Death is surely certain, but its consequences don’t just affect you. Many people have no Wills, assuming that their belongings will automatically be inherited by ‘obvious’, intended beneficiaries. But that’s not always the case. The COVID-19 pandemic certainly prompted multitudes to consider their health and estate affairs. From 12-16 September was the Law Society of South Africa’s National Wills Week. This article reiterates the significance of Wills.
Deceased estates exist when people die leaving property and assets to be distributed amongst beneficiaries in terms of a Will or intestate. Wills outline how deceased estates will devolve. The estates are administered in terms of the Administration of Estates Act 66 of 1965 and must be reported to the Master of the High Court.
Dying without a Will translates to your assets being distributed according to the Intestate Succession Act’s provisions, wherein the rules of devolution may not necessarily reflect your actual last wishes. The estate will be divided amongst the surviving spouse(s), children, parents or siblings according to a set formula, and the surviving spouse inherits the greater of a child’s share or R250 000. Without a Will, unintended persons may benefit from your estate and family conflicts arise because of no clear estate distribution instructions. Moreover, the process of appointing an executor may be time consuming, leading to significant administrative delays of your deceased estate or extra costs. Ultimately, beneficiaries are mostly affected, particularly if they are minors.
Through a Will, you bequeath assets as you wish. You can even align your Will’s scheme with your other estate planning tools such as ante-nuptial contracts, inter-vivos trusts, or benefits from retirement annuities, pension funds and life policies. This privilege is called “freedom of testation”, including nominating an executor.
Executors administer deceased’s estates according to testament wishes, accounting for all assets at date of death and settling outstanding debts. Where no executor is nominated, the Master of the High court will appoint someone. Executors should be knowledgeable, trustworthy and honest as this can potentially have devastating effects including possible penalties and interest on the estate duty if not paid over to SARS within 12-months of date of death. Executors play an important administrative role in winding up the estate.
A Will allows you to nominate your minor children’s guardian should you die. Without a Will, the state will decide the children’s guardian and the selection choice may not have been your preferred choice.
Other advantages of awarding a surviving spouse certain assets include roll over relief available for Estate Duty and Capital Gains Tax. For instance, section 4A (Estate-Duty Act) provides that the first R3.5m of the first dying spouse’s estate is not subject to the payment of Estate Duty and section 4q asserts that any bequest’s value to a surviving spouse is also not subject to estate duty. This minimizes the first dying spouse’s exposure to Estate Duty and CGT. Whatever is left in the hands of the surviving spouse, will ultimately be taxed upon their death, subject to the exemptions.
Having a Will is beneficial, but it’s equally important that it is valid. If the Will’s validity is contested, the courts will adjudicate on its validity. The Court can declare a Will to be upheld or revoked and order the Master of the High Court to either accept or reject a Will. However, the flexibility provided by the Act does not absolve the deceased from the formalities prescribed in the Act. Any Will must comply with the formalities in order to avoid unnecessary litigation.
A well-crafted Will helps speed up administration processes and limit potential disputes. Without a Will, a lifetime’s work could be undermined and your otherwise carefully constructed commercial and legal safeguards could be negated. What’s more, your dependants, family and beneficiaries are likely to suffer the hardship of an uncertain financial and legal future because of the inevitably long delay in winding up your estate.
Remember, where there is a Will, there is a way!
Please note that the above is for information purposes only and does not constitute tax/financial advice. As everyone’s personal circumstances vary, we recommend they seek advice on the matter. While every effort is made to ensure accuracy, Nexia SAB&T does not accept responsibility for any inaccuracies or errors contained herein.
Article prepared by: Tinashe Chipatiso (Tax and Corporate Consultant)
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