What is Estate Planning?
Estate Planning is the ongoing process of creating and maintaining a plan that is designed to preserve your accumulated wealth, and to ensure its most effective and beneficial distribution to the next generation on your death, in accordance with your wishes. Estate planning should be part of your ongoing financial planning.
What are the requirements for a valid will?
- A person (Testator) must be over the age of 16 (sixteen) years and mentally competent.
- The will must be in writing. This means that a will can by typed or handwritten. If the will is handwritten, the person who writes the will is not allowed to be mentioned as a beneficiary in that specific will.
- Each page of the will, including the last page, must be signed by the testator and two competent witnesses.
- It is very important that the testator and the witnesses sign the will in the presence of each other, at the same time and same place when they sign the will.
- The two witnesses must be older than 14 years and not be benefitting from the will, i.e. not be beneficiaries, spouses of beneficiaries or executors.
What happens if the testator cannot sign, for whatever reason?
- A person who cannot sign his/her will, can sign it by making a thumbprint. If a thumbprint is used, it must be placed on the will in the presence of a Commissioner of Oaths, as well as the witnesses. The will must be certified by a Commissioner of Oaths indicating that s/he is satisfied with the identity of the testator and that it is indeed the will of the testator.
What documents are important for safekeeping when it comes to Estate Planning?
- An up-to-date and correctly signed, valid will.
- Contact details of the executor and financial planner. We recommend that one originally signed will should also be held by the executor, one with yourself and a copy held by your financial planner as he/she will be assisting with claims and disinvestments for the estate.
- Letter of Wishes which explains to your heirs why you bequeathed certain items to certain people or how you wish them to use their inheritance.
- A spreadsheet or similar detailing the following:
- All your usernames and passwords for all accounts
- Account number
- Important contacts – Doctors, neighbours
- Mobile phone password
- Medical Aid details
- Personal details
- Important contacts
- Up-to-date list of assets (including all investments property etc) and liabilities.
- An up-to-date report detailing all policies that you may have in place.
- A beneficiary review.
What to communicate to your heirs?
Ensure that your heirs and other responsible persons (if heirs offshore) know where the originally signed documents are kept and your Go-To folder or box is. If you are preparing a will you do not necessarily have to discuss the provisions with your chosen heirs but including them in some or all of the process might be beneficial. For example, asking children which specific items, especially sentimental ones, they would like to have could prevent disputes and disappointments when the time comes.
When do I need a will?
Every adult should have a will. Regardless of your assets, you still need a will. A will is not just about money or possessions – it can contain special requests that you want adhered to when you die, for example, your burial, and who will take care of your pets, etc. If you don’t have a will, when you die, your assets will be dealt with in terms of the law of intestate succession, which means your assets might not go to the people you intended to benefit.
What is intestate succession?
The rules of intestate succession come into effect in cases where a will was not left to guide the distribution of the estate. This means that your estate will be divided amongst your surviving spouse, children, parents, siblings, even distant relatives in some cases, according to a set formula. For example: Intestate succession in South Africa allows for an estate to be divided between a surviving spouse and children, with the surviving spouse receiving at least R125,000. Excluding this, the estate is then divided equally between spouse and children. If spouses were married in community of property (i.e., they were joint owners) then one half of the estate goes to the surviving spouse and the other half is distributed according to the laws of intestate succession in South Africa.
How much will the taxman take?
What the taxman takes at death is known as “Estate duty”. Estate Duty is payable on the estate of every person who dies and whose nett estate exceeds R3.5 million. The Estate duty rate is 20% on estates below R30 million and 25% on estates above R30 million .
So, in calculating an estate’s ED liability, a basic deduction of R3.5 million is allowed as well as:
- The deduction of all outstanding liabilities
- And assets accruing to the surviving spouses.
“It is said that in this world, nothing is certain – except death and taxes.”
In conclusion, always make sure to do the following:
- Maintain a valid and up-to-date will.
- Ensure that a family member or responsible person is aware of where you keep your will and other important personal information.
- Work with a professional financial planner to ensure the most tax effective and beneficial distribution of your assets to the next generation, on your death, in accordance with your wishes.
Just these three points will save your loved ones a huge amount of stress at a time of great loss…. Is this not what you want for them?