This article was first published in the first-quarter 2016 edition of Personal Finance magazine.
Most people consider making or amending a will only when an emotional event occurs, such as the death of a loved one, a family feud or – most commonly – the prospect of divorce. However, an emotional state of mind can lead to irrational decision-making, so it is all the more important that you obtain objective professional advice when you make or amend your will. The very worst scenario is that you draft your will yourself and your executor finds it difficult or impossible to execute.
Although there is freedom of testation under South African law, this freedom is not absolute. The drafting of a will is complex, no matter how simple your affairs may seem – hence the need for advice. When the limitations are overlooked, the consequences can be serious for the administration of the estate, possibly with much less left for distribution than was intended.
The factors to consider include:
* The effect of divorce or annulment of a marriage. In terms of the Wills Act, you have three months after a divorce or annulment to amend your will to remove your former spouse as a beneficiary. During that period it is assumed that you would have amended your will, so if you die within three months, a bequest to your former spouse will fall away automatically. If you die after three months without amending your will, the will stands.
* In the event of divorce, you might have obligations in terms of a divorce settlement that entails delivering certain assets to your former spouse at some future date. It needs to be borne in mind that a divorce settlement takes precedence over a will.
* Ante-nuptial contracts also take precedence over wills. Where substantial donations have been made by one spouse to the other in terms of the ante-nuptial contract, these assets must be returned (or in some cases, replacement assets delivered) before the estate can be wound up and the rest of the assets distributed. The ante-nuptial contract might also regulate the property rights of the spouses in accordance with the accrual regime, which could mean that a measure of “rebalancing” of the testator’s estate needs to take place before the assets can be distributed to the beneficiaries. Conversely, the estate might have a claim against the estate of the surviving spouse.
* If the testator signed any suretyships during his or her lifetime, these, too, will have an impact on the administration of the estate. The executor of the estate might wish to give notice under such suretyships, and the administration of the estate might well be delayed if the executor has to find substitute sureties before the deceased estate can be released from its obligations.
* The will drafter is also required to take a careful look at all the assets and liabilities of the testator, including contingent liabilities (which are liabilities that may or may not materialise, depending on future events), in order to arrive at a net value. It is also essential to take into account all the estate duty possibilities to determine whether there will be sufficient liquidity in the estate to prevent the forced sale of any assets belonging to the estate. Alternatively, beneficiaries may need or want to pay into the estate to prevent the sale of assets.
* Certain policies may have nominated beneficiaries, in which case the proceeds would be paid directly to the nominees without flowing through the estate. It is important to note that the trustees of pension and provident funds have the discretion to decide who is entitled to share in the benefits (dependent children, for example), irrespective of any nominations.
* Minor children have a common-law right to claim maintenance against a parent’s estate, and a surviving spouse has a claim for maintenance in terms of the Maintenance of Surviving Spouses Act. Such claims have to be met before any benefits can flow to beneficiaries.
Not all of these factors can be considered direct limitations on freedom of testation, but they do have to be considered in relation to various scenarios that might need to be catered for in the will.
There are also other factors to consider, such as the doctrine of collation, which is often overlooked. Collation is an obligation imposed by law upon descendants who are heirs (through the provisions of a will or intestate succession) to account to the estate for certain gifts received from, or debts owed to, the deceased during his or her lifetime. By law, a parent is presumed to have intended to benefit his or her children equally, and, in the absence of a clause in the will dispensing with collation, any sibling can claim that any other sibling who received more during the deceased’s lifetime “add back” the difference for the purpose of distributing the estate. Note, however, that only descendants may be required to collate and then only if they are heirs of the deceased and if they would have been heirs in intestacy but for the existence of a will.
This synopsis of some of the less obvious considerations of will-making should alert you to the need to approach the task cautiously. Most important of all, have someone on your side to guide you through all the possible scenarios that could emerge after your death.
* Alfred Bester is a director of Legacy Fiduciary Services and a member of the Fiduciary Institute of Southern Africa.