Every year during National Wills Week, thousands of South Africans take advantage of the opportunity to have a basic will drafted for free. Yet many still put it off, assuming they will “get to it one day”.
The truth is clear. Dying without a will can leave your loved ones facing unnecessary stress, delays and financial hardship if something happens to you.
Why getting a will right matters
This year’s National Wills Week challenges South Africans to stop procrastinating. South Africans are urged to take the opportunity to get their affairs in order and focus on getting a will right.
Many of us are ill-prepared for death. While no one likes to think about dying, the reality is harsh. If you do not make provisions in time, those you love most will suffer the consequences of your lack of preparation.
The key questions you should ask yourself when it comes to dying:
- What do I want to happen if I were to pass away?
- Should the worst occur, what are your wishes?
- What do you want to leave for your family?
- What will become of your assets?
These are essential questions. Once you know the answers, you need to clearly document them in a Last Will and Testament to ensure you are getting a will right.
Distributing assets according to your wishes
Having a will ensures that your assets are distributed according to your wishes after your death. It also prevents family disputes and ensures your loved ones are provided for. In South Africa, without a valid will, your estate will be distributed according to intestate succession laws, which may not align with your intentions.
Your will needs to:
- Be in writing.
- Nominate your beneficiaries.
- Nominate guardians for minor children.
- Appoint an executor to manage your estate.
- Specify how your assets should be distributed.
- Specify whether you want to be cremated or buried and whether you are, or want to be, an organ donor.
- Make provision for a trust, if required.
- Nominate trustees.
- Be co-signed by independent witnesses to ensure compliance with the law.
While free online tools exist to help you draw up a will, it is worth paying a professional. This could be your financial adviser or lawyer. There are specific requirements involved in drafting and signing a will. If you fail to follow these, you risk your will being contested or deemed invalid.
A professional helps you consider tax implications, methods to cover estate fees and other associated costs and the liquidity of your family upon your passing. Getting a will right ensures your family have cash to cover living expenses and pay creditors.
Do I understand the full costs associated with passing away?
Spoiler alert: The costs are probably higher than you realise. Common estate administration fees in South Africa typically include executor fees, up to 3.5% of the estate’s value excluding VAT, conveyancing fees, advertising fees, master fees, other miscellaneous taxes and estate duties.
Estate duties are 20% on the first R30 million and 25% on the dutiable value above R30 million. These fees can significantly reduce the assets left to beneficiaries, especially if the estate is not liquid.
A lack of planning could force beneficiaries to sell assets, like properties or investments, to settle the fees. This can diminish the estate’s value and impact the family’s financial security, which is why sound financial planning is so important.
Ensuring financial security and coverage
How do I ensure there is enough money to cover these costs and that my family is not financially impacted? Several avenues exist, but one of the best ways is to have a life insurance policy in place.
Life insurance provides financial support to a family after the policyholder dies. It offers the necessary liquidity to settle fees and taxes. It also covers any debts you may owe and ensures the living expenses of your family are met.
Consider the amount of coverage needed, who your beneficiaries will be, and the affordability of your monthly premium. Align insurance benefits with the overall estate plan to avoid liquidity issues.
For example, if the estate requires liquidity to settle debts, the beneficiary should be the estate, not another person. Consulting a financial adviser helps distinguish between the estate’s needs and those of the beneficiaries. This is another critical element in getting a will right.
Where do I start?
A professional can assist in drafting a legally binding will. They also ensure that life insurance and other financial planning aspects align with your estate plan and any other family goals, such as education. The key is to take it one step at a time. Focus first on the most critical elements.
Marnus Mostert | Franchise Principal | Certified Financial Planner CFP® | Consult by Momentum | mail me |