A will is a legal document that stipulates how the assets accumulated during your lifetime should be distributed when you die.
It enables you to select your beneficiaries and also allows you to choose the executor of your estate. But, above all, a will represents financial peace of mind to those you leave behind.
Every competent person of 16 years and older who owns assets and is mentally able to understand the results of his or her actions, should have a will. Why? If a person dies without a will, it could lead to severe administrative, tax and legal problems and possibly also lead to financial losses.
A will should comply with certain legal requirements to be valid. In your will, you determine how your assets should be divided, and nominate an executor and trustee to take care of the division of the estate’s assets and to handle the administration of any trust assets.
You have the right to name heirs as you wish in your will. If you don’t, your assets will be divided according to the Intestate Succession Act, No 81 of 1987, after your death. This could mean that persons you would have preferred not inherit from you, could inherit.
Your will therefore determines the future of everything that you’ve built up through the years – and your heirs can be directly disadvantaged if you don’t plan correctly. Estate duty, income tax, VAT and capital gains tax (CGT) can take a big chunk out of your estate if your planning is wrong. It thus goes without saying that you should get the advice of a specialist or adviser for the drafting of your will.
Every person with assets needs a will. It will ensure that your wishes are attended to after your death, and it stipulates how your estate should be managed and who should receive your assets.
The most important issue is that your will should be a practical document – one that is easy to understand and easy to execute. If your wishes are simple and easily executable, your financial adviser can probably help.
However, if you suspect that your will might be more complicated (for instance because there are children from a previous marriage, complex business arrangements and specific wishes), you should call in the help of a trust company.
You can stipulate in your will that your children’s inheritance be administered in trust until they reach 18 years (or any later age that you may choose). Trustees manage assets in the best interests of minors. Guardians on the other hand look after minor children. Guardians are only called for if both biological parents are deceased.
Should you divorce your spouse, you may be obligated to pay maintenance. These obligations may be placed on your estate as well.
Some of the issues that may come to the fore are:
A testamentary trust is by far the best mechanism to comply with all maintenance demands. By placing a capital amount in a trust that can generate sufficient income, the maintenance claim will be served and the capital also protected for your eventual heirs. It is recommended to stipulate in the will that the purpose of the trust is for payment of maintenance.
Disabled dependants require greater care, for which you should make provision in your will. A testamentary trust is an ideal vehicle for this.
Objective trustees that will administer the disabled person’s inheritance in trust will be able to meet this need.
Where the possibility exists that estate duty may be payable at your death, it is important to do a proper estate planning.
Firstly make sure that you lessen the tax through proper planning of your estate. Ensure that there is sufficient cash to pay this tax; otherwise it may lead to the forced sale of estate assets if the cash shortfall cannot voluntarily be paid or taken over by the beneficiaries.
In cases where you live together with another person, both parties frequently contribute to the household (as with a marriage) and collection of assets without registering any assets on both parties’ names or fully accounting for assets. The identification of assets therefore is very important.
To avoid friction and fighting among heirs, it is advisable and practical that you and the person you are living with, decide together how your assets will be inherited. This doesn’t necessarily mean that you have to have a joint will.
Should you have offshore assets when you die, you’ll also have a foreign estate that will have to be administered.
Each country has its own legislation dealing with inheritance and the signing of wills. Your South African will won’t necessarily meet with the legal requirements of the country where your assets are. That might mean that your foreign assets won’t be inheritable in terms of your only will.
Therefore, it is important that if you do have offshore assets, you should have more than one will: for your South African assets and for your foreign assets, which complies with the laws of the country where your assets are.
The matrimonial law in terms of which the couple is married has a major influence on the inheritance of their assets.
In traditional marriages and those conducted according to own customs, the inheritance of assets is usually influenced by very complex rules. Some of these rules could be bypassed by drafting a valid will.
Second or more marriages require careful planning of your will. The relationship between the stepchild and parent is a potential source of conflict. The second spouse and the children from the first marriage should ideally inherit separate assets.
If you want to donate organs, this should not be stipulated in your will. Your will only comes into effect after your death. Organ donation is only of value if you are declared brain dead while your body is still functioning.
Your next of kin will therefore have to give permission for an organ donation. Make sure you pass on your wishes to them.
