When a loved one passes away from a sudden illness it can be traumatic for the remaining family, especially if the deceased’s financial affairs are not in order. With over 66,000 Covid-related deaths being reported by mid-July 2021 in South Africa, this situation is more of a reality than many would like to believe and spouses, children or other family members may be left with a burden if a Will is not in place, or up to date. And while a Will can be downloaded for free or purchased at a local stationer, it is strongly advised to consult with an attorney to ensure that the structuring of the assets is the most beneficial to the beneficiaries, and that it is correctly worded to achieve the outcome you desire. Otherwise it could end up costing those left behind financially and emotionally for years to come, while your wishes may not be honoured. Tamasen Maasdorp answers common questions about how best to manage your financial affairs before you die.
Why would you use an attorney?
Estate duty remains everyone’s biggest fear when it comes to dealing with ones Will and their estate. Estate Duty is a tax of 20% levied on your estate (25% on estates larger than R30 million). With effective estate planning, this tax is essentially optional. Your attorney would be able to assist with effective estate planning strategies to best administer your estate and avoid paying the tax man all of your lifesavings.
There are also instances when you would need more than one Will for your estate. Should you have assets all over the world, it could be subject to multiple jurisdictions and tax treatment thereof. Attorneys would then advise on a different Will to deal with your offshore assets based on which areas your assets are situated.
“In South Africa, for instance, there is far greater freedom in terms of who you can leave your estate to. You may wish to leave your whole estate to the SPCA and not your children or spouse, if applicable. These family members have no claim on the estate, and if they don’t inherit anything, there is nothing that they can do about it. In other countries, this doesn’t always apply as there are strict inheritance laws regulating heirship. As such, it’s key to understand what applies where and how that will affect both the deceased and their next of kin,” says Maasdorp.
What happens if I don’t have a Will?
If you don’t have a valid Will when you die, then your estate will devolve according to the Intestate Succession Act, 1987. Your estate will be divided amongst your surviving children, spouses and parents according to a set formula, in order of preference and on an equitable basis. Spouses come first, followed by descendants of the deceased, parents and siblings.
“Dying intestate can cause all manner of issues, as there are often questions around who should inherit what from the estate. A Will cuts through this confusion and is clear on who the beneficiaries are and what percentage of the estate, after duties apply, they are eligible for.” When there is a property involved, and you are married in community of property, 50% of the net value of the house will be divided among your heirs, while the surviving spouse retains the other 50%. If you fail to plan your would-be beneficiaries could suffer the consequences.
What if my spouse and I pass away, how will my children access my estate?
Guardianship is another key area to consider in your Will. This is a legal arrangement made with a third party who will take care of your children should you and your spouse die before your children reach the age of majority. During such time, your guardians would assist in administering the estate and ensure that the minor children are taken care of. In certain circumstances, an attorney would go as far as advising that families have a separate Will specifically to deal with guardianship.
Whomever is elected as guardian of the minor children should be a trusted friend or family member. That guardian would be eligible to be paid for managing your child/rens’ estate, but this needs to be set out in your Will, or they will be paid in accordance with the tariff set by the Master of the High Court. “If no guardian has been appointed before you die, all funds left to your child/ren will be paid over into the government-managed Guardian’s Fund and managed by the state. This is something you want to avoid so it is key to include your designated guardian/s in your Will (you can have more than one),” advises Maasdorp.
What is a trust and when should I use one?
There are two main types of trusts which attorneys often deal with, namely intervivos trusts and mortis causa trusts.
If you own a company, a home or commercial property, they can be placed in an intervivos trust – which is a trust that you set up in your lifetime alongside an independent trustee and all assets in this trust will not form part of your estate. This is often used to protect assets from potential liquidation or sequestration during one’s lifetime. The trust is not subject to Estate Duty so it is a good vehicle to use if you have assets outside of your personal estate.
The other option of a mortis causa trust is most commonly used in South Africa for estate planning. Here, the person will draw up this trust in their Will which will become the trust deed. In the Will, it will state that it is your wish to leave all assets to the trust and stipulates the terms and conditions which apply to the trust. “This is often done when children are still minors and they could inherit but instead the funds are only made available when they are older. It’s a way of protecting your legacy from their youth, as the more mature your children become, the more likely they will preserve the inheritance,” says Maasdorp.
What is the difference between a Living Will and a Letter of Wishes?
Besides a Will, within which guardianship and trusts are stipulated, you can also draw up a Living Will. Much like you may have seen in Grey’s Anatomy, this is when a person requests that they not be resuscitated if they are brain damaged and are being kept alive by artificial means. This decision is made in advance. It is not included in your Will, and a copy of it should be given to your doctor and your family while you are still alive in order to affect your wishes before you die. This is helpful as often a person’s Will is only read after they have passed on.
Lastly, you could also write a Letter of Wishes to express your intention regarding certain funds and how they should be administered. Although a Letter of Wishes is not binding, it is likely to be followed at the discretion of the Executor.
“In these difficult times, sudden deaths have been brought much closer to home due to COVID19. It is therefore advisable that you plan now, no matter the size of your estate, and seek legal advice when drafting a Will. This will not only give you peace of mind, but will protect your beneficiaries’ inheritance and your legacy,” says Maasdorp.