The Queen of Soul, Aretha Franklin, died on August 16, leaving behind four children, including one with special needs, and assets worth about $80 million. She also left no will: the singer, who had been suffering from advanced pancreatic cancer for years, apparently did not see the need for one, nor did she grasp that the end was nigh.
Don Wilson, her entertainment lawyer, told Rolling Stone magazine that he tried to convince her for years to take care of her estate, but she wouldn’t hear of it.
And Franklin wasn’t unusual in her choices: the Ike Turner estate is still contested by his relatives, 11 years after he died without a will, while Prince’s estate is reportedly “a mess”. It has been shared by his sister and five half-siblings – one of whom hadn’t spoken to the artist in over 15 years.
While these mega stars’ lack of estate planning may be perplexing, most people – particularly women – don’t have a will.
South Africa’s Master of the High Court’s figures indicate that about 70% of working people do not have wills and up to 90% of people die intestate.
We’re hardly unique in lacking estate planning: in the United Kingdom, at least 60% people die without a will, while in the US, only 44% have one.
In South Africa, where almost half our children grow up without fathers, losing a mother leaves children at the mercy of relatives, neighbours and the state.
Viwe Dyasi, a general manager for wealth, investment management and insurance at Absa, says women are not prioritising estate planning. “Women are generally taking care of others, their jobs and everything around them, parking estate planning,” Dyasi says. “Statistically, women live longer than men, and this longer life span means they must take care not to outlive their assets; their assets must last for a longer period, for them and their descendants. It is important, therefore, to get guidance from a professional financial adviser, to help women protect themselves financially.”
Women often assume that when they die, everything will automatically be left to the “obvious” intended beneficiaries, says Kobus van Schalkwyk, the head of corporate development for Standard Trust Limited at Standard Bank. “If you pass away without leaving a will – that is, intestate – legislation will determine how your assets should be distributed.”
A valid will ensures that the estate-administration process is accelerated, says Van Schalkwyk. “If you don’t nominate an executor in your will, the Master of the High Court has to go through the process to appoint an executor. It could take months, potentially leaving vulnerable family members without critical income.”
Leaving it to the state to decide who will inherit what, won’t necessarily be catastrophic for your beneficiaries, but it puts them in an extremely vulnerable position, particularly if you were a single parent.
The Intestate Succession Act of 1987, which was amended in 1992, is unequivocal about who gets what:
If you’re survived by a spouse (or spouses), but no children, he or she (or they) will inherit the entire estate;
If there’s a child but no spouse, the child inherits everything;
If there’s a spouse (or spouses) and children, the spouse gets a “child’s share” or R250 000 (whichever is greater), and the children receive the balance of the estate; and
If you’re married in community of property, half of the estate belongs to the surviving spouse (or spouses) and will not devolve according to the rules of intestate succession.
This, however, removes your freedom of choice to determine who gets what. It also complicates winding up the estate and forces the heirs to be dependent on a court-appointed executor, says Trisca Hattingh, the head of fiduciary services at GTC.
“(The Act) is very fair, but it takes your free will away. There’s nothing that you can bequeath. Lots of parents want to leave their paintings to a specific child, or the wedding rings to their daughters.”
Harry Joffe, the head of legal services at Discovery, says they’re particularly concerned about single parents with minor children.
“Single parents, when they take out a life insurance policy, often make the minor child a beneficiary, which is not part of the estate for distribution purposes, but it is for estate duty, so we can pay the money directly to the minor child’s bank account. It’s dangerous, though. There was a recent case in which R2.5m was deposited into a five-year-old’s bank account. The guardian had full access to it and spent it.”
To prevent that from happening, Discovery tells clients to protect the proceeds by using a trust, either inter vivos or testamentary.
“Inter vivos trusts are set up while you’re alive. The trust would own the policy and pay the premiums. If the single parent dies, we pay the money into the trust.
“A testamentary trust is created in your will and it comes into play after you die. It’s not ideal. The mom or dad sets up this in their will, but when they die, there’s a delay until the trust is created, and it could take three months. It is not as good as an inter vivos trust but better than making the minor the beneficiary.
“If you’re a single parent, you should be thinking about the inter vivos trust option. It costs around R6 000 and is the best way to protect your child’s interests,” Joffe says.