IN MANY CASES, ATTEMPTING TO DRAW UP A WILL BY YOURSELF MAY BE PENNY WISE BUT POUND FOOLISH
It may be tempting to “DIY” your will in order to cut costs, but if the ongoing dispute regarding Aretha Franklin’s estate taught us anything, it should be the dangers of delaying or cutting corners in drawing up this vital legal document.
While it was first believed that Franklin died without leaving a final testament, three handwritten wills were subsequently discovered in her home. The latest, written in a spiral notebook found hidden among her sofa cushions, reportedly mentioned that she wished her assets to be divided equally among her three younger sons, and left instructions for the care of her eldest son, who has special needs. Now, following more than two years of delays, costs and strife in finalising Franklin’s estate, the matter of which will is valid, who will control the estate and who will benefit has yet to be decided by courts.
This demonstrates that cutting costs by avoiding seeking professional advice and attempting to draft your will yourself, or by using a pro forma template obtained online, is a case of being penny wise and pound foolish, simply because of how badly things can go wrong if your will is improperly executed.
Notably, within the South African context, there are a number of strict formalities that must be complied with for the execution of a valid will, and Franklin’s wills would possibly have amounted to no more than a letter of wishes, which is not legally binding.
There are some instances in which letters of wishes have been accepted by the court as a last will even though they didn’t meet all the technical requirements, particularly where families were able to prove that the letter was intended to be the last will. However, having letters of wishes accepted as a last will necessitates making an application to the High Court, which entails paying extra legal costs that could have been avoided by obtaining proper advice at the outset.
This means that instead of paying a relatively minor sum for a will, your estate could pay as much as R20,000 or more for a court application. Making an application to the court to have your will declared as valid could also add substantial time to the process of winding up your estate, placing additional stress on grieving loved ones, and is by no means guaranteed to succeed.
Should the court application fail, meaning that you died without a valid will, your estate would then be distributed according to the Intestate Succession Act, which may not reflect your wishes.
Your will is therefore worth spending time and money on, but if you want to speed up the process and reduce costs, do your homework before seeking professional assistance. A fiduciary or estate planning lawyer will be able to offer holistic advice on the different options available in executing your will, and explain their consequences or tax implications, but as a client you need to think carefully about your wishes, and gather together all your financial information, including a full account of all your assets and liabilities.
There are a wide range of issues that need to be considered as part of the estate planning process that may be overlooked without specialist, professional advice, such as:
If you have minor children, you will need to nominate legal guardians in your will. If, for example, both parents pass away without nominating guardians, your remaining family would need to apply to the court to officially appoint guardians, which could take months and more money to finalise.
Additionally, if you leave your assets to your minor children without creating a testamentary trust, your minor children’s inheritance must be paid into the Guardian’s Fund. Immovable property may be registered in the child’s name, with the assistance of their guardian, but the consent of the Master will be required to sell the property in the future, and if the proceeds are not used to invest in a new property, they must then be paid to the Guardian’s Fund. It is better to give trustees of your choosing the power to make decisions around investments in the best interests of your heirs.
If, like Franklin, you have a special needs child who may not be able to manage their own financial affairs, you will need to carefully consider how you may wish to provide for their care, and whether you may wish to create a special trust. You should also seek advice if, for example, you have children who may not be able to manage money responsibly, or they suffer from addiction issues.
And finally, having heirs who live outside the country will also have implications for your estate planning given the differences in various countries’ tax laws, and you will need to look into whether your heirs have formally or financially emigrated (although exchange controls are in the process of being relaxed).
- RETIREMENT FUNDS
The distribution of your retirement fund death benefits is determined by the Pension Funds Act, which supersedes your will. You therefore need to ensure that the beneficiary nomination forms from your retirement funds are up to date, and take this into account during the estate planning process.
Additionally, the tax consequences of your nominating a trust as the beneficiary of your living annuity are not clear, so this should also be carefully considered before making any decisions. This may, for instance, impact your choices regarding how best to provide for a child with special needs.
- BOND OF SECURITY
If your estate is to be administered by a professional, you should consider exempting your executor from providing security within your will. If you do not exempt your executor from providing security or if you do not have a will, your estate will be required to pay the premiums for a bond of security, which is effectively an insurance policy for the proper administration of your estate. This can be quite expensive, costing about 0.5 – 0.7% of the capital value of your estate, and is an unnecessary expense which can be avoided if you have a properly-drafted will.
Written by: Citadel Fiduciary Managing Director, Hilary Dudley