“Are we being good ancestors?” (Jonas Salk)

What do you plan to give your family this Festive Season? Now’s the time to think beyond the brightly wrapped gifts under the tree and get started on an estate plan which will leave your loved ones the lasting gift of financial freedom.

Estate planning involves a lot more than just executing a valid will, but let’s start off with a reminder that a will must always be your top priority.

Your will is the heart of your estate plan

You will have heard this many times before, but it bears repeating. Your will (“Last Will and Testament”) could well be the most important document you ever sign. Without executing a will, you forfeit your right (and duty) to decide how your assets will be distributed so as to ensure the future happiness and well-being of your loved ones. You lose your opportunity to choose an executor you can trust to wind up your estate professionally and efficiently. And no matter your age or state, it cannot wait – no one knows when the fateful day will dawn.

Most importantly, your will lies at the heart of your entire estate plan. It underpins and powers it. So, if you don’t yet have a will in place (or if your will needs updating) make your number one priority: “Book an appointment with my lawyer. Now.” Then ask your lawyer to draft your will to form the core of your overall estate plan.

What is an estate plan and why should you have one?

Your estate plan is your roadmap to creating wealth, to protecting it, and to transferring it to the next generation (or beyond). It is the only sure-fire way of ensuring your own comfortable retirement and of providing for the financial wellbeing of your loved ones after you are gone.

It incorporates your overall financial strategy, answering questions such as how you will save and invest, what investment options you will choose, how you will acquire assets, how you will provide for tax and other liabilities, how you will ensure effective succession planning in your business, how you will transfer your wealth to the next generation and so on.

Bring your family in early

It’s never easy contemplating one’s own mortality but in fairness to your loved ones make sure that as soon as they are old enough to participate, everyone is part of the process. Bring them in on everything you can and keep them in the loop when you are tracking progress or thinking of changing anything.

Questions to ask yourself

As the old adage has it “Failing to plan is planning to fail”. So plan. Start by asking yourself (and your family) these questions –

• What is our end goal?
• How much wealth do we need to build up?
• What is our target date for reaching that goal?
• How will we achieve it?

Now formulate your financial mission statement

Use your answers to those questions to formulate a “financial mission statement” and a detailed strategy to get there. As always with goal setting, break the big goals down into little ones, with target dates for achieving them and ways of tracking your progress.

Done and dusted! But wait, how will you actually transfer that wealth to the next generation (or beyond)?

Preserving your wealth for the next generation – and beyond

For many, it’s only realistic to plan one or two generations ahead. But whether your aim is to provide financial cover for just your spouse and children, or for your grandchildren as well, or (let’s aim high here!) for your great grandchildren and beyond, your estate plan should lay out a clear strategy for preserving your wealth down the generations.

Trusts are often recommended for generational wealth preservation and transfer, and whilst they have pitfalls and should only be considered with professional advice, they can certainly provide a powerful solution. In particular they could result in substantial estate duty savings for many generations down the line. Similarly, corporate structures (companies, company/trust combinations and the like) are often used for this purpose, particularly when trading businesses are involved. Donations during your lifetime may be suggested but beware the tax implications. Living annuities enable you to nominate beneficiaries to receive the benefits (with a tax incentive for them to leave at least part of the funds invested). There may be other niche solutions to suit your particular needs.

The bottom line

There are many complex decisions to be made and there is no “one size fits all” solution. Every family’s situation and needs will be unique. Every class of asset and every wealth-transfer vehicle carries with it particular requirements, benefits, risks and cost and tax considerations.

Professional advice specific to you and your family is essential!

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© LawDotNews

“We are such stuff / As dreams are made on, and our little life / Is rounded with a sleep.” (Shakespeare)

We aren’t comfortable thinking about our mortality, but death comes to all of us and it is our loved ones who will suffer if we don’t make plans to look after them whilst we still can.

First prize here will always be a full estate planning exercise, but at the very least put a will in place. There is no other way of ensuring that your loved ones’ interests are protected, that they inherit what you want them to inherit, and that your estate is wound up by an executor you trust to act with integrity and professionalism.

Formalities rule

Make sure that your will is a proper and valid one, professionally drawn in accordance with all the required legal formalities.

As we shall see below, our courts have only a limited ability to help out when requirements aren’t fully complied with, and that can be disastrous for your dependants.

