Part of living our lives is understanding that death is always an unexpected event, and it happens to all of us eventually. Every one of us leaves a legacy when we pass on and leaving a good legacy that provides security for your loved ones can only happen if you have drafted a will.
As more and more South Africans struggle with their health, it is up to us to share our knowledge base about the financial implications of one’s death with as much empathy as possible.
Sadly, research has shown that 70% of South Africans do not have a last will and testament – and equally worrying numbers are without insurance cover leaving families unprepared and without the guarantee of financial stability and support.
At Liberty, we support our clients in addressing these worrying trends, helping them access the legal expertise they need to set up a well-considered last will and testament. When our financial advisers receive questions about wills and estate planning, the vast majority relate to the costs and procedure.
Firstly, we need to dispel the myths and misconceptions about wills. No, if you die without a will, your estate will not be given to the State. However, the Intestate Succession Act does stipulate who the beneficiaries of your estate can be, and this can cause complications for other loved ones, for example for those who are not direct relatives. It is only after 30 years post-death, if no beneficiaries have come forward, that an estate will be forfeited to the State.
Identifying these beneficiaries – and what they will receive – is one of the most important considerations for these conversations around death, because without a will, you do not have a say in who benefits from your assets.
From a layman’s perspective, the importance of a valid will’s is often underestimated. Many mistakenly believe their heirs can take any document stating a deceased’s wishes to a court for approval. However, while certain case law has set some form of precedent for this, it ultimately complicates the process and there is potential that a court could disagree and declare the document invalid. International assets are also not necessarily covered by a local will, and you may need to have a will drafted in the same jurisdiction as your overseas property.
Effectively, having a well-drafted will can save your client’s loved ones many headaches.
Lastly, our clients need to know that it is the Master of the High Court in a given region that issues letters of executorship, a vital step in the process. When a valid will is in place, the executor’s first job is to pay all the creditors of the estate, meaning the estate must be liquid to meet all expenses and debts. Executors can only make distributions to the heirs when the creditors are paid off. Part of estate expenses would include taxes, estate duty, capital gains tax, income tax, executor fees and any debt the deceased had. Ultimately, the estate needs sufficient money to be wound up, and sometimes the only way to do this is for the executor to start selling assets.
However, there are ways to deftly avoid this. Life insurance can be the perfect complementary tool to ensure liquidity, an affordable and effective way of injecting cash into your estate to cover these costs and any other debt.
For many of us, asking these questions means that we must confront our own mortality, and some people may be embarrassed to ask what they think may be perceived as ‘basic’ questions. But we need to reassure our clients that this is one of the most important financial discussions we can have, and that a will – and life insurance – can bring them the ultimate peace of mind.
Disclaimer: This article does not constitute tax, legal, financial, regulatory, accounting, technical or other advice. The material has been created for information purpose only and does not contain any personal recommendations. While every care has been taken in preparing this material, no member of Liberty gives any representation, warranty or undertaking and accepts no responsibility or liability as to the accuracy, or completeness, of the information presented. Please consult your financial adviser should you require advice of a financial nature and/or intermediary services. This article does not constitute tax, legal, financial, regulatory, accounting, technical or other advice. The material has been created for information purpose only and does not contain any personal recommendations. While every care has been taken in preparing this material, no member of Liberty gives any representation, warranty or undertaking and accepts no responsibility or liability as to the accuracy, or completeness, of the information presented. Please consult your financial adviser should you require advice of a financial nature and/or intermediary services.