Avoid the heartache and headache!

This year, National Wills Week is from 17th to 21st September, and is a time when participating attorneys in South Africa will draft basic wills for free. If you haven’t already written a will, this presents the perfect opportunity to do so before it’s too late.

Writing a will could make an enormous difference to your family in the future, and it is an easily achievable goal that will give you the peace of mind that you can take care of your loved ones after you’re gone.

Lots of people put off writing a will because they mistakenly believe that it is a difficult task. However, the process doesn’t have to be complicated if you work with a professional who has the expertise to ensure that your will covers all key factors and complies with all your wishes; then is correctly drafted, witnessed and signed with no room for misinterpretation.

It is important that the person who drafts your will also has the necessary knowledge to ensure that it meets all legal requirements, so that your will is valid. A practising attorney is a qualified law professional who can also advise you on any problem that may arise.

Will I, won’t I?

If you have made a valid will, once you pass away, your assets will be disposed of in line with your wishes. This division of your estate is called “freedom of testation”.

On the other hand, if you depart without leaving a will, you could cause a lot of unnecessary heartache and headaches to the people you leave behind. If you don’t leave a valid will, your assets will be distributed according to the provisions of the Intestate Succession Act. This generally ensures that your possessions are transferred to your spouse and offspring, but certain problems can easily arise if you die intestate.

The intestacy laws in South Africa at the time of your death will dictate what happens to your estate and, given the nation’s instability, there is no guarantee that they will be as fair as the provisions in place now. In a country where corruption, poor governance and deficient administrative systems are order of the day, would you be happy knowing your hard-earned money could easily end up lining the wrong pockets?

Without clear directions as to distribution, it is likely that at least some of your assets will not go where you would like them to. Not only may they not be left to the people of your choice, but a lack of instructions could also cause conflict amongst your loved ones at an emotionally vulnerable time. Without a will, it may take a long time for an executor to be appointed, and it can result in additional and unnecessary costs. A failure to do any estate planning also means that your estate may be subject to a hefty tax bill, which you have the power to lessen considerably if you seek professional advice and make sufficient preparations before you pass.

Never underestimate the importance of drafting a will. And, once you have made one, you should be sure to review and update it at least once a decade, as well as after any significant life changes, such as having a child or getting married/divorced.

Don’t hesitate to arrange a meeting if you require more information, or wish to discuss your financial situation before taking advantage of this year’s National Will Week by drafting a basic will with the help of a participating attorney. Just be sure to contact your local provincial law society beforehand to check whether an attorney is reputable.

(Information gathered from lssa.org.za and infinitysolutions.com.)

In the wake of the 2018 budget, there are recent changes that could affect your estate, especially with regards to paying VAT, Master’s fees and estate duty.

Here’s a quick snapshot!

The good news is that executor’s fees remain at 3.5% of your total assets, plus VAT. However, as you’re likely all too aware by now, VAT has increased from 14% to 15%, which means that if your executor has registered for VAT, you will feel the effect of this hike.

The Master’s office has also changed their fee to work on a sliding-scale structure. Whereas previously, the maximum fee was ZAR600, you could now pay up to ZAR7,000.

If your total estate is valued at over ZAR30 million, you will be affected by a 5% increase in estate duty and are now liable to pay 25%. However, if your estate is less than this amount, you will still only be subject to pay 20%.

In light of these recent changes and any increases that may affect you, here are 6 estate planning tips that can help you to protect your assets and potentially save you money:

1. Update your will and review beneficiaries

Whether you have children or not, one of the most important parts of estate planning is to make sure you have a will, which is a legally binding way of nominating beneficiaries and guardians. Once you have written a will, it is important to update it when the need arises. As the years go on and your situation changes, you may wish to change the names of beneficiaries in your will, life insurance policies, trust deeds and group life funds.

It’s also important to make sure that your loved ones know exactly where to locate all necessary documents in the event of your death.

2. Make a living will

It’s a good idea to draw up a living will, which is written evidence of your wishes with regards to the type of medical care that you would (or would not) want in the event that you don’t have the physical capacity to communicate your needs. This is especially important in cases where there is no hope of any sort of significant recovery.

3. Appoint guardians and trustees for minors

Deciding who would raise your children if you and your partner both die is a difficult task that many parents avoid doing. However, it is essential to nominate a legal guardian for any minors in your will in case there is ever a tragedy that would leave them orphaned. The legal guardian/s that you choose for your kids will be responsible for looking after them until they are 18 years old, so it is not a decision to be taken lightly, and there are several factors you should consider, such as the guardian’s age, location, financial situation, and existing responsibilities.