A dying mother’s instruction to draw a will – too little, too late

A tragic High Court case from 2021 illustrates the dangers of delay –

• Dying of terminal cancer, a mother filled out a bank form headed “Will Application / Aansoek om testament”. In it she gave the bank instructions to draw her will.
• Her intentions were laid out clearly in the document – to leave everything to her minor child.
• Unfortunately she died the next day, before her will was drawn and signed. Her husband claimed that she had accordingly died “intestate” (without a valid will) leaving him to inherit a full “child’s share” with a minimum of R250,000. As their marriage was in community of property, the husband was already a 50% owner of all the marital assets, and this estate not being a large one the practical effect appears to be that he would likely inherit everything, and the child would get nothing.
• A group of relatives, trying to give effect to the mother’s wishes and to protect the child’s interests, asked the High Court to accept the bank’s instruction document as a valid will in terms of a section in the Wills Act which provides that: “If a court is satisfied that a document or the amendment of a document drafted or executed by a person who has died since the drafting or execution thereof, was intended to be his will or an amendment of his will, the court shall order the Master to accept that document, or that document as amended, for the purposes of the Administration of Estates Act, 1965 (Act 66 of 1965), as a will, although it does not comply with all the formalities for the execution or amendment of wills referred to in subsection (1).” (Emphasis supplied).

A cruel twist of fate

There was no doubt here that the bank form correctly set out the mother’s wishes. But there was a fatal problem – as the Court put it “…the content of the document in issue and the circumstances surrounding its execution indicate clearly that the deceased did not intend it to be anything other than a drafting instruction. There is nothing to support the contention that the deceased intended the document to be her will; everything points to the contrary.”

The form could therefore not be accepted as a valid will, and the child is left with little or nothing other than the Court’s expressed hope that the husband would if practicable “honour his late wife’s declared wishes regardless of the fact that due to a cruel twist of fate [the child] did not end up being entrenched in a will as she had intended.”

Without a doubt the Court would have come to the child’s assistance if it could have, but the clear wording of the Wills Act left it unable to do so.

Make a will – now!

None of us knows when Death will come knocking at our door. If you don’t already have a valid, updated will in place, make sure that “Make a Will” or “Update my Will” is at the very top of your priority list.

Your will could well be the most important document you ever sign, so getting professional advice and assistance is an easy decision here.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© LawDotNews

“A Legacy Letter is a way for you to share your values, life lessons, cherished memories, hopes for your family’s future, and anything else that is really important to you.”

Estate planning is key to ensuring that your loved ones are properly catered for after you are gone. Ideally go beyond the practical and financial issues and also leave something personal, something of yourself.

Follow these three simple steps to ensure that you don’t just leave behind assets, but also a lasting and valuable legacy –

1. Firstly, leave a valid and updated will (“Last Will and Testament”). It’s the core and the foundation of your plan to protect the people you care for.
2. Next, address the financial and practical aspects. Will each of your loved ones have enough to support them? Will there be enough cash in your estate to ride out the inevitable delays in winding it up? Are children and any other vulnerable family members protected? Have you taken advice on setting up trusts? Do you have enough life insurance in place? Have you left a full “Important Information File” to help your executor and your family take control of and finalise your estate?
3. Now go one step further – don’t just leave an estate, leave a legacy. Read “How to Preserve Your Life’s Lessons for Future Generations” on Mission Wealth for ideas on how to share a meaningful “Legacy Letter” with your family. Follow the links in that article to “Leaving a Legacy” and “The New Way to Leave a Lasting Legacy”.

Let’s close with these words of wisdom from that article: “The golden rule of all estate planning is: Don’t wait.”

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© LawDotNews

“Death is not the end. There remains the litigation over the estate.” (Ambrose Bierce)

Your will (“Last Will and Testament”) will always be the keystone of your estate planning, and a recent High Court decision sounds yet another warning to beware the “do your own will” concept. By not having his will drawn by a professional, a father inadvertently caused one of his children to be disqualified from inheriting her intended share, whilst her husband was disqualified from being appointed as executor.

Who is disqualified from inheriting?

Our law, in the form of the Wills Act, provides that no one (or their spouse) can receive “any benefit” under a will if –

• They signed it as a witness (unless it was also witnessed by two other competent people not receiving any benefit), or
• They signed it for the testator (even though in their presence and at their direction), or
• They wrote out the will or any part of it in their own handwriting.

“Any benefit” in this context means not just inheritance as an heir, but also appointment as executor, trustee or guardian.

A court can only allow such a person to inherit “if the court is satisfied that that person or his spouse did not defraud or unduly influence the testator in the execution of the will”. Importantly (as we shall see below), it is up to the heir to prove the absence of any fraud and undue influence.

