I often hear statistics bandied about regarding the number of South Africans who pass away without a Will, which in reality, is a straightforward situation to remedy. A Will is a relatively simple document and can be readily obtained by most people – be it through an attorney, accountant, financial advisor or even a template purchased from a stationery store.
To simplify explanations within this article, the person executing the Will will be referred to as the testator (male tense) i.e. he will bequeath assets to his wife, children and others, and technical terms such as surviving spouse, testator, testatrix etc. will be avoided. The basic precepts of estate planning begin with one's matrimonial regime, as this will have a bearing on how assets in your estate will devolve, even before you have drawn up a Will. Matrimonial regimes range from marriage in community of property and antenuptial contract (with or without accrual) to religious, customary and civil union marriages.
The next step in the estate planning process is to draw up a Last Will and Testament. This essential step in regulating one's affairs is often ignored or overlooked despite its simplicity.
If you do not have a Will in existence when you pass away, your estate will be wound up, and your assets will devolve in terms of the rules of Intestate Succession. Depending on the circumstances of each case, this can still be a relatively reasonable basis for the distribution of your net estate.
- In the first instance, if you are survived by your wife only, she will inherit everything.
- If you are survived by your children only (i.e. no wife), they will inherit everything.
- If you are survived by your wife and children, your wife will inherit the first R250 000, or a child's share if this is greater than R250 000. This scenario could create hardship for your wife who, under normal circumstances, would probably have received the entire estate ahead of the children. However, there are provisions in the Intestate Succession Act that can be utilised to change this position, one being that a major child can repudiate his inheritance in favour of his mother (surviving spouse). If all your children are majors, and all of them repudiate in favour of their mother, she will inherit everything. This may not always be a solution, especially where family relationships are strained and individual financial circumstances dictate otherwise.
- If you are not survived by a wife and children, your estate will then be split equally between your mother and father (parents). If your mother has predeceased you, then her 50% share will devolve upon her descendants by representation, i.e. your brothers and sisters (on your mother's side). This devolving of assets may therefore include any half-sisters or half-brothers from a previous marriage of hers. If there are no descendants on your mother's side, then her share will devolve upon your father (surviving parent).
- If your wife, children and parents do not survive you, your siblings or their descendants will then inherit, failing which your closest relatives will inherit per capita. If you have four relatives in the same degree of relationship to you, they will each receive a 25% share.
Consequences of dying intestate
The consequences of not having a Will can be mitigated in certain circumstances (see point 3 above) or may achieve a similar outcome to having a Will. There are, however, disadvantages to not having a Will, some of which can be severe:
- You cannot nominate your executor of choice. There are provisions in the Act whereby an executor will be chosen for you from a select group of persons.
- As a result, your family may not be able to negotiate an executor's fee.
- The executor may be someone that the deceased did not want.
- Security for the administration may be requested by the Master depending on the person to be nominated.
- As mentioned above, your estate will devolve according to the Laws of Intestate Succession and may land up devolving upon an unintended person:
- A person that you would have dis-inherited.
- A person to whom you would have allocated a smaller share of your estate.
- A person with a drug problem or one who is incapable of looking after their financial affairs, and needs to be protected.
- Your benevolent wishes, if any, will not be honoured.
- Your aged parents might not be adequately provided for.
- If minor children are involved, their share of the estate will be paid to the Guardians Fund, run by the State and from which limited access is available until they turn 18. This limited protection only lasts until the child turns 18 (becomes a major), after which they can access these funds. It is unlikely that a young adult of eighteen years will be able to manage and protect their inheritance, particularly if it is a substantial sum of money.
- If your wife has predeceased you and minor children are involved, a guardian will be chosen for them by the Courts. This guardian may not be the guardian of your choice.
Benefits of executing a Last Will and Testament
As financial advisors, we recommend that over and above getting advice on financial investments and estate planning, you draw up a Will and ensure that it is valid, i.e. it complies with all the relevant formalities laid down in the Wills Act.
You do not need an elaborate or complex Will of 30 pages - a simple, properly executed Last Will and Testament will avoid the disadvantages mentioned above. By executing a valid Will, you ensure that:
- Your current Will is the one to be followed by revoking any previous Wills or codicils.
- You choose your executors.
- You choose the trustees of any testamentary trust required for your minor children.
- You exempt both the executors and trustees from having to provide security.
- You give the executors and trustees the power of assumption and resignation.
- You protect your minor children's inheritance by creating a testamentary trust for them until they reach the age of your choosing.
- You choose your beneficiaries and the share of your estate to which each will be entitled.
- You can provide for specific legacies and charitable bequests.
- You can provide for aged parents.
- You can make provisions to take care of your pets.
- You can nominate a guardian or guardians to take care of your minor children should both natural parents be deceased.
- You can appoint your successors in title to act as trustee of your family trust upon your passing (if your Trust Deed allows for this).
- You can exclude (protect) any inheritance from the consequences of the beneficiary's marriage regime.
- You can protect an inheritance from the insolvency of a beneficiary.
- You can provide your beneficiaries with the flexibility to repudiate their inheritance and specify the specific consequences thereof in your Will.
- You can mitigate or defer certain taxes, particularly capital gains tax and estate duty, by bequeathing your estate to your wife.
- You can deal with your South African estate only and execute a separate Will for your foreign assets. This course of action speeds up the administration process in both jurisdictions.
- You can ensure that your estate has sufficient liquidity to meet its liabilities (income tax, CGT, estate duty, Masters fees, executor's fees etc).
The benefits listed above provide compelling evidence of why it makes good financial sense to have a Last Will and Testament in place, especially when minor children are involved or changes occur in personal circumstances. Not only is it good financial sense, but by doing so, you are caring for your family in that there is less for them to worry about after your passing. Contact your financial advisor today to find out how they can assist you.