No one likes to think about their own death, but it is vitally important that you plan properly so that your loved ones have financial security after your death. Start with having a valid will but speak to a fiduciary practitioner if your estate planning needs are more complicated.
It is vitally important to have a plan when it comes to your family and finances, and this entails planning before your death to have a proper succession plan in place.
There is a well know saying “the only certainty is death and taxes”!
I often find that this is a difficult topic, but if you do not plan properly, you are planning to fail, and this can have undesirable consequences.
Your succession plan does not only have to take effect when you die, so let’s start with the aspects that are worth considering.
Risk cover to ensure financial security
One of the objectives of risk cover is to meet a need, especially for the people you leave behind.
This will include, but is not limited to, income provision for minors or a spouse, lump sums to cover debt, cost of winding up an estate, leaving a legacy bequest in your will, etc.
Passing away without a valid will
Dying without a valid will, results in one dying intestate and your estate will devolve according to the Intestate Succession Act. What this means is that your estate will be divided according to a set formula and not how you may have wanted your estate to devolve.
If you do not know or understand what this entails, there can be some undesirable consequences which brings me to my next point.
Having a valid will
Before discussing the basic requirements of a valid will, bear in mind that only someone who is sixteen years and older and mentally capable of understanding their actions at the time of making the will, is competent to execute a will.
The Wills Act prescribes a number of necessary formalities – there are some exceptions so consult with an expert when drafting a will
- Each page of the will must be signed by the testatrix, if a female, and a testator, if male.
- Two witnesses must attest that it is the signature of the testatrix. The witnesses must attest and sign each page of the will in the presence of the testatrix.
Witnesses need to be fourteen years or older and competent to give evidence in a court of law.
The following points are best practices, although they do not affect the validity of will when executed:
- Wills should be dated to avoid confusion in case another will is found.
- Witnesses should not benefit from a will.
- Witnesses cannot be nominated as an executor, administrator, trustee or guardian and if they are, the nomination will be void.
- The will should be clear and readable.
- Signatures should be as close to the last line of every page as possible.
- Pages should be numbered.
Dealing with minor children
When dealing with minor children extra care needs to be taken – it is important to understand what will happen with direct bequests to minor children.
- The Guardian’s Fund
The Guardian’s Fund was created to receive and manage money on behalf of persons who are legally incapable or do not have the capacity to manage their own affairs. The money in the Guardian’s Fund is invested with the Public Investment Commission. The High Court looks at legal or natural guardians or may appoint a guardian, who can then claim maintenance for the person whose money is held in the fund.
It would be advisable to make any bequest to a minor payable to a trust, such as a testamentary trust set up in your will.
A testamentary trust is a trust that comes into effect on the death of the founder to own and manage assets on behalf of beneficiaries, usually minor children who cannot legally inherit the assets until they turn 18.
This trust can receive and manage all assets and not only fiscal money.
- Guardians of minors
Your will should not only contain details about how your assets will be distributed, but should also nominate the chosen guardians of your children after your death. Keep in mind that minor’s legal or natural guardian will be in control of the minor’s bequeathed assets unless the High Court decides otherwise as the upper guardian of the minor.
Any person with an interest in the well-being of your child may approach the High Court for an Order to grant them this responsibility. The Court is the Upper Guardian of all minor children and must act in the best interests of the minor.
Difference between a trustee and a guardian:
A guardian is appointed to care for your children on a day-to-day basis.
A trustee is appointed to manage the trust’s assets to the beneficiary’s benefit.
A guardian can be a trustee. However, it is often a good check and balance to have a separate, independent person as a trustee, who is financially astute.
Choosing an executor
The primary task of an executor is to administer your estate according to the stipulations in your will, looking after the best interests of your heirs while executing this responsibility. As this is a big responsibility, the choice of person to act as executor is not to be taken lightly.
The Master’s office requires an executor who is not a professional person or institution to appoint a trust company or attorney to administer the estate. Therefore, it is important to carefully select your executor now, before someone else does this for you.
Different types of assets are dealt with differently
Different assets need to be dealt with in different ways as there are specific set of rules when dealing with different types of assets, just to name a few which needs specific consideration:
- offshore assets
- firearms
- property
- investments or financial assets
From this short article you can see that it is of utmost importance to join hands with an expert to assist and guide you in all aspects of your succession plan.
It is therefore important to speak to a Certified Financial planner (CFP® professional) to plan for your specific needs on death and beyond.
Denise Fourie, Wealth Adviser at PSG Wealth, PSG Wealth Silver Lakes
Affiliates of the PSG Konsult Group, a licensed controlling company, are authorised financial services providers. Visit www.psg.co.za for more information.
