LIFESTYLE NEWS - Death is an unpleasant topic that people would rather avoid. However, by planning for your death, you are giving life to the wellbeing of your family and dependents when you are no longer around. It can be seen as a final act of love and is not just for people with vast estates.
South Africa’s National Wills Week 2018 takes place between September 17-21 to emphasise the importance of drafting a will as part of a comprehensive estate planning process.
Importance of a will
A will can take a lot of pressure off a bereaved family during the difficult time of a death. It removes the uncertainty and chaos by providing certainty about how your assets should be distributed. However, a will cannot be a mechanism to rule from the grave.
Floris Slabbert, Director at Ecsponent Financial Services says that a will allows you some control over your assets after death instead of leaving the decision to the state. “A will can name an executor, distribute property, designate guardians and provisions for your children, stipulate how to settle debts and have a clearly defined plan to minimise the tax burden, among more.
Dying without a will
Dying without a will, or without a valid will, means your estate will be administered in terms of the Intestate Succession Act. The most obvious, most unsettling, aspect dying without a valid will is that you forfeit the freedom of deciding what should happen to your estate, which will then be allocated in terms of pre-determined legislated guidelines. This is also a risk when people fail to update their beneficiaries following important life events, like a death or birth in the family or a divorce.
” If you are married and pass away, your assets will be awarded to your spouse in terms of the Act. If you have children, your estate will be divided and shared between your spouse and children. The state, however, decides on this split,” says Slabbert.
Without a will, it may also take a much longer time for an executor to be appointed by the state. An executor is responsible for making sure that all your debts have been settled and all remaining assets are distributed according to your wishes. “Without a will, you will have no say in choosing the right person to carry out this crucial role of ensuring your loved ones are treated fairly,” he adds.
Slabbert adds that there may also be additional costs associated with distributing your belongings in the absence of a will. Without your clear instructions as a guide, conflict among loved ones is also more likely.
What is a will?
A will is a signed and witnessed legal document that specifies how your estate is distributed, names an executor and appoints guardians for your children.
To be considered valid and legal, it needs to meet certain minimum requirements. For a will to be considered valid it must:
- be a written document
- contain a clause revoking all your previous wills
- be signed by you, the testator, on each page.
- witnessed by two competent witnesses over the age of 14 who are not beneficiaries in the will.
A Living Will is a separate document from a standard will and does not refer to the distribution of the estate after your death. Instead a living will stipulates your wishes in the event that you are incapacitated and unable to make decisions. These include what type of medical care and interventions you want to receive, such as decisions around life support, and how your affairs are to be handled in this time.
A will cannot be drawn up if no estate planning is conducted
In addition to creating confusion, dying intestate can also create tax implications that reduce your loved ones’ inheritance.
Slabbert says that professional estate planning is essential before compiling your will.
“There are many considerations to take into account. For example, many people specify that their assets must be preserved for their children in a testamentary trust. However, they do not take the cost of maintaining such a trust into consideration. This can amount to significant figures and is best addressed during the estate planning phase.”
It is often said the only two certainties in life are death and taxes. In this case, we can go one step further and say that Sars follows you to the grave.
Without the proper planning, your estate may attract unnecessary taxes and fees.
Some tax implications upon death include: estate duty, which is a tax on your net assets, capital gains tax, in which the death is considered a capital gains event (there are exemptions, to be described below), and income tax on your taxable income before you die as well as income generated by assets in your estate after you die.
Many of these costly taxes can be minimised or even avoided through proper planning within the rules of the Tax and Wills Act.
Neither estate duty nor capital gains tax is payable on any part of an estate bequeathed to a living spouse. There are also further capital gains tax exemptions if you do not leave your estate to a living partner (surviving Spouse). A rebate of R 300 000 is provided to a natural person in the year of their death.
“Also, there are very clear rules and conditions governing the tax implications of annuities, pay-outs from life assurance policies and lump sums from retirement funds. There are also deductible expenses, such as the funeral cost, and deductible liabilities, such as certain debts. Navigating this terrain requires a clear planning process underpinned by a thorough understanding of estate duty tax and holistic financial planning,” says Slabbert.
An estate planning professional will point out the finer details of these exemptions that apply to you.
After you die
It is important to keep your nominated beneficiaries informed about your wishes and ensure the nominees on all your policies are up to date and where to access copies of your will and other important documents. Not only will it minimise conflict, but also will ensure speedy pay-outs from life insurance policies. Funeral costs and living expenses that your family will have before they have access to your investments can add up very fast.
While the process may seem daunting and one that you would rather deal with another day, it is very important to face the task head-on. With professional help and advice, the entire process becomes manageable and you can have peace of mind that your loved ones will be looked after in a way befitting your wishes.
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