Illustration: Colin Daniel

CAPE TOWN - Are you happy to get a free will from a so-called professional? Is there really such a thing as a free product, or are you signing up for a future cost? The saying goes, “if it seems too good to be true, it probably is”. It is no different with a free will, which, in most cases, is not adapted to your personal circumstances.

It is estimated that the average person spends 76 800 hours building his or her estate, but few people spend any time ensuring that their estates will not be diluted by more than 30% when they die, through death taxes. More emphasis is usually placed on investment strategies and the creation of wealth than on estate planning, despite the fact that estate planning is one of the key pillars of a sound financial plan. 

Your estate plan should take the following into account: your will, your trust, all your assets and liabilities, “deemed property”, such as your life insurance policies, and liquidity to fund capital gains tax, estate duty and executor’s fees (where applicable).

It is astounding that many people are happy to accept a (free) standard will that does not take their personal circumstances into account. When you consider that a will is probably the most important document you will draw up, more effort should be put into it than accepting a free, stock-standard will that often does not even recognise a trust you have set up, never mind complement your estate plan. 

Most people delay drawing up a will because it is an emotional document to prepare. Your will should always be up to date and reflect your current wishes in terms of how you would like your assets to be distributed upon your death. Your will is a living document and should be reviewed whenever your circumstances change, but at least once a year. 

The important things to consider are:

• Calculate the estate duty for the options you are considering, to ensure that the wording of your will supports the most tax-efficient option. This is particularly the case where you need to decide who (your spouse or others) should receive the residue of your estate. In many cases, it may be more efficient to nominate your spouse to inherit the residue of the estate, rather than other people, if you bequeath similar amounts to them. You need to have an in-depth discussion with a professional when you do this exercise.

• If you are married, it is preferable to have individual wills, rather than a joint will. The problem with a joint will is that, when the surviving spouse dies, it can take a long time to locate the original will at the Master of the High Court’s office. If the original joint will cannot be found, the surviving spouse will die intestate. Intestate succession is based primarily on blood relationship, whereby the estate will be distributed among family members in a certain order. The assets will therefore be divided in terms of the Intestate Succession Act, and this may not be how you wanted your assets to be split.

• If you have assets abroad, you may require a separate will for your offshore estate.

• If you set up a trust, be careful to state in your will and the trust deed how trust assets should be dealt with after your death, because such a testamentary reservation may cause your estate to be inflated by all the trust assets.

• If you set up a trust, name follow-up trustees in your will, and ensure that your trust deed allows for this.

• Be careful of blindly setting up a testamentary trust (as part of a vanilla, free will). You probably do not need another (testamentary) trust if you already have a trust structure in place. A testamentary trust does have a place, but it has limitations, such as limited prescription as to how the trust should be managed – it merely consists of a couple of paragraphs forming part of your will – and does not have the flexibility to accommodate changes, because the only way to amend a testamentary trust is to go to court. 

• Always draft a will that clearly demonstrates your intentions. 

• Although a will does not have to be dated, dating it makes it easy to identify which will is the most recent one. 

• Always have a revocation clause in your will to replace previous wills (where relevant).

• For a will to be valid, it has to be signed by two independent, competent witnesses who do not stand to inherit from the will and who will not exercise any undue influence. A person as young as 14 can witness a will in terms of the Wills Act.

• Include special instructions in your will, such as whether you would like to be buried or cremated.

• Name an executor, who will be responsible for administering your estate. By nominating this person in your will, you will avoid any unnecessary delays in the administration of the estate. The executor’s role is to control the estate’s assets, pay debts and distribute what is left. Appointing your spouse (or anyone else) as the executor does not mean that he or she has to wind up your estate; he or she can appoint an agent to handle this, and he or she can negotiate the fee for this service.

It is a good idea to name an alternative person as executor in case the person you nominate is unable to take on the task, or is no longer around. If an executor is not appointed, the Master of the High Court must appoint an executor. Such appointment will take place with the involvement of the estate’s beneficiaries and creditors. This will delay the finalisation of the estate. Professionals often offer to draw up your will for free, but it may end up costing you much more because of the executor’s fees they charge. 

The Administration of Estates Act prescribes a tariff equal to 3.5% (plus VAT) of the value of the gross assets of the estate being administered as executor’s fees, as well as a commission of 6% on all income collected by the executor from the date of death to the date on which the administration process is finalised. This fee may be negotiable in certain circumstances. 

• Ensure that your will contains a clause that any assets left to your child do not form part of that child’s matrimonial regime. If, for example, you leave a property to your daughter, who marries in community of property, including this clause in your will ensures that the property will not form part of your daughter and her spouse’s joint estate. You may even achieve a better solution by transferring assets into a trust for your family, as the same death taxes will be payable whether you transfer assets into your children’s hands or into a trust for their protection. 

• If you have minor children, state that no money must be paid into the Guardian’s Fund.

The aspects discussed above make it clear that a will is not some standard template, where only names and identity numbers are changed. Make sure you consult a reputable professional. It may be the best investment you make for yourself and your family.

Phia van der Spuy is a registered Fiduciary Practitioner of South Africa® and the founder of Trusteeze, which specialises in trust administration.

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