What is a ‘donation mortis causa’?
23 March 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: What is the definition
of "death bed"? If a terminally ill person (say someone with cancer)
wants to donate money to her children, will that constitute a death bed
donation? Keep in mind that the doctor did not state how long she has to live;
but it could be weeks or 2 years.
A: The Income Tax
Act, in the Donations Tax part, does not refer to "death bed”, but an exemption
from donations tax applies in one of two cases.
Please do remember that the property that qualified for this exemption (in
both instances) will be deemed property in the estate and no deduction is
allowed in respect of the claim (if not transferred before death). This is in terms of section 3(3) and 4 of the
Estate Duty Act.
Juta’s in their electronic service explains the first one
(donation mortis causa) as follows:
A donation mortis causa must be executed with the
formalities for a will, which are a written form, and signature by the (in this
case) donor and two witnesses. The donation must be accepted by the donee prior
to the death of the donor, but is nevertheless revocable by the donor at any
time before his or her death, and falls away in the event of the prior death of
the donee. (See also the same comment in Smith v Parsons).
The second one is where the donee will not obtain any
benefit thereunder until the death of the donor.
In the case of SARS v Marx, Judge van Zyl explained the
difference as follows:
It may be asked in what case then, other than donations
mortis causa (for they are specially exempted under the preceding paragraph of
s 56(1)), was it intended that the exemption should apply.
The kind of case to which it would apply seems to be those
in which the donor contracts to donate irrevocably property to a beneficiary,
or to a trustee for the benefit of a beneficiary, in terms of which its whole
operation is suspended until his death or thereafter; that is, no delivery or
transfer of the property or of any pecuniary advantage, profit or gain
therefrom is to take place until then.
As stated above, the mere contractual right thereby vested
in the ‘donee’ is not a ‘benefit obtained by the donee thereunder’ so as to
preclude the exemption from operating, and the donation would not be a donatio
mortis causa, because it would not be revocable, which are both essential
characteristics of the latter kind of donation (Meyer & others v Rudolph’s
Executors 1918 AD 70 at 83, 88).
It is advisable to obtain legal advice in this regard as the
issue is not a tax one.
Disclaimer: Nothing in this query and answer should be construed as
constituting tax advice or a tax opinion. An expert should be consulted for
advice based on the facts and circumstances of each transaction/case. Even
though great care has been taken to ensure the accuracy of the answer, SAIT do
not accept any responsibility for consequences of decisions taken based on this
query and answer. It remains your own responsibility to consult the relevant
primary resources when taking a decision.