Also contact the Foundation for Organ Donors toll-free on 0800 226611 FREE for more information.
It is not advisable to describe your wishes for your funeral arrangements or cremation in your will. The content of your will is frequently only read after the funeral, which makes it too late to see to your wishes. Rather convey such wishes to your next of kin before your death.
Provisions clauses linked to an inheritance that had not been properly thought through could leave an heir severely hamstrung even though it was not the intention. Some of the provisions may be regarded as a non-peremptory directive or merely an indication and is not binding, unless it indicates that someone else will benefit if such directive is not carried into effect.
Provisions that are immoral (contrary to good morals of public policy), such as making your daughter’s inheritance subject to the proviso that she has to divorce her husband before she can inherit, can also be deemed invalid provisions. The same applies to unfair discriminatory provisions that are in contravention of a country’s Constitution and which could be construed as being racist and therefore unconstitutional.
If you are unsure of attaching any provisos to an inheritance, rather get advice from an expert. We can help.
Avoid any addenda to a will, since it carries risks. The law sets strict requirements with which one must comply and which could cause both the will and addenda to be invalid.
Rather incorporate what you want to describe in the addenda into the main body of the will and avoid the risk.
It is not advisable to try and describe all your assets in your will. You risk leaving out assets obtained later. Describe only those assets that will be bequeathed to specific heirs and bequeath the rest of your assets in set proportions to specific heirs.
Terms such as “cash” and “movable goods” should not be used unqualified in a will, since this may be interpreted in different ways. This could lead to serious problems and fighting among heirs.
It is important that you make provision for the transfer or continuation of your business after your death.
This should be done by way of agreements with partners and shareholders. It is vitally important that agreements must be in writing and not be only verbal. Verbal agreements are very difficult to prove after the death of one party.
Your death does not mean the end of contracts entered into before you died, unless it was a contract of a personal nature that requires your personal skills.
In all other cases, the executor of your estate is bound to your contracts. It may be necessary to grant express and specific authorisation in your will to the executor in order to execute contracts.
If some of your heirs are insolvent at your death, their inheritances will form part of their insolvent estates and will be used to pay creditors.
To avoid this, the benefits should not be bequeathed directly to the heir, but to a discretionary testamentary trust to be administered to the benefit of such an heir until rehabilitated. This way, the heir’s inheritance will be safeguarded for him and his children.
If you and your spouse are married under the accrual system, the spouse whose estate accrues the least in value during the marriage will have a claim against the spouse whose assets grow the most. Accrual claims are handled just like any other claim against the estate of the deceased. It is critically important that you plan your estate accordingly.
Much has been said about wills being your last word here on earth. They could also be described as a manual for the execution of the last wishes of the deceased. This is not wrong, but what about the wishes of the heir? How does this affect him or her?
Normally one doesn’t hear from those who inherit, that they complain or get involved in court cases. It may sound strange to say that a person does not need to accept an inheritance, but it can happen – usually for financial reasons.
It is known in legal circles as doctrine of election. In more fancy language it is known as adiation (acceptance) and repudiation (refusal) of the inheritance as set out in a will.
To use an example: a father bequeaths certain assets to his son or daughter, but places a certain obligation on one of them, such as to stipulate that the heir must give a part of the inheritance to another member of the family.
In short, the doctrine of election makes it possible to receive something in exchange for the heir paying or giving something to another person. This is when the heir has the choice of accepting or refusing his inheritance.
The executor of your estate must administer your estate in terms of the Administration of Estates Act 66 of 1965, and any other relevant Acts, and execute your estate in accordance with the stipulations of your will (or Intestate Succession Act, when applicable) under supervision of the Master of the High Court. The executor is the company, firm or person that you appointed in your will.
The appointment of an executor is a big responsibility. You may appoint your spouse, but this is in most cases not a good idea, since your spouse could be emotionally shattered and not ready to take important financial decisions.
Without the necessary knowledge, your spouse will also not know where to get the best advice or service. Your spouse may be exposed to someone serving his own interests, in which case the estate’s chequebook might end up in the wrong hands.
Approaching a reputable company or section of a company specialising in wills, estates and trusts is a much safer idea:
You should review your will regularly to ensure that it is still a correct reflection of your current wishes and fits your current situation.
Changing circumstances that could make it necessary to alter your will include:
