Estate Planning & your Last Will and Testament
1 The Importance of a Will
1.1 In the absence of a properly executed Will a deceased persons estate will be distributed under the laws of intestate succession.
1.2 By way of some examples, if you have no validly executed Will and if you have:
- a spouse but no children, your spouse would inherit your entire estate.
- children and no spouse then your children would inherit your entire estate in equal shares.
- both a spouse and children at the time of your death the child will inherit the greater of a child’s share or an amount fixed by the Minister of Justice, currently R125 000.00. A child share is determine by dividing the value of the intestate estate through the number of surviving children of the deceased and the deceased children who have left issue, plus the number of spouses who have survived such deceased. In the case of a marriage in community of property, one half of the estate belongs to the surviving spouse and, although it forms part of the joint estate, will not devolve according to the rules of intestate succession.
- neither descendants nor a spouse, your parents will inherit in equal shares.
- Although the Intestate Succession Act is silent on this point it can be accepted that the State would take the estate of a deceased person if there are no blood relatives. Whether or not this would take effect immediately or after 30 years is not clear.
In view of the above it is imperative to plan your estate properly, failing which amongst other things:
- your loved ones may be left in a state of confusion and stress with regards to determining the complex issue of administering your deceased estate;
- undesirable persons may inherit from you;
- there will be a delay in the administration and probable increase in costs;
- money for the benefit of minor children may be held in the Guardians Fund, instead of being administered in terms of a trust created for the purposes of maintaining such heirs.
2 Factors to consider when preparing your Will
2.1 Trustees and Guardians
In the event that you have minor children, you can create a trust in your Will which provides that your children’s inheritance be administered in trust until they reach the age of majority (or any later age that you may choose). Prior to this point trustees elected by you would manage the assets for the benefit of your children.
The appointment of a guardian will only take effect should both parents of a child become deceased. The suitability of the guardian in both the financial and personal sense needs to be evaluated. Further, prior consent of the guardian is advisable.
2.2 Maintenance claims against your estate
2.2.1 Surviving Spouse
You may be obligated to pay maintenance to your surviving spouse. These obligations may be placed on your estate as well and such spouse could claim against your estate. Factors to be considered in the granting of such maintenance would be amongst other things, the age of your spouse, duration of your marriage, his or her prospects of finding employment and the extent of your estate.
In terms of our laws, you have an obligation as a parent to look after your children – until they are self-sufficient and not necessarily until they’re 18. The fact that your child may have been born out of wedlock will not stand in the way of a maintenance claim against your estate.
A creation of a testamentary trust can assist with maintenance demands. By placing a capital amount in a trust that can generate sufficient income, the maintenance claim will be served and the capital also protected for your eventual heirs.
2.2.3 Accrual claims
If you and your spouse are married under the accrual system, the spouse whose estate accrues the least in value during the marriage will have a claim against the spouse whose assets grow the most. Accrual claims are handled just like any other claim against the estate of the deceased.
2.3 Living together
In the event that you live together and you and the person you are living with accumulate assets you should account for such assets comprehensively and determine how these assets will be inherited. You can prepare separate Wills in this regard however both parties’ intention should correspond properly and be recorded accurately.
2.4 Offshore assets
Your Will executed in South Africa may not meet the requirements of a foreign country in which your assets are located. Further these offshore assets will form part of a foreign estate and it will be necessary to have two Wills, namely one to deal with South African assets and one to deal with offshore assets.
2.5 Funeral arrangements/cremation & organ donation
If you have specific wishes regarding the disposal of your remains and/or you want to donate your organs you are best served communicating this to your next of kin and not necessarily rely on your Will to communicate this after your death, as it is likely that the contents of your Will may not be known to your family at the time of the disposal of your remains. Further, there is specific legislation in place regarding the donation of human organs and tissue transplants and the appropriate organisation within the residential area of the deceased should be approached during his or her lifetime.
