A recent report by the Master of the High Court has revealed that less than 15% of South Africans have a will when they die. Not having a will when you pass away complicates the estate process for your loved ones in an already difficult time. Winding up an estate is a time-consuming administrative process that is awkward to navigate, and making it as easy as possible for your family to deal with leaves a lasting legacy.
Many people feel that they do not need to have a will, as they do not have any assets. This cannot be further from the truth. Let’s use a few examples to illustrate what can happen.
Thabo’s story
Thabo is 25 years old and started his first job two years ago. He is single, has no children and insists he does not need a will as he is young and does not have a lot of assets. So what does Thabo own?
He owns a car worth R300,000 that he still owes R220,000 on. The vehicle is insured. His bank account has a balance of around R30,000. Thabo also has group life insurance through his employer that will pay R1,500,000 to his estate when he passes away (no beneficiaries were appointed).
Should Thabo pass away due to a car accident, intestate succession will determine how his estate will be distributed. His total estate will be worth R1,610,000. After costs and taxes, half of Thabo’s estate will be transferred to his mother. As Thabo’s father died in 2012, the other half of Thabo’s estate will go to his father’s surviving child, the half-brother Thabo barely knew.
Should Thabo have drafted a simple will, leaving everything to his mother, the situation would have been much different.
Annie’s story
Annie is a single mom of a four-year old girl. Annie has been separated from her husband for the last two years, but they are not legally divorced yet. Annie inherited a flat from her grandmother, where she and her daughter live. The flat is worth R800,000. She has a small car (2002 model) that is worth R30,000. Annie has no savings, but diligently pays the premiums on a life policy that will pay R1,000,000 to her daughter if she passes away. Annie does not have a will.
What will happen if Annie is to pass away unexpectedly? Her assets will be split between her daughter and her estranged husband. All assets inherited by minors have to be paid to the Guardian’s Fund, which is administered by the Master of the High Court. The flat will most likely have to be sold to liquidate the funds due to her daughter that need to be paid into the Guardian’s Fund.
In addition, the policy proceeds will be paid to the legal guardian of the minor child, in this case, Annie’s estranged husband. There is no guarantee that he will use the proceeds for the benefit of the child.
What can Annie do to make sure her legacy is protected for her daughter? She can draft a will where she leaves her assets to a testamentary trust in favour of her daughter. Annie can also change the beneficiary on the policy to be paid to the trust on her death. The trustees will act in the best interest of the beneficiaries of the trust, in this case her daughter.
Speak to a financial advisor today to help you with your estate planning and to ensure your will is drafted correctly, is valid and can be executed should you not be here anymore.
Leave a lasting legacy for your family and loved ones.
Article created by: Nici Macdonald, CFP®, FPSA®
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