As the Court put it: “This disqualification exists in order to prevent falsity and fraud, and to prevent ‘the exertion of undue influence over people in bad health or in feeble state of mind’. This is because the fact that someone who stands to benefit from the death of a testator in terms of a will, and who is involved in the drawing of the very will in which that benefit is declared, ineluctably invites speculation that he or she may have improperly influenced the testator in the framing of his final testament, more particularly so where the will is executed at a moment of crisis in the testator’s life.”

If the beneficiary would have inherited anyway under intestacy (i.e. if the deceased had not left any valid will at all) they may still inherit but no more than the value of their intestate share.

The facts of the family fight

• In poor health and realising he needed a will, the testator had asked a friend to help him draw one. The friend produced a typed will, in terms of which each of the testator’s three children (from two different marriages) received one third of his estate. In addition a son-in-law was appointed as executor.
• The will was, said the Court, “slightly unusual” in that it included a narrative on the father’s difficulties with his third wife, but the real problem (as it turned out) came from the fact that annexed to it was a four-page typed schedule of 69 assets with spaces against each of them for insertion of the name of the child to receive that asset. Critically, those names were filled in by hand by one of the daughters – on, she said, her father’s instructions.
• The will and schedule were properly signed and witnessed, and the father died five days later.
• As is regrettably all too common when a deceased leaves behind children from more than one marriage, a fight developed between them, with a claim that the schedule of assets did not reflect the father’s wishes through either fraud or undue influence.
• The end result (much bitter dispute over facts later) the Court held that the daughter who had completed the names on the schedule by hand was disqualified from inheriting any more than her share on intestacy, and her husband was disqualified from being appointed as executor.

The bottom line

All that dispute, uncertainty and legal cost could have been avoided had the father called in a competent professional to draw his will for him (preferably long before his illness struck). Don’t make the same mistake!

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© LawDotNews

“Someone’s sitting in the shade today because someone planted a tree a long time ago” (Warren Buffett)

Whilst the first and most important step in your estate planning is always to have in place a professionally drawn and regularly updated will (“Last Will and Testament”), there is another aspect which demands your urgent attention, particularly now…

What will your family live on while an executor is being appointed?

It is essential that you provide for your family’s ongoing financial needs during the process of winding up your estate, because all your bank accounts will be frozen as soon as the bank learns of your death, pensions and the like take time to transfer across, and your assets generally will be tied up in your estate and inaccessible to your loved ones.

The executor of your deceased estate does have the power, provided of course that your estate is solvent and has sufficient funds, to release money to your dependents and to make advances to your heirs – but only after being formally appointed. Which brings us to…

Delays in the Master’s Office are getting worse

No matter how professional and efficient your nominated executor may be, he or she is powerless to act until the local Master of the High Court (“Master’s Office”) issues the necessary “Letters of Executorship” (“Letters of Authority” in smaller estates), so applying for them is always a priority for those nominated.

The issuing process has never been a quick one, but delays have worsened substantially in the past few years with media stories abounding of major problems in Master’s Offices around the country and reports of “unprecedented backlogs” and “an almost total breakdown in services”.

The recent ransomware attack on the Department of Justice and Constitutional Development is just the latest in a litany of woes afflicting these offices – pandemic-related lockdowns, office closures and remote working, staff shortages and a surge in the number of deaths, a Special Investigating Unit investigation into allegations of misconduct and corruption in some offices (with two officials suspended so far and many others reportedly in the firing line) – the list goes on.

Nominated executors are complaining of inordinate delays in being appointed, and of extreme difficulty in communicating with Master’s Office officials by phone, email or even by personal office visits.

Here’s how to fund your loved ones in the interim

The bottom line is that you will leave your grieving family dealing with financial worries at the worst possible time if they have to wait for your chosen executor to be appointed.

You need to find another way of giving them immediate access to funds, enough to cover their living expenses and any new expenses like funeral costs.

There are a few tried and tested ways of providing this cash flow, with separate bank accounts and investments being probably the simplest and most quickly accessible options. Consider also other assets in family members’ own names, family trusts, businesses held in entities that will survive your death, and so on. Another popular choice is life/endowment policies, TFSAs (Tax Free Savings Accounts) based on a life product, living annuities and the like – be sure to nominate beneficiaries for these products otherwise they will fall into your estate and not be paid out to your loved ones direct. Be certain that your loved ones know what measures you have taken and how they can access these funds quickly and easily.

Your own situation will be unique and you need to structure everything correctly, so there is no substitute for professional advice here!

