YOUR MONEY: Protecting your own

Question:

My grandfather owns several buildings that are rented out to businesses. One of those businesses that rent from him is mine. He also has a small share portfolio, but the broker has gone Awol. I know who the investment house is through which he bought and held his shares. My grandfather, however, is showing signs of dementia and I’m worried about what will happen to the buildings once he cannot make decisions anymore. I’m his only heir. The rental from the buildings is his sole income. What, in terms of the law, can I do to protect his assets and ensure he receives his income in future? - Anonymous

Answer:

We commiserate with you on the deterioration of your grandfather’s health. Few people realise that of the 4.4-million people in South Africa over the age of 60 nearly 187,000 suffer from dementia. This makes your question one of great interest to many people.

Giving you power of attorney over his estate sounds like an option, but it is a big no-no in South Africa because power of attorney expires when a person passes away or becomes mentally incapacitated.

Though we don’t have all the facts regarding your grandfather’s circumstances, you are left with two choices as far as we can gather. You can ask the high court for your grandfather to be declared mentally incompetent and for you to be appointed as either curator bonis or administrator of his estate.

Curator bonis

A curator bonis manages the financial affairs of a person on their behalf who has diminished mental capacity, is mentally ill or is physically incapacitated. You will have to approach the high court for an order declaring you the curator bonis of your grandfather’s estate. This is a long process (and you will need lawyers).

It’s also expensive: a curator bonis may receive an annual fee of 6% on gross revenue from assets (such as dividends, pension, interest, and rental income).

Your other option is to ask for a ruling in which you are declared as administrator of your grandfather’s assets.

Administrator

An application to be appointed as an administrator may only be brought where the person is mentally or intellectually incapacitated (not physically). This option is much cheaper because the application is made directly to the master of the high court and no lawyers are needed.

In your grandfather’s case the master of the high court will automatically order an investigation into the estate because its value exceeds R200,000 and his income from the letting of the buildings exceeds R24,000. The costs of this investigation, which can be no greater than R15,000, are paid from the patient’s estate. Very importantly, you as applicant will have to provide proof that your grandfather has received a copy of the application.

You must also have medical certificates from at least two independent mental health specialists as evidence of the diagnosis and prognosis.

In conclusion, you will have to decide if you want to be appointed as the curator or administrator of your grandfather’s estate.

Please bear in mind that, should your grandfather pass away when you are the curator or administrator of his estate the curatorship comes to an end. The unexpected legal fees at death, such as executor fees and conveyancing attorney fees to transfer his properties, can all add up to hundreds of thousands of rand and may cause liquidity issues for the estate. It could force the executor to auction off assets (which can include properties) in order to cover these costs.

- Ken Newport, national manager for succession planning at Capital Legacy

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