Implications of the use of personal servitudes as estate planning instruments

Abstract

Estate planning is the process during which a plan is set up in order to regulate the use, conservation and transfer of the estate owner's assets. The division of ownership and use of property by means of personal servitudes is a useful estate-planning tool. A distinction is made between two types of servitudes, namely: a praedial servitude and a personal servitude. The scope of this dissertation is focused on personal servitudes as estate-planning instruments. The study aims to discuss the financial implications of using personal servitudes as estate-planning instruments against a general back drop of the nature of estate planning, the nature of personal servitudes and the registration requirements of personal servitudes. These financial implications are mainly in the form of taxes. The study discusses the following taxes with regard to personal servitudes: normal income tax, estate duty, donations tax, transfer duty and capital gains tax. Several other issues pertaining to the use of personal servitudes are discussed together with the use of one-year usufruct schemes in order to avoid taxes. The study concludes that the use of personal servitudes as estate-planning instruments can be both beneficial as well as detrimental to the estate planning process. It is suggested that estate planners must consider all aspects of personal servitudes and all consequences that it may have on an estate before making use of these limited real rights