The importance of wills and estate planning

Wills and estate planning are vital for ensuring that your assets are distributed according to your wishes. Properly creating a will and establishing trusts for estate planning can ensure your wishes are followed, reduce complications and protect your loved ones after your death.

Your marital or relationship status can significantly impact your will and inheritance rights. Here’s how:

• Civil marriages: Your inheritance depends on whether you’re married in or out of community of property.
• Same-sex marriages: Fully recognised under the Civil Union Act, with the same inheritance rules as civil marriages.
• Religious marriages: (ie Hindu, Muslim and others): Not always automatically recognised under South African law, so additional legal steps may be needed to secure inheritance rights.
• Life partnerships: A recent constitutional ruling gives life partners the same inheritance rights as spouses. Since these relationships don’t have automatic legal protection, a cohabitation or life partnership agreement is highly recommended.

The implications of divorce

In South Africa, divorce has a significant impact on a will. According to the Wills Act 7 of 1953, if a person dies within three months of their divorce, the law assumes they would not have wanted their ex-spouse to inherit.

As a result:

• Any inheritance left to your ex-spouse is cancelled if you die within three months of the divorce
• After three months, if you haven't updated your will, your ex-spouse may still inherit
• Other parts of the will stay the same unless changed
• If you don’t have a valid will, intestate laws decide who gets your assets.

Estate planning after having children is crucial because minors cannot legally manage assets, so parents must take proactive steps to protect their inheritance. Without a plan, funds may go to the government-managed Guardian’s Fund. Appointing a guardian or creating a testamentary trust ensures secure asset management until the child matures.

It’s also important to include failing provisions in your will. These will ensure that if a beneficiary, like your spouse, passes away before you, assets go to your children or other heirs. For guardianship, they specify who will care for your children if your spouse is unable to, preventing the High Court from making the decision.

Appointing a guardian in your will

You can appoint a guardian for your children in your will, designating someone to care for them and manage their assets until they turn 18. It's crucial to choose a financially responsible individual. However, there’s a risk of mismanagement if the guardian lacks financial expertise, potentially affecting your child’s inheritance.

Testamentary trusts in South Africa

A testamentary trust is created through your will and takes effect after your death. It allows a trustee to manage and distribute assets for minor beneficiaries, especially if they can’t handle large sums of money yet.

Without one, there’s a risk that guardians themselves may misuse the inheritance.

A testamentary trust ensures funds are used responsibly and prevents guardians from having full control. It can include rules for releasing the inheritance in stages, like at age 25 or 30, ensuring the child is mature enough to manage the funds.

The role of the Guardian Fund

In South Africa, the Guardian Fund is a government-managed fund that holds and administers assets on behalf of minor beneficiaries or legally incapable individuals. If a child inherits assets and there’s no appointed guardian, the Guardian Fund manages the inheritance until the child turns 18, ensuring proper stewardship.

When managing offshore assets in your will, several key considerations need to be addressed to ensure the assets are appropriately handled across different jurisdictions.

Do you need an offshore will?

You don’t necessarily need an offshore will for offshore assets. Ask your offshore financial institution if your South African will is sufficient to cover these assets (such as bank accounts or investment portfolios), or if a separate will should be drafted in the jurisdiction where the assets are located.

Forced heirship laws

Certain countries, particularly in Europe, have forced heirship laws, meaning a portion of your estate must be given to your children or spouse, regardless of what your will specifies. Countries like France, Spain, and Portugal, for example, have strict regulations on inheritance that may not align with South African estate laws. If you own assets in these countries, it's crucial to seek professional advice and consider having a separate will drafted in the local jurisdiction to comply with these laws.

Wills for immovable property

For immovable property like offshore real estate, you should have a will in the property’s jurisdiction. Unlike movable assets, real estate can’t be transferred between jurisdictions, so a local will ensures distribution according to local laws. When drafting a will abroad, ensure it's in the local language to avoid misinterpretation.

If your will beneficiaries move abroad, they can still inherit your assets, but there may be additional tax considerations. While most countries don't impose inheritance taxes, the situation can be more complicated if they are beneficiaries of a trust.

South African tax residency rules may affect them, and they could face punitive taxes both in South Africa and in the country they now reside. It's highly recommended that beneficiaries living abroad seek professional advice to understand the tax implications of inheriting assets from a trust, especially if they’ve ceased South African tax residency.