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© LawDotNews

“Don’t fear death, plan for it” (Anon)

Amazingly, here we are in the middle of a deadly pandemic yet still some 70% – 80% of working South Africans are said to have no will in place.

That’s crazy for two reasons –

1. Without a will your loved ones are exposed   When you die your grieving family must start learning to cope without you, don’t expose them to the added uncertainty and worry that they will face if you haven’t left in place a valid will (often referred to as a “Last Will and Testament” to distinguish it from a “Living Will”).Without a will, your estate will be wound up in accordance with our laws of “intestate succession”. You have forfeited your right (and duty) to ensure that your loved ones each receive what they need from your estate, that your children and their inheritances are properly looked after, and that your estate is wound up by someone you trust.
2. Estate planning is essentialEstate planning in this context is the process of arranging your financial affairs in such a way that the legacy you leave is as large and as well-structured as possible. This needn’t be overly complicated or expensive, and everyone should have their own estate plan regardless of age, health or financial position. In a nutshell you are looking to maximise assets, to reduce estate costs and the taxman’s cut, and to streamline the process of winding up your estate so your heirs are paid out as quickly as possible.
   
   No will means no estate plan, and no estate plan means unnecessary worry, cost and delay for your grieving family.
   

 How to protect your family with a 15-point checklist

Use this checklist to make sure you provide for your family’s happiness and financial wellbeing long after you are gone –

1. Make a will: See above – a will is a no-brainer! The consequences of dropping the ball on this one are so serious, and it is so easy to make a proper will, that endangering your family’s security and happiness by not having one just makes no sense at all.
2. Don’t Procrastinate: Procrastination is human and, when it comes to contemplating one’s own mortality, entirely understandable. But it’s not forgivable – death is inevitable, and absolutely no one, no matter how healthy or young, can assume that they will be alive tomorrow. All too often death comes without knocking, so don’t fear it – plan for it. Now.
3. Beware the DIY route: As tempting as it may be, going the DIY route (online will templates are easily found) is a bit like packing your own parachute for your first jump without assistance – great if you are an expert, but for most of us getting professional help makes a great deal more sense. It’s not you but your loved ones who have to live with any mistakes you make now!
4. Ensure validity: Your will to be valid must comply with all legal formalities, and although the courts have a discretion to declare a “defective” will valid that process is uncertain, slow and expensive. Rather get it right upfront.
5. Avoid ambiguity and dispute: Any lack of clarity in the wording of your will is fertile ground for dispute, and our courts are regularly called upon to sort out bitter, divisive and expensive family feuds that could have been avoided with a professionally drafted will setting out clearly and concisely exactly what the deceased’s wishes and intentions were. 
6. Foreign assets: If you have assets in another country, you may need a foreign will as well as a South African one – ask a professional.
7. Consider business continuity: If one of your assets is an operating business, or an interest in one, put a continuity plan in place so it can be carried on without interruption.
8. Review your will regularly: This one is easily (and commonly) overlooked. You finally get a will in place and think “great, that’s it then”. Not so! Personal circumstances change, laws change, taxes change – diarise to review and if need be update/replace your will no less than annually.
9. Choose your executor wisely: This can be make or break for your family. Choose someone you can depend on to wind up your estate quickly and professionally.
10. Pay special attention to your minor children’s needs: Firstly, this is your chance to leave each of your children what they will need financially. You could split your estate in equal portions, or you may decide to differentiate based on each one’s situation and needs (a tip here to avoid a family feud – explain to everyone upfront the reason for your decision). Now is also where you nominate your choice of guardian for your minor children – don’t leave that choice to others! Ensure also that your minor children’s’ inheritances are held in trust for them, with your choice of trustees.
11. Reduce costs and taxes: To maximise what your heirs receive you need to look at all the costs your deceased estate will have to pay out. A professional can guide you through the process of minimising estate duty, executor’s fees and costs (beware of false economy here – “cheap” could also be “nasty”!). Taxes – income tax and capital gains tax in particular – can take a sizeable chunk of your estate without proper planning.
12. Nominate beneficiaries whenever you can: Where you are able to, nominate beneficiaries for your life policies, annuities, tax-free investments etc to ensure payout directly to chosen recipients, without all the delay inherent in the process of winding up your estate and in many instances reducing costs and taxes. Take professional advice here – different rules apply to each of these categories.
13. Plan for liquidity issues. Plus, what will your family live on? You don’t want the executor to be forced to sell an asset (your house or business perhaps) that you have left to a particular heir, but that will happen if there is insufficient cash in the estate to meet the various costs and taxes of winding it up. Similarly, your bank accounts and the like will be frozen once the bank becomes aware of your death, so you need to find another way to ensure that your family has cash to live on whilst your estate is being wound up (it can be a lengthy process with all the red tape). Separate bank accounts, life policies (see above), family trusts and the like might work in your particular circumstances, but specific professional advice is key here.
14. Leave your loved ones an “Important Information” file: This is critical. There are too many heartbreaking stories of grieving spouses and children floundering in a sea of confusion and worry because they have no idea where the deceased’s will is, how the estate is structured, what assets there are, what debts, how to access password-protected computers, where important documents are kept, who they should contact for help. Sometimes they are even at sea as to what assets they have in their own names. The list is endless.What should be in the file? In short, everything that your survivors might need, starting of course with details of where your will is.  Put yourself in their place – what would you need to know if you were the survivor? What information and documents would make it easier for you to get on with life?  Once again, professional advice and assistance will save your loved ones a mountain of trouble and concern.A last thought on this aspect – have “that conversation” with your family as soon as possible. It’s not easy but they deserve no less. Ideally bring them in at the start of your planning and the creation of your “Important Information” file. At the very least they must know about it, where it is and how to use it.
15. What else? No generalised estate planning checklist can ever be comprehensive. Tailor your plan to your particular needs. Brainstorm, ideally with family and professional input, what else needs attention.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© LawDotNews

