Death and last wills and testaments are topics most of us prefer to avoid. And we are not alone. Just recently Argentinian football legend Diego Maradona died intestate, lining up a string of potential litigation proceedings and family squabbles over his estate. Pop star Prince similarly died without a will in 2016 and, to date, his estate has not been wound up. Pablo Picasso, Bob Marley, author Stieg Larsson, British singer Amy Winehouse and Martin Luther King Jr all died without a will in place.
And, in each case, their legacies were shrouded in unnecessary costs and potential stress – and a plethora of tabloid headlines.
All of this drama can be avoided for the loved ones left behind if you take the time to draft a will and then ensure that it is revised and updated on a regular basis.
If the COVID-19 pandemic has taught us anything, it’s that we need to prepare for the unexpected. Whether we are old or young, single or in a relationship, healthy or ill, rich or poor, famous or powerful – all of us should have a valid last will and testament. If you die without an authentically executed will, the chances are that you will die intestate, meaning that your estate will be wound up in terms of the Intestate Succession Act, 81 of 1987.
Contrary to popular belief, this does not mean your assets will be forfeited to the state. Rather, by not having a will, you will forfeit your testamentary freedom of deciding who inherits what, who should act as your executor and who should administer the inheritances of your minor children. You owe it to your loved ones to spare them the personal and financial risks which will inevitably be associated with such a situation and lack of clarity.
MAKING YOUR WISHES KNOWN
South African law recognises the principle of “freedom of testation”. In simple terms this means that a person who executes a will has the freedom of ability to, among other things, nominate any person and/or institution to act as the executor of the estate and trustee of any testamentary trust created in terms of that will; as well as nominate any heir to the assets that form part of the deceased estate. This principle extends even further, to the fact that you are also allowed to express your particular wishes when it comes to matters such as cremation, organ donation and whether or not you would like to be kept on life support machines (the so-called “living will” concept).
Although the above principle is well entrenched in our law, it is, however, (and rightly so) restricted. Bear in mind that any nomination of executor, trustee and heir, as well as your wishes regarding cremation, burial, organ donation and a living will, cannot in any way be illegal, undue or against society’s generally accepted moral values. If any of these restrictions are applicable, your will runs the risk of being invalid, which may result in the provisions of the Intestate Succession Act being applicable when your estate needs to be wound up.
In our view, a will is probably one of the most important documents that you can ever draw up. Therefore, it forms a critical part of your holistic estate plan. The fundamental purpose of estate planning, in most cases, is the legacy that you leave behind. Proper planning ultimately culminates in a carefully planned and validly executed will.
According to Section 4 of the Wills Act, 7 of 1953, any person aged 16 years or older can execute a valid will, unless they are mentally incapable of understanding the nature and effect of their legal actions in executing a will. The Wills Act continues to determine all the legal formalities involved in executing a valid will. You need, for instance, to sign the will in the presence of two independent witnesses.
We understand that planning for death is not easy, but it is very important that you take the time to do so, since none of us want to leave confusion, unnecessary costs and potential stress for our loved ones when we die. Here are some important guidelines to follow when considering your will in the context of your overall estate plan:
GET THE RIGHT ADVICE
Make sure you obtain professional assistance, not only for the sake of compliance with all necessary legislation, but also to ensure that your will reflects your wishes and is optimal from a tax perspective. Badly drawn up wills not only risk being invalid and less than effective in terms of estate planning and tax efficiency, but can also cause disputes and uncertainties, which could end up in court, always a costly exercise.
In South Africa, death triggers a range of potential taxes from estate duty to capital gains tax to transfer duty. A professional can assist you by crafting a proper and comprehensive estate plan that takes into account all the relevant taxes and ensures the optimal application of the variety of tax legislation relevant to the provisions of your will.
In recent years certain changes have been proposed and implemented to current legislation pertaining to estates and trusts in South Africa, in particular regarding taxation. These changes and their inevitable implications underline, in our view, the importance of involving a professional to attend to your estate planning as part of your will. For example, not everyone knows that retirement benefits do not form part of your estate and are, therefore, exempt from estate duty and executors’ fees. This kind of detail is of vital importance and highlights the benefit of consulting a professional.
NOMINATE A TRUSTWORTHY EXECUTOR
The executor is the person and/or institution responsible for winding up your estate and giving effect to the stipulations contained in your will. It is advisable to nominate someone you trust, who you know will act with absolute honesty, integrity and professionalism in carrying out your last wishes.
Statutorily, an executor is entitled to a fee of 3.5% (excluding VAT) of the value of your estate. This may seem significant, but the fee is worth your while when you consider the possible delays and frustrations that may result if you nominate someone who does not have the necessary experience and professionalism to adequately fulfil this critical role.
At Citadel we hold the view that your will falls into the category of short-term planning and, as such, justifies regular revision, at least once a year. Changes in legislation, new developments in law, marriage, births, adoptions, retirement, divorce, deaths and other life events are all important milestones that impact your planning and existing structures and should prompt you to revisit and revise your will with the guidance and input of a professional.
Written by: Citadel Fiduciary Partner, Jan Dawid Luttig