Whatever the size of your personal fortune and assets owned, a will is an important aspect of an overall strategy to manage financial affairs. Yet, many South Africans – close to 70%, based on statistics available from the Master of the High Court – do not have a valid will.
There is a lingering misconception that a will is something only wealthier individuals, with lots of assets or many dependants and heirs need. This is totally incorrect and one of the drivers of National Wills Week, an annual awareness project by the legal fraternity about the importance of having this key document in place. For everyone.
Not having a will can have detrimental consequences for dependents, whether minor children, a spouse or family members. By having a will in place, individuals are able to plan their estates according to their own, personal wishes and needs and it will ensure that the process of distribution of assets to beneficiaries is a quick and painless one.
Who needs a will?
South Africans are afforded with the right to freedom of testation, which essentially means that we can decide, within limits, exactly where our assets shall devolve on our demise.
Therefore, every person who has something to leave behind should have a valid will in place, to ensure that their estate is allocated to the beneficiaries of their choice, after having taken into consideration the various estate-planning objectives.
What happens if you die without leaving a valid will?
If a person dies without leaving a valid will, or where their will is declared partially or completely invalid, their estate will be distributed in accordance with the laws of the Intestate Succession Act 81 of 1987, as amended. While the provisions of this Act are generally fair, ensuring that assets are transferred to spouses and children, there are several problems that may arise, namely:
- Assets may not be left to the deceased’s person of choice;
- It may take some time for an executor to be appointed, and in addition they may not be someone you would have chosen for yourself. This person will be responsible for the winding up of your estate;
- Extra and unnecessary costs are involved;
- Any inheritance due to a minor must be deposited into the Guardian’s Fund, a government-run fund that safeguards their inheritance until they reach the age of majority, currently set at 18; and
- Conflicts may arise between family members, as no clear instructions have been made regarding the division of an estate.
What renders a will valid?
The Wills Act 7 of 1953 stipulates certain formalities that need to be met for a will to be rendered as valid. In summary, a valid will must be in writing, a testator must be over the age of 16 and be capable of appreciating the nature of the effect of the act, the testator and witnesses must sign the will in the presence of each other and the witnesses must be over the age of 14 and not receive any benefit in the will.
A will requires specific and necessary clauses. Anyone drafting their own will should have it reviewed by a professional to make sure the requirements are met.
For instance, it must include clauses like the revocation of all previous wills, the exclusion of collation, naming of a residuary heir and exempting the executor from providing security, to name a few.
What factors should be taken into consideration when drafting a will?
- There are strict legal requirements that need to be adhered to when drafting a will, failing which the validity of the will could be impacted.
- Who will take care of a minor child (younger than 18 years). Also, be cautious about leaving assets to children under the age of 18, as they will require a guardian to sign any documents on their behalf. In this instance one should consider a testamentary trust to be created to administer assets in the child’s best interests. Having their inheritances placed in the Guardian’s Fund, which is administered by the Master of the High Court and which is only released to them on reaching 18 years, should be avoided.
- Make an effort with effective estate planning, which if done right, could reduce estate duty tax and ensure liquidity in the estate. Always ensure that you can provide for your loved ones’ immediate expenses that they would need to settle, e.g. funeral, household and medical expenses.
- Changes to personal circumstances – marriage/divorce, birth of a child or death of a loved one.
- Know where the will is located and tell a trusted person where it can be found or who they are to notify in the case of your demise.
- The possibility of negotiating a reduced executor’s fee.
Why should you allow qualified professionals to assist you in drafting your will?
A qualified professional will have the required experience and knowledge in this field, in order to ensure that your will adheres to the strict requirements with respect to drafting a valid will, and keeping up to date with estate-planning information, changes to tax rules and trends on a global scale that may be relevant to your estate.
Qualified professionals are also able to identify issues that may arise and advise you accordingly to avoid such issues or mitigate them as far as possible, while also ensuring that the will complies with your express wishes and that the assets in your estate are allocated as you have intended.
By also nominating a qualified professional you can negotiate a reduction in executor’s fees, as opposed to imposing the maximum executor’s fee (prescribed by the Master of the High Court) of 3.5% excluding VAT.
What role does the executor play and why are they paid a fee?
An executor is responsible for the effective winding up of deceased estates, and their role includes, but is not limited to the following:
- Meeting with family, reading of the will, establishing and verifying the identity of beneficiaries – obtaining relevant documents necessary for submission to the Master and for estate management and distribution.
- Responsibility of carrying out the directives in terms of the deceased’s last will and testament.
- Preparing and lodging all documentation in order to report the estate to the Master of the High Court and obtain letters of executorship.
- Placing relevant advertisements in the local newspapers and Government Gazette in accordance with the Administration of Deceased Estates Act 66 of 1965, as amended.
- Once letters of executorships are obtained an estate last bank account needs to be opened.
- Pay creditors.
- The executor will also be required to pay out any special bequests to legacies and to pay any debts and obligations as and when they become due
- The executor may need to sell assets in the event that there is not enough liquidity.
- Dealing with Sars, registering the estate.
- Calculate and pay relevant estate tax and ensure correct documentation is filed with Sars and the Master.
- Drawing up of the liquidation and distribution account – which details all assets and liabilities and how the estate has been divided and distributed – this is then lodged with the master and submitted to Sars, where it is assessed and thereafter lies open for inspection.
- Another advertisement is then placed in the local newspaper and Government Gazette – notifying the public that the account is lying open for inspection.
- Attending to any of the master’s queries during the finalisation stages and requesting for permission to distribute.
- Finalisation and distribution of the estate.
- Closing of estate.
It is important to note that the winding up of a deceased estate is no easy task, no matter how simple or complex the estate may be. A great deal of time is dedicated by the executor in trying to effectively wind up the estate as quickly and smoothly as possible and therefore their fees are well justified.
A simple estate can take roughly 16 months to two years to finalise.
This content was compiled in collaboration with Brenthurst Wealth’s Malissa Anthony, a member of the estate-planning, legal and fiduciary team. Details here: Brenthurst Legal and Fiduciary services