2.6 Exclusion of an insolvent heir
A testator is naturally reluctant to contemplate the prospect of his/her estate being used to settle the claims of creditors of a beneficiary, and where this is a possibility, it is advisable to insert a clause to the effect that the portion which would have devolved upon an heir who has been declared insolvent will go to an alternative heir or heirs.
2.7 Exclusion from Collation
Descendants who are heirs are obliged to account to the estate for certain kinds of gifts received during the lifetime of the deceased, and their benefits from the estate will be adjusted accordingly. Where a testator wishes to avoid the effects of collation (which can be highly disruptive) a specific clause to this effect should be inserted.
2.8 Estate liquidity & capital
2.8.1 In the administration of an estate the order of distribution would be as follows:
22.214.171.124 Creditors of deceased estate must be paid;
126.96.36.199 Then legacies (special bequests);
188.8.131.52 Then residue after payment of legacies and liabilities (including estate duty)
A carefully drawn up Will counts for nothing if there is insufficient liquidity to give effect to the intentions of the testator. To this end it is likely that assets may have to be sold which can have negative cost implications.
2.8.2 Analysis of income needs on death
A persons capital accumulated during his lifetime should be sufficient to replace his income earning capacity failing which his dependants may be forced to change their standard of living. Essential to this enquiry is the deceased’s marital regime, provisions of the Will, nature and value of assets in the estate, personal means of the surviving dependants and provisions made for them outside of the deceased’s estate, such as pensions, annuities and life assurance.
Life assurance policies play an important role in estate planning and ensuring that there is liquidity in the estate and sufficient capital for the maintenance of dependants. After the happening of certain circumstances such as marriage, birth of a child and divorce one needs to assess these policies and determining the required income needs and liquidity.
3 The importance of regularly reviewing a will
In the event of the death of a spouse in a joint will, the surviving spouse must have a new will drawn up as soon as possible, because the joint will is that of the first-dying only, as well as of both spouses if they die simultaneously or soon after each other within the period provided in the will.
Unless specific provision is made, the joint will therefore does not cover the death of the surviving spouse. The regular and sometimes speedy reviewing of a will is very important and in some cases extremely urgent. Changes in, for example, your marital status, the addition and/or omission of heirs and the changing of guardians, executor and trustee, are a few examples of cases that could be extremely urgent. Changes in assets that have been specifically bequeathed, such as a particular property, as well as new additions to your assets, necessitate a revision of your will. New legislation, amendments to legislation and new estate planning techniques are other reasons why it is very important for people to whom these might apply, to review their will and their estate planning.
4 The Impact of Divorce
In the event that you divorce your spouse you should revise your existing Will as soon as possible due to the fact that Section 2B of the Wills Act No 7 of 1953 requires that you amend your Will within 3 months of the date of such divorce, failing which it will be presumed that you intended your divorced spouse to inherit in terms of your Will. During the aforementioned 3 month grace period your Will shall be implemented in the same way as it would have been implemented if the previous spouse had deceased you before the dissolution concerned, unless it appears that the testator intended to benefit his previous spouse notwithstanding the divorce.
- The requirements for a valid Will
- The Testator/Testatrix must be over the age of 16 and he or she must be competent to understand his or her actions in executing the Will.
- All Wills executed after January 1954 must be hand written, typed or printed.
- The testator/testatrix must sign the Will at the end thereof in the presence of two or more witnesses who are over the age of 14 and who are competent to give evidence in a court of law.
- Further the witnesses must attest and sign the Will in the presence of each other and the presence of the testator/testatrix.
- If the Will consists of more than one page, each page other than the page on which it ends must be signed by the testator/testatrix anywhere on that page and at the end of the Will on the last page (i.e. not leaving a gap between the last clause of the Will and the spaces provided for signature).
Intestate Succession Act 81 of 1987
Government Gazette 1188 18 March 1988
Administration of Estates Act 66 of 1965 s72(1)(a)
Wills Act No 7 of 1953
Butterworths – Estates