Estate planning can be an intricate area of financial planning to navigate and can be particularly cumbersome if too many complex structures and arrangements are put in place unnecessarily. When planning your affairs, keep in mind that simplicity, clarity and detail are key.
Be cautious of DIY wills
While it may be tempting to use a DIY will template, bear in mind that there are inherent risks involved. Off-the-shelf wills are generic and do not account for the details of your specific circumstances. If errors are made or the strict witnessing requirements of a valid will are not followed, your will could be declared invalid – leaving your estate to be wound up under the rigid rules of intestate succession. Further, intended beneficiaries may be disqualified from inheriting, and vague wording can cause confusion and misinterpretation of your wishes.
Plan for simultaneous death
A person cannot succeed as an heir or legatee unless he survives the deceased person, and this part of our law can be blurred in the case of simultaneous death of a married couple or where it is difficult to determine the order of death where a couple loses their lives in the same accident or tragedy, for example, a car accident. As such, it is always advisable to include a ‘simultaneous death’ clause in your will to provide for this eventuality. In addition, ensure that a third party (other than your spouse) has a copy of your will.
Be specific when nominating your beneficiaries
When nominating your heirs, beneficiaries and legatees, be as specific as possible to avoid any unintended consequences. For example, if you intend making a bequest to your domestic worker, be sure to include her full name and ID number. A vague reference to ‘my domestic worker’ can lead to confusion, especially where you employ more than one domestic worker. Bear in mind that there may be numerous people in your family with the same first name and surname, so take extra precaution when nominating your heirs and beneficiaries by including their ID number as well as their relationship to you.
Keep your will simple
Ideally, keep your will as simple as possible and be sure to leave your emotions out of the document. The more complicated you make your will, the greater the risk of errors, misinterpretation and unintended consequences. Legal rights such as usufruct, usus, habitation, fideicommissum and bare dominion can add unnecessary complexities to your will if incorporated unnecessarily or incorrectly. Do not use your will as a platform for expressing your emotions, exacting revenge, or announcing unwelcome ‘surprises’ on your family and loved ones.
Page and paragraph sequencing
Check that the page and paragraphing sequencing of your will are correct and in order. For instance, if the paragraph numbering jumps from paragraph 3.5 to 3.8, the Master might query whether there is a page missing from your will. Similarly, if your page sequencing jumps from page 3 to page 5, this could raise questions regarding the validity of your will and whether it has been tampered with. At the same time, check that any cross-references in your will are correct.
If you have any other legacy documents in place, make sure that none of them contradicts the intentions of your will. Any uncertainty and confusion regarding your final wishes can result in a delay in winding up your estate, contestation of your will, or uncertainty regarding your wishes. For example, if you set up a testamentary trust in terms of your will and also draft a Letter of Wishes, it is important to ensure that the guidance you give in your letter does not go against the discretion you have granted your trustees in the trust deed. Similarly, it is important to ensure no contradictions between your will and your trust deed.
Revoke old will
When you draft a will, it is important to include a clause which expressly revokes any former will and codicils you may have made. In addition, be sure to destroy copies of any previous will you may have drafted, bearing in mind that you may have given copies to a friend or family member for safekeeping. Unless you explicitly revoke your earlier will, a later will does not automatically revoke your previous will. If you do not explicitly revoke your previous will, both wills could be read together in the event of your death. If you have a copy of an old will in custody at an institution, such as a bank or insurance company, request that they return it to you so you can destroy it.
Appointing multiple executors
While appointing multiple executors may provide checks and balances when winding up your estate, it can also lead to dispute and logistical problems, especially if one of the executors no longer resides in the country. When it comes to the executors appearing at the Master’s Office or Sars, it may cause unnecessary delays when trying to co-ordinate the diaries of numerous individuals. When nominating multiple executors, give careful thought as to whether they will be able to work together in the best interests of your estate and its beneficiaries.
Check your nominated trustees and guardian
If you have set up a testamentary trust in terms of your will, take time to check whether the trustees you nominated are still appropriate. Friendships and relationships evolve, and it may be that some of the trustees you nominated no longer fit the bill when it comes to administering your assets in the best interests of your loved ones. At the same time, check that the person you have nominated as guardian for your minor children is still the person you would like to care for them if you are no longer around.
Keep your funeral and burial wishes separate
If you have specific requests regarding your cremation, burial, funeral arrangements or memorial service, it is advisable to document these separately from your will, bearing in mind that your will might only be read after your burial or cremation.
Before drafting a separate will for your foreign assets, it is important to first determine whether you need one and what the implications of having one are. While in law a South African will is valid overseas and can be recognised in a foreign jurisdiction, several problems may arise. Depending on their law, other countries may have different rules regarding testation and the validity of wills, and these could impact on you. If your foreign assets include an overseas bank account or unit trust investment, likely, you do not require a separate will. However, if your foreign assets include immovable property or interests in foreign businesses or companies it is advisable to have a foreign will drafted by an expert in that foreign jurisdiction.
If any of your intended beneficiaries or heirs reside overseas, it is advisable to keep certified copies of their ID documents and birth certificates as these will be required by the Master when winding up your estate and obtaining copies can cause unnecessary delay.
Ask your advisor to prepare a liquidity calculation to ensure that in the event of your death your estate can cover its estate duty obligations, settle liabilities and administration costs, and provide for other taxation liabilities such as CGT. If your estate is not liquid at the time of death, your family members may suffer financial hardship or be forced to agree to the sale of an asset to generate cash.
While domestic insurance policies will be considered deemed property in your estate to calculate estate duty, buy & sell policies are exempt from estate duty calculations. However, your buy & sell policy must be correctly structured to avoid estate taxes. The buy & sell policy must be taken out by a person who is a co-owner of your business, and the policy must have been taken out with the specific purchase of purchasing your shares in the event of your death. In addition, the premiums must be paid by the co-owner and not by you (the life insured). Incorrect structuring of the policy and underlying buy & sell agreement can adversely impact the liquidity in your estate.
The executor of your estate will not be able to proceed with the winding-up process without copies of important documents such as your ID, passport, birth certificate, marriage certificate, divorce orders, maintenance agreements, trust deeds and title deeds, so it is advisable to keep a separate folder containing all this information. Searching for these documents and requesting replacements from Home Affairs can cause unnecessary delays and possible financial distress for your loved ones.