Wills

All too often, we avoid or delay the process of having a will drawn up. The reason is simple –  we just don’t like to think of the inevitable (i.e. death). We also tend to neglect revisiting our wills once they have been drawn up.  Both of these habits are problematic. It is unfair on our loved ones whom we leave behind not to have an updated will that is ready and accessible to them.  Robyn de Kock, a Partner at Eversheds, and a contributor to the blog, explains the intricacies of wills and why we cannot afford to ignore them.

Q: Why is it important to have a will?
By executing a will, one is providing instructions as to how one’s assets are to be distributed and dealt with upon death. Without a will, one would not be able to make specific bequests to heirs, decide who administers the estate and how minors are to be looked after.

Q: What happens if I don’t have a will when I die?
If a person dies without a will, that person is regarded as having died ‘intestate’. Should a person die intestate, the provisions contained in the Intestate Succession Act will apply, in terms of which only certain people may inherit in predetermined percentages.

In the case of minor children, if no provision has been made for a trust to be created, their inheritances will be paid to the Guardian’s Fund and will be administered by the Guardian’s Fund until the children turn 18.

Q: What information do I need to get together to have a will drawn up?
You will need the full names and identity numbers of all people to whom you refer in your will (executors, trustees, heirs, etc), a list of all your assets (local and offshore), details of any life insurance policies you may have and copies of any trust deeds of which you are a beneficiary.  The person drawing up your will should also be aware of any legal agreements that you have entered into that are affected by your death.  For example, where you own shares in a private company, you may have entered into a shareholders’ agreement in respect of such shares which provides for what happens to those shares on your death.

Q: What is an executor and what is his/her role?
An executor is the person tasked with winding up a deceased estate and reporting to the Master’s Office.

The executor should be a person with the necessary skills and experience to administer the deceased estate from start to finish. Generally speaking, an executor will be responsible for reporting the estate to the Master’s office, advertising the estate, taking control of and collecting the estate’s assets, paying the estate’s liabilities and administration expenses, drafting, submitting and advertising the liquidation and distribution account (the L&D account) and distributing the assets of the estate to the heirs.

Q: What are the executor fees?
The statutory fee is 3.5% of the gross value of the estate plus 6% of all income accrued to the estate after death. Having a will (and selecting an executor) gives one the ability to negotiate a lower fee at the time of their appointment.

Q: What taxes will be due on my estate?
Estate duty, which is levied at the rate of 20% upon the “dutiable amount” of the estate.

In addition, death is a Capital Gains Tax (“CGT”) event.  This means that the deceased person will be liable for CGT on the market value of his capital assets as at the date of his death (except where such assets are left to the surviving spouse of the deceased).

Q: Where should I keep my will?
It is good practice to execute two duplicate originals. One original should be kept with one’s important documents (preferably in a fire-proof safe) and the other original with the executor.

It is advisable to keep a file containing the contact details of the executor, information on the assets and policies and other important documents, together with one’s will.  Your close family should know where this “file” is kept.

You should also ensure that your surviving spouse has access to cash in his or her own account.

Q: How often should I update/review my will?
It is advisable to review your will every 10 years or upon the occurrence of a major life event (for example, having children, divorce, marriage, etc).

Q: I have heard that if one leaves assets to a wife or husband there is no estate duty and CGT, is this correct?
Yes, this relief applies to all “spouses” including civil marriages, customary marriages, muslim marriages, hindu marriages, civil partnerships (which include same-sex) and relationships governed by a cohabitation agreement.

Q: I have heard that the first R3.5 million in an estate is free of estate duty, is this correct?
After the net value of the estate has been calculated, a further “abatement” of R3.5 million is allowed.

Notably, in 2010 the Estate Duty Act was amended and now permits a last-dying spouse to enjoy a total cumulative estate duty deduction of up to R7 million for estate duty purposes.

Q: What is exempt from estate duty? (“Retirement Annuities Q&A” / “Life and Living Annuities Q&A” / “Preservation Funds Q&A”) – anything else?
Certain offshore assets (for example, offshore assets acquired before the deceased became resident in South Africa), reasonable funeral, tombstone and death-bed expenses; all liabilities which were, at the date of death, due to persons ordinarily resident in and, to a certain extent, outside South Africa; all administration costs allowed by the Master; expenses incurred in the ascertainment of estate duty; bequests to registered charities; the amount of any claim against the estate for accrual in terms of the Matrimonial Property Act; any property which accrues to a surviving spouse; foreign insurance policies; the proceeds of any other policy:

(i) that was not affected by or at the instance of the deceased
(ii) where no premium on the policy was paid by the deceased
(iii) where none of the proceeds have been or will be paid into the estate of the deceased and
(iv) where no part of the proceeds of the policy will be used for the benefit of a relative or dependant of the deceased (i.e. key man insurance).

Q: Who should be the executors of my will?
It is recommended that one nominate an executor who has experience in winding up estates.  There are many regulatory bodies to deal with (SARS, the Master’s office etc), which can be a time-consuming, tedious and confusing process for the uninitiated.

The alternative is to nominate a close and trusted family member or friend who may then ‘outsource’ the role to an experienced advisor.

Q: How do I make provision for minors in a will?
It is best to provide for minors by making use of a testamentary trust (a trust that comes into existence upon death). The trust can provide for the maintenance, general welfare and education of the minors as well as the appropriate age upon which any residual assets and income of the trust will be paid over to the minors.

A will can also be used to nominate a legal guardian for the minor children.

Q: If I have assets locally and offshore, should I have a local and an offshore will?
You may need to have an offshore will, depending on where the offshore assets are located.   Certain jurisdictions will not recognise a South African will.

If you have any assets of significant value offshore, it is advisable to obtain advice as to whether wills in the countries where the assets are located will be required.

About the Author:

Robyn de Kock is a Partner at Eversheds and is a member of the Society of Trust and Estate Practitioners. She specialises in areas including corporate tax, international tax, trust laws and wills.