You can also set up a trust in your will so as to provide an income and capital for your children, and you can make additional provisions for their guardians. Furthermore, you should appoint a trustee in your will — their role is to administer your children’s inheritance to them, while a guardian’s role is to care for them. It is crucial that you appoint a trustee for inheritances by minors, as in the absence of such provisions in a will, your child’s inheritance will be kept until they reach adulthood in the Guardian’s Fund, which falls under the administration of the Master of the High Court.

4. Make donations

Donations tax still remains at 20% if you donate less than ZAR30 million in a tax year, and increases to 25% for donations exceeding this amount. However, you can donate up to ZAR100,000 each tax year to children or a trust, without needing to pay any donations tax; and there is no limit on the amount that you can donate to your spouse tax-free.

You can reduce your estate and avoid significant estate taxes by making donations. There are various other ways to limit certain taxes, such as estate duty and capital gains tax, depending on your family situation and the size of your estate, so don’t hesitate to arrange a meeting to discuss the options.

5. Secure your offshore assets

If you intend to keep any offshore assets, it means you have a foreign estate that needs to be administered too. Each country has its own legislation when it comes to dealing with inheritance, and a South African will won’t necessarily meet another country’s legal requirements, so you’ll need to execute a separate will in the jurisdiction that deals with the assets.

6. Get life insurance

When it comes to winding up an estate, many people are faced with liquidity issues, which is when there is not enough money to settle the estate’s liabilities — be that a bond, vehicle finance, taxes, executor’s fees or conveyancing costs.

If this is the case, your loved ones could be forced to sell assets, such as the family home, to cover the expenses. For this reason, it is important to get comprehensive life insurance, which will provide estate liquidity in the event of your passing.

(Information gathered from findanadvisor.co.za and proactivewillsandestates.co.za.)

Happy Women’s Day for tomorrow!

In celebration of Women’s Month I wanted to share an article that focuses specifically on a financial planning aspect that is often overlooked for women. Recently, the Fiduciary Institute of Southern Africa (Fisa) discussed some important financial planning considerations for women that highlighted the need for an up-to-date will.

It is estimated that at least half of the estates reported at the Master’s Office each year are of people who died intestate (without a will). This is largely due to the fact that South Africans often don’t see the need to draft a will, especially when they are relatively young or don’t have a significant asset base.

It is important to note that men and women living together are not automatically treated as ‘married’ under the law in case of intestacy. Couples who live together without getting married often assume that the law treats them as married, this is not necessarily the case.

The bottom line? You need your own will and have to understand the implications of your partner’s estate planning.

Fisa often finds that where a woman does not have a lot of assets, or leads a busy life, proper estate planning is neglected. Where estate planning is done, it is important to not only consider current circumstances, but to plan for the future.

The Intestate Succession Act applies to every South African who dies without a will and stipulates that the estate should be divided according to a specific formula. If the person was involved in a relationship other than marriage, the type of relationship will determine whether the partner will be allowed to inherit.

In terms of the Act partners need to be regarded as a “spouse” in order to inherit in the case of intestacy, but the term is not defined in the Act. As a result, other legislation and court cases have to be consulted for an explanation.

Historically, a marriage entered into in terms of the Marriage Act was the only recognised spousal relationship, but with the introduction of the Constitution, the legal system acknowledged that people in other types of relationships were entitled to protection.

Williams says as a start, legislation was passed in the form of the Customary Law of Succession Act and parties to traditional marriages under black customary law are now regarded as spouses when dealing with an intestate estate.

Court cases have also extended the definition of a spouse in this context to include monogamous Muslim and Hindu marriages and polygamous Muslim marriages.

In terms of a Constitutional court ruling, same-sex partners are also regarded as spouses for purposes of intestate succession.

The law allows parties to have a joint will, but Fisa usually advises against it. There have been isolated instances where the surviving spouse dies and the Master’s Office battles to trace the original will that also applies to the surviving spouse.

It is crucial for partners in a relationship to ensure that they draft wills to protect one another.

If you would like some advice on how to go about setting up your will, I’d be happy to advise you on this.

* This content was sponsored by the Fiduciary Institute of Southern Africa.

Source: moneyweb