“No matter how much you’ve been warned, Death always comes without knocking” (Margaret Atwood)

No one wants to contemplate their own passing, but the reality is that sooner or later it is inevitable, and particularly in these dangerous times we need always to be prepared.

The loss of a loved one is always distressing. It can however be compounded by the challenge of dealing with their assets. 

Few people appreciate all the costs involved in settling an estate. Understanding these expenses and planning for how to deal with them can make a big difference to those left behind.

Executor’s fees and costs

Every estate must be wound up by an executor. Ensure that in your will you nominate an executor you can trust to act with integrity, professionalism and speed.

An executor can charge a maximum fee of 3.5% plus VAT. That equals 4.025% of the value of the estate. Depending on the size and complexity of your estate this fee may be negotiable. 

The executor will also incur costs such as advertising to find any outstanding creditors, bank charges, accounting fees, conveyancing on the transfer of property and paying the fees due to the Master of the High Court. Together, these could run into tens of thousands of rands.

Taxes and estate duties

The South African Revenue Service (SARS) levies 20% estate duty on the value of any estate, but there is no estate duty payable on an estate with a net value below the R3.5 million abatement (allowable deduction). Any amount above R30 million will be taxed at 25%. An estate worth R40 million will therefore have to pay estate duties of R7.8 million (R5.3 million on the first R30 million, after the R3.5 million abatement, and R2.5 million on the next R10 million).

These taxes will not, however, be paid on any assets left to a surviving spouse. In that case they effectively ‘roll-over’ and will only be charged upon the spouse’s death.

The estate will also have to pay capital gains tax on any assets that are sold. SARS will also conduct a final income tax assessment.

In addition, South Africans need to consider that if they have assets in other parts of the world, they may be liable to pay estate taxes in those countries as well. There are double taxation agreements in place with many countries that prevent most assets from being taxed twice, but where taxes elsewhere are higher than in South Africa, the estate will still have to pay the difference. Inheritance tax in the UK, for instance, is 40%.

Outstanding debt

The estate will have to settle any debt such as credit cards, loans, or bonds on property. Interest on these debts does not stop accruing when someone passes away, so it is best to deal with them as early as possible.

It is most critical to consider how to handle home loans, especially if they are held over a property in which surviving family members are still living. Sometimes these individuals may not qualify to take over the bond due to their own financial position, which means that the house may have to be sold if the debt can’t be settled.

Being prepared – check what cash the estate will have 

Even though an estate may have sufficient assets to meet all of these expenses, it can still be a problem if it doesn’t have enough available cash. That is because the executor may have to sell assets to free up money.

This not only leads to potential extra costs and taxes but can be traumatic if something like a house where a loved one is living or a car that someone needs for transport has to be disposed of. This is why it is important to prepare an estate to make sure that there is enough cash available.

One way of doing this is to take out a life insurance policy that will pay cash into the estate. This will ensure that your family members aren’t left with a potentially major financial burden and face additional stress after your death.

The above is of necessity just a summary of the cost considerations involved, so speak to your attorney about how your will and estate are structured and how you can plan to meet all the costs.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© LawDotNews