Keith Setaka | Absa Financial Services
The words ‘Last Will and Testament’ have a chilling kind of finality that many of us might prefer to ignore, reassuring ourselves that we are too young to consider the possibility of dying. However, the sad reality, as the well-known aphorism goes, is that “In the midst of life, we are in death” – and failing to prepare for that eventuality will mean leaving behind a family uncared for and unprotected.
Having a valid will is a critical part of financial planning because it allows you to specify exactly how you wish to distribute your assets – monetary and otherwise – to your selected beneficiaries following your death. It allows you to plan your estate according to your own wishes and needs, and ensures that the process through which your assets are distributed to the beneficiaries is simple and painless for them. By putting a legally binding will in place, you secure your loved ones’ financial future.
But while many people understand the need to have a will, it’s astounding that very few actually have one in place. Consider, for instance, the latest figures released by the Masters of the Court, which reveal that over 70% of the South African working population do not have wills. That means many workers die intestate, and risk their assets, pension and life policies payouts being inherited by the wrong people.
Yet, it doesn’t have to be like that. Working with a professional to draft a will is a fairly straight-forward process, and many institutions do it for free or at a fraction of the cost if they’re nominated as executors. A professional consultant will ensure that your will meets all legal requirements, and that your estate can be set up in a tax-efficient way to prevent assets being eroded by exorbitant estate taxes.
In addition, a professional consultant will assist you to ensure that there is adequate liquidity in the estate to meet necessary obligations during the winding-up period, as well as be able to advise you on issues surrounding nominating an executor: the person or institution responsible for winding up the estate.
It is important to know that the length of time that it takes to wind up an estate varies – simple estates with only one or two properties and a cash inheritance, for example, could take approximately six months, while complex estates or those placed under audit by the government could take years. Typically, the minimum length of time it takes to administer an estate is six months.
Another key piece of information that you should know is what happens to any life insurance policies that you may have in place. Depending on what you have specified in your policy, the proceeds will be paid directly to your named beneficiaries or into the estate account, wherein the proceeds will cover liabilities (if any) and the surplus disbursed to the estate beneficiaries.
A commonly overlooked part of the disbursement of assets to beneficiaries is if they are left to minors. In that case, their benefits will be transferred to the Guardian’s Fund administered by the Master of the High Court, which will pay out all their inheritance when they reach the age of eighteen. You can set up a testamentary trust through a will to protect your dependents’ inheritance until such time they meet certain conditions specified in a will, for example, when they are of an age you comfortable with, have graduated or achieved a certain milestone.
There are, of course, many other complex matters to consider, but the alternative – dying intestate – is infinitely worse. The obvious risk is to have your assets inherited by the wrong person because of a lack of explicit instructions. Another risk is that it might take considerably longer to wind up the estate, and that the assets finally allocated to beneficiaries might be depleted as they may need to be used to cover financial commitments in the estate during that winding up period.
Essentially, if you die intestate, your estate and assets will be administered in terms of the provisions of the Intestate Succession Act. According to this Act, succession is determined by relationship, namely spouses and descendants, and the process is a lot more complex as there are a number of scenarios that intestate succession covers.
These rules of intestate succession also apply if your will is found to be invalid. A critical point to note is that you have to live in South Africa at the time of death for these rules to apply – otherwise the laws of the country you reside in will apply.
The sheer volume of information that you need to know and consider when drawing up a will can be overwhelming. For this reason, I would strongly urge you to seek the counsel of an experienced advisor to advise you based on your unique needs and state of affairs. Absa, for instance, has been helping people with their estate planning for over 100 years and has the expertise to help you make sure that your family and loved ones are well taken care of even if you are no longer around to look after them yourself.