- Will or testament: A legal document that communicates a person’s final wishes pertaining to their assets and dependents.
- Executor: A person or institution appointed to carry out the terms of a person’s will or to put it into effect.
- Trust: A legal institution in which a trustee holds or administers assets, for the benefit of persons (beneficiaries) for the furtherance of charitable or other purposes.
- Trustee: A person given the power of administration of assets in a trust with a legal obligation to administer is solely for the purposes specified.
- Inter vivos trust (Living trust): This trust’s duration is determined at the trust’s creation and can entail the distribution of assets to the beneficiary during a trustor’s lifetime.
- Testamentary trust: This trust is created when upon the death of a person as specified in their testament. Nominated Trustees will manage the assets in your trust.
- Master’s office: To serve the public in respect of Deceased Estates, Liquidations, Registration of Trusts, Tutors and Curators as well as Administration of the Guardian’s Fund
Why is it important to draw up a will? To ensure that your:
- Wishes are carried out after death.
- Property and assets are distributed as specified.
- Dependents are looked after financially.
- Estate is solvent i.e. that you do not leave beneficiaries with the financial burden of settling an insolvent estate.
It becomes vital to draw up a will when you:
- Start investing money and accumulating assets.
- Marry or have a life partner.
- Have your first child. This is especially important because, in South Africa, a minor cannot inherit from an estate.
Basic information to include in a will:
- Whether you prefer to be buried or cremated.
- To make specific bequests e.g. valuable jewellery that is allocated to a certain beneficiary etc.
- If your children are minors, to stipulate the Trustees for the trust that will be created once you have passed away.
- Whether you are an organ donor.
- To nominate guardians for minor children.
What happens when you pass away and you don’t have a will?
- A Master’s office will become responsible for appointing an executor over your assets.
- Your assets are dealt with according to the laws of the country. This may not necessarily be in line with your personal wishes. For example, if you are single when you pass away, your assets are automatically transferred to your parents. If you are married, all your assets are to be inherited by your spouse.
- Should you pass away without a will, your assets will be transferred to the State and your minor child will only be able to access the assets at the age of 18 years. This could result in your assets being inaccessible, leaving your spouse and children suddenly losing their home, for example.
Who to choose as an executor for your estate:
- An executor company – they manage estates on a daily basis and have experience in the field.
- A family member – in such a case, this person should preferably have a financial or legal background. Note that managing a person’s estate could place immense stress on a person.
What happens when your liabilities exceed your assets?
- Insolvency of estate: The beneficiaries of your estate (family members or friends) are expected to contribute to settling the estate, or your assets are to be liquidated.
- Solvent estate: There are not enough finances to pay the executor and liabilities because of special requests where life insurance goes directly to a third party. Therefore, beneficiaries are expected to contribute to the estate as well.
Other interesting facts:
- There is limited financial growth in the Master’s fund. Should you have a will in place, your assets are placed in a trust where the finances can be managed more effectively. Trustees can, for example, buy property and ensure maximum growth of your assets until it can be accessed by your minor child(ren).
- There is no estate duty (tax) when assets are transferred from you to your spouse should you pass away. However, estate duty is charged on all assets exceeding R3,5 million to a third party.
- The maximum fee chargeable by an executor is 3.99% on an estate including VAT. One can stipulate a lower fee in the will. This is calculated on gross assets (it does not take into account your liabilities).
- If you have not nominated a guardian for minor children, the court will appoint the most suitable person(s).
- If someone contests the wishes of a testament, the case will go to High Court.
This week’s guest:
- Fanie Jansen van Vuuren