir or heirs nominated in a mutual last will and testament, subject to the survivor benefitting from the massed estate. The benefit that the survivor obtains must be a limited interest over the massed assets, such as a usufruct (right of use), fiduciary interest or the survivor being named as an income beneficiary under a trust. In the event where a limited interest is not established, there will not be statutory massing and it could amount to a donation to the heirs by the survivor, which in turn could hold donations tax consequences for the survivor.

For massing to be valid, after the death of the first dying, the survivor must accept or reject the massing. If the survivor accepts the massing, the administration of the estate will involve the joining of the assets and liabilities of the survivor and the deceased, which are then jointly bequeathed to the heirs as though the survivor has died. If the survivor rejects the massing, then the deceased estate will be administered separately from the survivor’s estate as if the survivor had predeceased the deceased. 

But why would one want to mass your estates given that it sounds complicated with potentially dangerous tax consequences?

Massing is generally used in instances where spouses who are married in community of property want to benefit their children on the death of the first dying but also want to provide for the maintenance of the surviving spouse. Instead of becoming entitled to the half share of the community estate due on the dissolution of the marriage by death, the survivor obtains a limited interest over the joint estate. This arrangement grants ownership of the joint estate assets to the children (or a trust established for the children) while ensuring the well-being of the survivor. A good example could be a farmer who wishes his farm to pass on his death to his son to continue farming, with the surviving spouse entitled to live on the farm and benefit from the fruits of the farming. 

If one views massing in this context, the benefits of massing could include the following:

1. Protects assets from the survivor squandering the assets of the first dying.
2. The benefit of the joint estate can reach the ultimate heirs, for example, your children, earlier while still providing for the maintenance of the surviving spouse.
3. Protects estate assets from the survivor’s future marriages.
4. Potential savings on estate duty (although, this should not be the reason for massing in the first instance).

In South Africa, there is a rebuttable presumption against massing. This means, that for effect to be given to massing, the joint last will and testament must clearly stipulate that massing must take place in order to refute the presumption against massing. For massing to occur, the following requirements must therefore be met:

1. The mutual last will and testament must make provision for the massing and joining of the respective estates.
2. The mutual last will and testament must make provision for a bequest of the joined assets of the deceased and the survivor.
3. A limited interest must be created in favour of the survivor.
4. The survivor must formally, and in writing, accept the conditions of the mutual last will and testament.

To conclude:

Depending on your circumstances, massing your estate with your spouse (or someone else) can make sense particularly if the goal thereof is asset preservation or succession. However, it requires the assistance of a professional estate planner to correctly plan for and incorporate the massing as part of the overall estate plan, which includes considering the appropriateness of massing as well as tax and other consequences flowing from a massed estate. Additionally, as the survivor could repudiate the massing, it is also important to prepare for such consequences in the will to avoid unforeseen consequences arising should there be a repudiation of the massing. 

If the consequences of massing sound relevant to your situation or should you already have a massed will, have a discussion with your estate planner regarding the need for massing to ensure you are fully informed and aware of the consequences of massing your estate. Incorrectly planned massing can be complex, painful and expensive.

November 6, 2023
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