Have the final say – your will, your way

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A collection of news in brief from Investec Private Bank

Whether you’re a young professional or retiree, married or single, own property or not or have an investment portfolio, a will forms the cornerstone of sound financial planning. It is the instrument that will be used to pass your assets to the next generation.

 

It needs to not only be valid and enforceable, but drafted eloquently enough to ensure your wishes are fulfilled, to protect future generations, to avoid administrative delays and excess costs and to implement your estate plan. 

Elizabeth Fick (Tax & Fiduciary, Investec Wealth & Investment) answers 10 frequently asked questions about wills

Elizabeth Fick
   
  • 1. Why is it important to have a will?

    If you pass away without a valid will, the law prescribes to whom your assets will devolve. A valid will is the document that contains your last wishes and prescribes who should inherit your assets. In your will, you should appoint an executor for your estate and, if you have minor children, a guardian for them.
     
    It is very important to ensure that your will is legally valid, well drafted and that you understand all the tax and exchange control implication of your bequests. If correctly drafted, having a will makes the wrapping up of your estate easier and prevents unnecessary administrative delays.
     
    Any person 16 years or older can have a will, provided they are capable of appreciating the nature and contents of the will.
  • 2. What is the legal process when you pass away?

    When you pass away, your estate must be registered with the Master of the High Court (the Master) in South Africa (SA). Once the Master receives the prescribed documents, he/she would issue a letter of executorship, which authorises the executors of your estate to act and wind up your estate in accordance with your will. Your executors can then begin the transfer of assets, payment of taxes and wrapping up of your estate.
     
    Most estates take about a year to wrap up. However, this can take significantly longer if your executors are not familiar with the process and don’t have professional help.  
  • 3. Should I appoint a professional executor?

    The administration of a deceased estate can be complicated and requires a lot of work. For this reason, many people appoint a professional executor to act alongside their friends or family members.
     
    An executor can charge up to 3.5% of the value of the gross assets of the estate, as well as a commission of 6% on all income collected after death to the date, while of wrapping up the estate. However, in most instances, this fee is negotiated and can be agreed on upfront.  
  • 4. Why is it problematic if you die without a valid will?

    If you don’t have a will in place, the South African Law of Intestacy prescribes what would happen to your assets on your death. You will have no control over who inherits your wealth.
     
    If you have minor children, their portion of their inheritance would be paid over to the guardian’s fund. Failing a natural guardian, the court would appoint a guardian for them and this may not be the person you wished to care for them.
     
    You would not be able to decide who the executor of your estate would be, and this means you could end up incurring unnecessary expenses and fees for your estate.   
  • 5. Who can draw up and revise a will?

    There are many formal requirements that must be met for a will to be valid and recognised. If any of these requirements are not met, your will or a portion thereof could be invalid.
     
    Paying a lawyer to draft your will can be costly. However, it’s cheaper than having to pay a lawyer to deal with your estate if your will is invalid.
     
    A will can be amended by codicil - an addendum that explains, modifies or revokes all or part of the will. However, there have been cases when the codicil has not been correctly drafted and/or executed, contains conflicting provisions or where executors simply forgot to read it.
     
    Therefore, to avoid unnecessary conflicts and complications, it’s easier to replace your will in its entirety, should you wish to amend it.
  • 6. Should you have a joint will with your spouse?

    If drafted correctly, and massing (a type of merging of estates) occurs, a surviving spouse cannot unilaterally amend the contents of the will in relation to the massed estate. This inevitably results in protecting the entitlement of the original heirs in terms of the joint will.
     
    However, a joint will has its disadvantages. It is inflexible after the death of the first dying spouse and does not cater for a change in circumstances. If the surviving spouse needs to sell property that is bequeathed to other heirs in the joint will, the surviving spouse may be unable to sell this property, potentially causing financial stress.
  • 7. If you have assets offshore, do you need a separate will?

    It is possible to have one will that deals with your worldwide estate. However, each country has its own laws and procedures when wrapping up an estate. This often leads to administrative difficulties and lengthy delays.
     
    If you have a separate will for your offshore assets, your offshore estate would be wrapped up independently from your SA estate, saving your estate time and money. In addition, if you have immovable property abroad, it is advisable to have a will dealing with the immovable property.
     
    For example, if a South African owns property in the UK, a valid worldwide South African will would be recognised in the UK. However, UK property will pass according to UK law.
     
    Best practice is either to have a separate UK will or at least to take legal advice in the UK to check whether the provisions contained in a worldwide will would work and if the dispositions are efficient for UK inheritance tax purposes.
  • 8. What are the estate duty and tax implications you should consider?

    On death, South African residents are liable for estate duty tax based on their worldwide assets. Estate duty is currently levied at a rate of 20% in the case of an estate less than R30 million, and at a rate of 25% on the value above R30 million.
     
    However, both the UK and the US also levy an estate duty, potentially levied at a maximum of 40%, on assets that are physically situated in their jurisdiction. Collectively, these are known as situs taxes. To prevent double taxation, SA has entered into an estate duty agreement with both the UK and US, to allow South Africans to claim a credit in SA for the situs taxes paid in the UK and US. This essentially means that instead of paying 20% SA estate duty, you will pay 40% situs tax.
     
    To avoid incurring unnecessary taxes, South Africans investing offshore should always consult their tax practitioners and ensure they understand international tax law. 
  • 9. How often should you revise your will?

    Your will should change as you change. There have been many legislative changes over the years, which may impact the bequests and validity of your will. Your will, along with your estate plan, should be reviewed annually, to ensure it that it fulfils your wishes, is practically viable and compliant with the law.  
  • 10. Where should you keep your will?

    Ensure that the original copy is kept with your attorney or executor. You can also set up a will on Investec Online.
     
    Manage my life is designed to help you simplify your administrative chores. You can organise all your personal information in one secure online place - with clear tabs for saving information and the ability to access these documents from anywhere in the world. You can also nominate someone to receive this information when you die.
     
    Part of Manage my Life is ‘My will’ - a highly secure online tool that allows you to create and store a digital copy of your will. 
     
     

    Basic will

    There is a simple template you can use to draft a will.
     
    You can choose to create a will as an unmarried individual and leave your estate to your nominated heirs, or as a married individual and leave your estate to your spouse.
     
    You can then upload a digital copy of your will on the ‘My will’ page and it will be automatically stored in ‘My Briefcase’.

    Complex will

    If you require a more complex will, you can click on ‘Need someone to assist you with your will?’
     
    You can browse a list of available firms (Mazars, Ewing and Sentinel) that specialise in wills and estates. Once you have chosen a firm, a pop-up appears. Just fill in the form and a message will be sent to the relevant firm. The firm will contact you in two business days.
     
    Once a will is drafted, you can save a copy on ‘My Briefcase’.

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