The estate planning consequences of dying without a valid will can be far-reaching and can result in consequences that the deceased neither intended nor foresaw. Without a valid will, your estate will be distributed to your closest relatives in a pre-determined order which could result in family members unduly benefitting from your estate. However, over and above the unintended consequences of the distribution of your assets, intestacy can impact almost all areas of estate planning. If you haven’t yet made time to draft a valid will, consider the following:
Your matrimonial property regime
One of the first factors to consider is the impact of your matrimonial property regime on intestate succession. Where the deceased is married in community of property, the rules of intestacy will only apply to his 50% of the joint estate. Where the deceased is married with the inclusion of the accrual, the rules of intestate succession will only apply after the application of the accrual claim – bearing in mind that this could potentially include a claim against or in favour of the deceased estate. Where the deceased is married out of community excluding the accrual, these rules will apply to the deceased’s separate estate.
Where a parent dies, the other surviving parent will be the legal guardian of the minor child. However, where a person dies intestate and there is no other surviving parent, the state will appoint a guardian for the minor child, which is hardly ideal. Having a will enables a testator to nominate a guardian, and an alternate guardian, for their minor children to ensure that the most appropriate person (or people) is chosen to care for the minor children.
One of the benefits of drafting a will is that you can nominate a trusted person or fiduciary company as executor whose function it will be to administer your deceased estate. If you die without a will, the state will appoint an executor to wind up your estate, keeping in mind that this could be a complete stranger with no understanding of your family dynamics or personal circumstances. While your intestate heirs can nominate a person to be appointed as executor, the onus remains on the Master of the High Court to confirm the appointment. Family dynamics are rarely simple and reaching an agreement on who should be nominated as executor can cause unnecessary delays in winding up the estate. Another consideration is that a testator is able to negotiate lower executor’s fees when drafting their will, whereas in the absence of a will this cost cannot be negotiated.
Intestate succession laws
The laws of intestate succession can be broadly summarised as follows:
- Spouse, no dependants: If the deceased leaves a surviving spouse and no dependants, the spouse will inherit his entire estate. In this regard, it is important to note that this includes couples in a same-sex civil union, a spouse in a religious marriage, and polygamous spouses in terms of customary marriages. Whereas cohabiting couples were excluded from inheriting in terms of the laws of intestate succession, a judgement in the matter of Mwanya vs the Master of the High Court concluded otherwise. In 2020, the court ruled that the Intestate Succession Act which precluded cohabitants from inheriting was outdated and that heterosexual couples in a life-long relationship should be protected, although this is still to be confirmed by the Constitutional Court.
- Dependants, no spouse: Where the deceased leaves behind only children, then his children will inherit his deceased estate in equal shares.
- Spouse and dependants: If the deceased leaves behind a spouse (or spouses, in the case of polygamous marriages) and children, then the estate will be distributed by determining the value of a child’s share. A child’s share is calculated by adding up the value of the deceased estate and dividing it by the number of spouses and children of the deceased. The surviving spouse (or spouses) will receive a child’s share or R250 000, whichever is the greater. Thereafter, each child will receive an equal share of the deceased estate.
- Parents only: Where the deceased has only surviving parents, then his parents will inherit his entire estate.
- Siblings only: If the only surviving heirs are the deceased’s siblings, then they will inherit the deceased estate in equal shares.
It is important to remember that the principle of per stirpes applies in the case of intestate succession. For instance, where the deceased leaves children but no spouse, the children will inherit the estate in equal shares. Where one child has died before the deceased and left behind children of his own, those children will inherit from the deceased per stirpes through representation.
The absence of heirs
Where a person dies leaving no heirs, the assets in his estate will be forfeited to the state and placed in the Guardian’s Fund for safe-keeping for a period of 30 years. If no heirs come forward during this period, the money will become the property of the state.
The distribution of immovable property in the event of an intestate death can result in estate planning problems. Let’s take the example of a deceased who was married in community of property and leaves behind his spouse and two minor children who live in the family’s primary residence. The deceased’s share of the joint estate will be distributed between the surviving spouse and children using the ‘child’s share’ calculation. This means that each child will effectively inherit a share of the primary residence. If the surviving spouse needs to sell the property for whatever reason, she will need to obtain the permission of the Master who acts on behalf of the minor children. Similarly, where the fixed property is inherited by multiple heirs, it may be difficult for the heirs to reach an agreement on how that asset should be dealt with, and this can cause unnecessary delays in the estate administration.
Where the testator owns fixed property in a foreign jurisdiction, it is vital that he drafts a foreign will to deal with those assets in the event of his death. Many civil law jurisdictions have what is referred to as forced heirship rules which provide inheritance rights to family members. Generally speaking, a South African will cannot override the rights of family members to inherit in terms of a foreign jurisdiction’s mandatory succession rights.
Exclusions from intestate succession
It is important to note that there are certain assets that are not subject to the rules of intestate succession. In the case of retirement funds – whether a pension, provident and/or retirement annuity funds – keep in mind that these benefits will be distributed amongst your heirs and/or nominees in terms of Section 37 of the Pension Funds Act. This means that the fund trustees will distribute the benefits to your financial dependants in accordance with their respective needs. If you have a living annuity in place, the proceeds of such an investment fall outside of your deceased estate and will be distributed to your nominated beneficiaries. Similarly, the proceeds of any domestic life policies will be paid directly to the beneficiaries nominated on the policy.
Estate duty and taxes
An appropriately structured will and estate plan can be very effective in reducing estate duty and other taxes. On the other hand, an estate that is wound up according to the laws of intestate succession will not be able to benefit from such structuring. This could also result in cash shortfalls in the estate which could, in turn, lead to assets being sold in order to cover the shortfalls.