Debunking myths about wills

Our National Manager of Succession Planning and High Advice, Ken Newport, sheds light on the inaccuracies and pitfalls of the information expressed in the video.

Myth 1

“You do not need a will, especially if you are a working-class person and don’t have a lot of properties”. 

Response: A Will is important due to the fact that in South Africa you have freedom of Testation which allows you to prescribe how you wish your estate to be distributed. A will also allows you to provide other important directions such as preferred guardians of minor children, setting up of Testamentary Trusts (so as to avoid minor’s inheritance from going into the Government Guardian’s Fund), appointing an Executor, etc. all by way of the Will. 

If you do not have a will then your estate will be distributed in terms of the provisions of the Intestate Succession Act 81 of 1987. The government will distribute it according to a set formula which may not be how you intended your assets to be distributed.

Myth 2

“To avoid taxes and administration fees – don’t put anything of value in your will”.

Response: Your estate, in its entirety (not just your Will) is administered and attracts taxes and fees, even if you do not have a will this is still the case. The Estate Duty Act 45 of 1955 prescribes that a person’s estate consists of all property of that person at the date of death and all property which in accordance with the Act is deemed to be property of that person at the date of death. This is regardless of whether or not that person stipulates such property in their Will or has no Will in place.

Myth 3

“The only things that you should have in your will are what you want to give your children, and what you want to happen when you die, how you get buried / ashes scattered etc. and items like shoes, bags, belts, clothing, jewellery”. 

Response: In the event of not dealing with your entire estate in your Last Will and Testament,  you will die partly testate and partly intestate, meaning that the bequest and provisions you make in your will shall be carried out accordingly, however, the remainder of your assets will be distributed in terms of the provisions contained in the Intestate Succession Act 81 of 1987. Failing to provide for provisions such as creation of Testamentary Trusts for minor children would mean that the inheritance of such minor children will be placed in the Government Guardian’s Fund.

Myth 4

“Assets, investments, share portfolios, shares, policies, house – don’t put it in a will. If you just nominate the beneficiaries in your policies and pensions then you don’t need a will, as long as they’re of age – they will inherit it. Put your beneficiaries as co-owner of the investments. Make sure that you don’t need lawyers and administrators. Avoid the process – children can directly inherit.”

Response: Although beneficiary nominations are possible for certain investments, life policies and retirement funds, and will therefore not form part of your executable estate, these assets will still be subject to relevant taxes such as estate duty and capital gains tax. However, this is not possible for a majority of assets and certain assets are restricted from having co-owners. 

Even if the assets are not included in your will or you do not have a will in place, your estate still needs to be reported to the Master of the High Court in terms of the Administration of Estates Act 66 of 1965, and an executor appointed in order to administer your estate. By law executor's fees are up to a maximum 3.5% plus VAT (if applicable). 

There are also further complications with his view of transferring ownership of assets to dependents as it doesn’t account for the possibility of them passing away before you do.

Myth 5

“The rich don’t own anything when they die – therefore it doesn’t go through probate and they don’t pay estate duty. They avoid all fees because of proper estate plans. (We assume he is referring to trusts). If you don’t have a lot – put everything in your children’s names. Beneficiaries must be the ones to claim the monies on their behalf.” 

Response: 

Firstly, probate is foreign concept and is not applicable in South African Law.

The notion that the “rich” don’t own anything when they die is nonsensical.

A proper estate plan is absolutely essential, and this includes a correctly structured Last Will and Testament and may include other vehicles such as trusts where they make sense.

Inter vivos Trusts also form part of a proper estate plan and having such structures can greatly reduce costs and taxes when you pass away, as assets owned by a Trust do not form part of your personal estate and are therefore not subject to executor fees and taxes such as estate duty and capital gains tax when you pass away. However, these structures can also be complex and costly to set up and run required professional to help administer and do proper accounting thereof.

For professional advice on estate planning and to draft your will, securing your legacy and your family’s financial future, contact Capital Legacy today.

Capital Legacy pioneered the Legacy Protection Plan™. This cover is the most cost-effective way to provide funding to cover your estate legal costs and fees when you pass away. The Legacy Protection Plan™ integrates with your will to indemnify you against the legal fees and costs at death, including executor fees, conveyancing fees, testamentary trust fees and more.

Click here to read more about the importance of a will and the consequences of passing away without one.

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