When you start to think of and plan for your death, the first step is to have a will, taking care to ensure that the will is valid and can be held up in court if need be, and that it provides for your loved ones in the most optimal and practical manner. Let us dive into some of the important provisions and considerations to contemplate when drafting a will.
If you have minor children, it is advised to leave assets that you wish for them to inherit in a testamentary trust. Such a trust will only come into existence if you pass away while your children are still minors and the provisions of the trust must be outlined in your will. This trust will let the trustees make financial decisions on behalf of your children, like how their inheritance is invested, how much can be distributed to your minor children, as the beneficiary of this testamentary trust, for school fees, health expenses, or how a property is managed, to name a few. Leaving property directly to a minor will result in practical complications since the minor will not have the means or ability to take care of the property. The Master can also advise that at the time of inheriting, the property should be sold and that the proceeds should be held in the Guardian’s Fund where it will be kept until they reach the age of 18. Liquid assets left directly to minor children will also be held in the Guardian’s Fund. This fund’s return is a fixed rate determined by the Minister of Finance and it is often a rate below the rate of inflation, which means the money withdrawn from the fund will not be worth the same as when it was invested in the fund. There are also limitations on how much can be withdrawn from the fund for the minor’s maintenance before they reach the age of 18 and claiming these funds can be an administrative burden.
Jointly owned assets
Being married in community of property means, in simple terms, that all assets between yourself and your spouse are jointly owned. Another commonly found situation of jointly owned assets is when you have a business partner, depending on the legal structure of your business. Bequeathing joint assets or even shares in a jointly-owned company to someone other than your co-owner may practically not be possible or can create unwanted complications. It is therefore important to consider this when deciding how joint assets or shares in a business must be dealt with should you pass on. One way to deal with this is to bequeath the joint asset to the co-owner and other assets to other loved ones or dependents. When you have a business partner it is advised that your partner takes out a life policy on your life that will provide them with the needed liquidity to buy your share of the business and other joint assets if you pass away. This will in turn create liquidity in your estate which can be used to settle debts in your estate or can be distributed to loved ones.
Maintenance can be claimed
If a deceased does not financially provide for a spouse or children in their will, these dependents have the legal right to claim maintenance from the deceased estate. Maintenance claims will outrank other claims from beneficiaries in the will. If you have an obligation to financially support someone while you are alive, make sure that your will adequately provides for them when you die, as your responsibility will not pass with you. By not providing for them in your will the winding up of the estate will become a lengthy process as this matter will need to be addressed in court, which in turn will also involve legal fees.
Setting conditions in your will
Some people want to use a will to rule from beyond the grave, controlling their heirs’ behaviour after they have passed by imposing strict goals they need to reach or conditions that need to be met in order to inherit. Unfortunately, this can, in more cases than not, cause unnecessary complications in the process of winding up an estate as it may be difficult to prove whether these conditions have been met and goals have been reached. The executor may ultimately find that enforcing these conditions may just not be practical, which may lead to unhappiness, family rifts or can even cause loved ones to not be taken care of due to unreasonable demands and conditions.
An outstanding mortgage
An unsettled mortgage on property may add complication to the process of winding up an estate and if the implications are not understood it can have devastating effects for loved ones since they may lose their home. If the property is jointly owned and one owner passes away, The National Credit Act, requires the surviving owner to reapply for the mortgage in their own name and if not successful, will be deemed to sell the property and will have to find alternative accommodation. If the sole owner of a property with a mortgage passes away without making any reference to the outstanding debt on the property in his or her will, the risk of loved ones losing their home may also be realised. According to Section 4(b) of the Estate Duty Act, all debts, including mortgage bonds, owed in South Africa will be deducted from the estate before any distributions are made, which can leave loved ones with less inheritance to help them manage financially. This can, however, be prevented by clearly stating who should take over the debt in your will. As explained above, note that the person taking over this debt will, however, have to apply for it in their own right and it is therefore important to ensure whoever is elected has the financial ability to qualify for such a loan and is willing to take over this debt.
Assets with emotional values
A will should not only address assets such as properties, bank accounts and investment policies. Some assets may have sentimental value to you, your significant other, children, family members or even friends that often do not have a monetary value attached to them, but may be irreplaceable nevertheless. Use your will to address how you would like these assets to be distributed and be mindful and sensitive of how it may affect the feelings and relationships of the loved ones left behind.
A legacy is not just about how you lived but also about how you leave loved ones behind. Being mindful of provisions to either include or exclude from your will can help to ensure that your estate is wound up quickly, efficiently and without unnecessary drama.