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Steps to take before drafting a will

Drafting a will requires the drafter to give careful thought to a number of important issues.

If you’ve taken the wise step to consult with an expert to have your will professionally drafted, be sure to prepare yourself adequately for the consultation so that you have all the necessary information at hand. Drafting a will is not as easy as it may seem and requires the drafter to give careful thought to a number of important issues. Here’s what to consider before putting your will together:

Your matrimonial property regime

Determine which matrimonial property regime you are married under. It’s always surprising how many couples are not sure what marital regime they are married under nor how it impacts on their ability to testate. Remember, if you are married in community of property, you and your spouse own the joint estate in equal, undivided shares. This means that, when it comes to testation, only 50% of the joint estate is yours to bequeath. If you are married out of community of property with the accrual, bear in mind that the accrual contract continues to apply after your death. This means that your surviving spouse may have a claim against your deceased estate for their share of the accrual to the extent that it is less than yours. This could create liquidity problems in your estate if you intend leaving some or all of your assets to a third party. In addition, be sure to check your antenuptial contract as it may be that certain assets were specifically excluded from the accrual at the time of drafting the contract.

A guardian for your minor children

If you have minor children, choosing a suitable guardian for them is a priority, albeit often a difficult and divisive decision to make. Many couples struggle to find common ground when choosing suitable guardians for their minor children, so be sure to have these discussions before meeting with your financial advisor or fiduciary expert. When choosing a guardian for your children, give consideration to factors such as their existing relationship with your children, their financial stability, their morals and values and to what extent they align with yours, their religious beliefs, where they live, and also their willingness to take on the responsibility. Most importantly, have the discussion with the proposed guardians before meeting with your financial advisor to ensure that they agree to the appointment. For the purposes of preparing your will, your advisor will need the full names and ID numbers of the guardians.

Choose trustees for your testamentary trust

Also important for those with minor children is to set up a testamentary trust in your will for the safe custody of any assets intended for your minor children. Choosing appropriate trustees for the trust is an important task as it will be their responsibility to ensure that your wishes are carried out after your death. Generally speaking, three trustees is an appropriate number with one of the trustees being an independent person, such as your financial advisor, attorney or fiduciary expert. Appointing too many trustees can make the management and decision-making in the trust cumbersome and slow. Once again, for the purposes of drafting the will you will need the full names and ID numbers of the nominated trustees.

Your executor

Another important decision you need to make is that of choosing an executor. While you may be tempted to appoint a close family member, bear in mind that the job of executor is an administratively intensive and time-consuming one that requires a certain level of financial and legal knowledge. Further, keep in mind that the job of the executor begins immediately after one’s passing, which means that they may need to assume their responsibilities while in mourning. Also bear in mind that family relationships and dynamics change over time, and if you’ve nominated a close family member as executor conflicts of interest may arise which is never ideal.

Your assets and liabilities

Be sure to make a full inventory of your assets and liabilities, including business interests, trusts, jewellery, artwork, immovable property, investments, retirement funds and any valuable moveable property. It is essential for your financial advisor or fiduciary expert to have full sight of your assets and liabilities so that he can draft a will that aligns with your overall estate.

Trust assets

If you’re setting up a testamentary trust, be sure to identify exactly which assets you intend bequeathing to the trust. The purpose of a testamentary trust is to house assets that you intend bequeathing to your minor children. Bear in mind that, in terms of our law, minor children lack contractual capacity and are therefore unable to inherit. In the absence of a testamentary trust, any assets bequeathed to your minor children will be administered by the Guardian’s Fund until they are old enough to inherit the assets.

List your heirs

Your heirs are those people who stand to inherit the residue of your estate, which is whatever assets are left after all your debts, the cost of administration, and any legacies or special bequests have been distributed. When drafting your will, your advisor will need the full names and ID numbers of your heirs. Importantly, if there is an heir that you do not wish to benefit from your estate, you need to make a note of this.

Special bequests

Make a note of any special bequests that you would like to leave a person which could include a cash amount, a car or a piece of artwork. However, it is important to first understand the implications to your estate before making special bequests in your will. When distributing your assets, your executor will first use your assets to pay the costs of administering your estate and to pay your creditors. Thereafter, your legatees will receive any legacies due to them in terms of any special bequests you have made. Lastly, whatever is left in your estate will be awarded to your heirs. As such, it is important to determine whether there is sufficient liquidity in your estate to give effect to your wishes, and this is something your advisor should be able to assist you with. Once again, be sure to obtain the full names and ID numbers of any legatees you intend naming in your will. Bear in mind that many family members bear the same family names and initials, so be absolutely clear when naming your legatees.

Life policies and retirement funds

Generally speaking, it is advisable to make no mention of any life policies or retirement funds in your will as it can cause confusion when it comes to the beneficiary nomination. If you have nominated beneficiaries to your life policies, while the proceeds will be considered deemed property in your estate for estate duty purposes, the proceeds will be paid directly by the insurer to your nominated beneficiaries. Where you have any approved retirement funds in place – including pension, provident, preservation or retirement annuity funds – bear in mind that it is the trustees of these funds who make the decisions regarding the distribution of the funds in the event of your death.

ADVISOR PROFILE

Craig Torr

Crue Invest (Pty) Ltd

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All very good advice.

However if you feel unsure and while you are trying to decide who to appoint and get help from.

Go to Google read on the basic rules and write up something very simple and make sure someone has it.

Do not die intestate. That’s a real mess

Hi Craig–generally very good advice. I am currently revising my testament and one particular point had me going sideways as I was unsure of a point you made in the Retirement Funds section. Where a Living Annuity comes into the equation, such LA does not form part of the Testament in the sense that Trustees can change it. After reading your comments on the Retirement Funds which I thought may have included LA as well. I actually wrote to my investment company and asked their legal experts how they see it. Regarding purely a Living Annuity–the answer they gave me was—
a) gets given to the beneficiary as as new LA
b) gets given to the beneficiary as a lump sum
c) or a combination of the above.
Whoever may want this changed or amended may only do so via the courts which is a very expensive option.
Thank you for a good and well written article.

RULE #1: Establish an inter-vivos discretionary Double Trust structure right now – Family Trust for all paid off assets, Residence Trust for your own residence, Property Trust for investment properties; Business Trust for your business’ assets and so forth.

Rule #2: Move all assets into the trusts right now.

Rule #3: Appoint professional Trust administrators (NOT a bank, auditor or attorney)

Rule #4: You now own NOTHING so now draw up your will which is a simple wish list of how you want the trusts managed after passing.

This is by no means expensive if you consider that death taxes & fees are as high as 55% in South Africa if everything is in your name.

That means that by your 3rd generation, every single cent of your economic production over an entire life time no longer belongs to your family!

End of comments.

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