Wealth Management

Jenny Williams
Senior Servicing Consultant

 

 

 

Your Will and testament: A family financial planning necessity 

A last Will and testament should be carefully reviewed and regularly updated to ensure that the surviving family members’ well-being are adequately addressed following the death of a family member. 

Including the whole family in discussions about family financial planning, will ensure that all members are aware of the deceased family members’ specific wishes. 

Jenny notes that “Establishing the requirements and details of a Will is a priority in terms of discussions, which need to take place with your family and financial adviser”.  This will progress to drafting, signing, and storing of the physical document, and ensure that relevant persons know its content, expectations, and whereabouts.  Most importantly, knowing the whereabouts of all the assets of the deceased is fundamental, ensuring no assets are overlooked due to a lack of disclosure which is avoided by effective family financial planning and open discussions.  

 

 

A Will is much more than a simple allocation of assets after death

Wills are mechanisms for effective financial planning which serve a family into the future.  Without a Will, a person will die intestate. This could have significant implications as the deceased leaves behind no indication of what should happen to their estate.  The administration of an intestate estate is extremely time consuming and arduous with often significant financial and emotional consequences for the beneficiaries. 

For example:  In accordance with the Intestate Succession Act 81 of 1987, if the deceased was married and had children, the surviving spouse will only be entitled to the greater of R250 000 or a child’s share of the estate.  This could have a significant impact on the surviving spouse’s ability to provide for the family unit. 

If the deceased left an estate of R6 million and had two children, the surviving spouse would only be entitled to R2 million, and the children will each receive R2 million.  In terms of the Intestate Succession Act, a life partner is not yet recognised as a spouse.  This will result in the life partner of the deceased not being entitled to any inheritance from them and that the deceased’s entire estate will devolve upon their children or parents.  A Will is an absolute necessity in instances such as these.

The value of a Will is dependent on it being relevant to a family’s needs and the disposal of the assets in the most appropriate and equitable manner.  It is important to avoid emotional decisions on the distribution of the assets amongst heirs, ensuring that minor children and family members, who may be incapacitated or unable to manage their own affairs, are provided for. 

The use of a Testamentary Trust (established after communication with family members) would be advisable in these circumstances, with the nomination of suitable and appropriately qualified trustees.  The appointment of guardians (after prior consultation) for minor children of a Testator or Testatrix should be included in the Will. 

The family’s existing finances (while private and confidential outside of family) should be well known to everyone within. Those involved should have a sufficient level of financial literacy to understand the repercussions of the decisions made. 

A Will is an extremely important component of the family financial planning process.  The nomination of a spouse as the sole beneficiary of the estate of the first dying spouse will ensure that no estate duty is payable within the estate of the first dying.  Currently, in terms of Sec 4(q) of the Estate Duty Act of 1955 the value of all property bequeathed to the surviving spouse is deductible from the gross estate of the first dying.  If the entire estate is left to the surviving spouse, the R3,5 million abatement in terms of Sec 4(a) will then roll over to the estate of the second dying and the total deduction of R7 million will be applicable in the estate of the second dying spouse.  Any portion of an estate not bequeathed to a surviving spouse, which becomes part of the dutiable estate will incur estate duty at 20% up to the value of R30 million and at a rate of 25% for any value in excess thereof. 

 

 

Whilst the determining of the provisions of the Will is an important family financial planning process, there are several other important factors that must be discussed and provided for, such as:

• the surviving spouse or partner’s needs and requirements, especially relative to current as well as retirement accommodation.
• existing banking and retirement banking necessities, and importantly, the use of electronic media. 
• a certain level of computer literacy is a prerequisite today for communicating and accessing financial services, such as banking apps or digital payment platforms and family communication.
• basic computer literacy skills, smartphone usage and cyber security.

After the death of the first dying spouse, the update of beneficiaries on existing investments and policies
requires immediate attention, as well as the existing Will of the remaining spouse.

The best way to avoid unforeseen negative consequences for loved ones, is by engaging the services of your professional financial adviser and completing a thorough estate planning exercise – shared with the whole family.

Underestimating the value of estate planning – regardless of how insignificant you may think your estate value is – could leave your loved ones to deal with financial planning matters and asset allocation, contrary to your wishes, and in many cases with negative tax consequences, which are not in their best interests.