Why a will is vital

Every year, thousands of families are left in difficult financial situations as a result of their loved ones not having put in place adequate estate planning in the event of their death. In South Africa, it is estimated that as much as three quarters of South Africans admit to having no form of estate planning in place.

These results are consistent with international findings. According to a survey by US legal website FindLaw, nearly 60 percent of Americans do not have a will in place. The same survey suggests that older people are more likely to have arranged a will, while only a quarter of those aged between 25 and 34, who are often most likely to be starting a family, have a will in place.

According to Chris de Klerk, Corporate Actuary at PPS Insurance, many people mistakenly believe that they do not have enough assets to warrant the drawing up of a will. “If you have any property or financial assets such as life insurance, shares or cash, it is advisable to draw up a will in order to ensure that your assets are properly distributed when you die.”

He says that many people also believe that if they are married, their spouse will automatically receive everything in the event of their death. “If you don’t have a will in place at the time of your death, then you die ‘intestate’, which means the Master of the High Court needs to intervene. Generally, this means that your spouse and children will receive the assets. However, this can be a lengthy drawn-out process which can be avoided if a will was already in place.”

De Klerk says that funds solely in your own name may also be frozen by the Master of the High Court until the matter of your assets has been resolved, potentially leaving your family struggling financially, especially if you are the main breadwinner.

Determining guardianship of children

For parents there are other important aspects that need to be considered when planning their estates, including trust funds and guardianship of the children. Without these issues being clearly stipulated, guardianship of any dependents would be left up to the courts to decide.

“Estate planning is often not taken into consideration by young people. This becomes even more important when children are involved. Matters such as who will look after your children and how the inheritance will be structured are vitally important and should be clearly explained in a will.”

People who don’t have dependents, such as a spouse or a child, may believe that there is little need for them to be concerned about estate planning. However, it is important to note that making a will is not just about deciding who gets what.

De Klerk says that part of the process of estate planning is the ability to nominate a power of attorney for both your finances and your health care. “One can also create a living will explaining exactly what kind of care you wish to receive, should you become unable to make that decision at a later date.”

“Regardless of how wealthy you are or how many dependents you may have, ensuring that the right person is appointed to make health care decisions on your behalf should you become incapacitated is crucial.” A will for every South African

The Fiduciary Institute of South Africa (FISA) estimates that only ten percent of the South African population has a will. FISA, which represents R200-billion of fiduciary assets, has a vision for every South African to have a will regardless of the size of their estate.

Speaking at a presentation in Johannesburg, FISA EXCO member Graham McPherson said South Africans were fortunate to have freedom of succession and yet it was hardly used. He said there are currently fewer than five-million wills registered in South Africa. The number of valid wills may be even lower as many people have more than one will in circulation.

Of total reported adult deaths an estimated 70 percent comprise estates worth less than R125 000. These are dealt with by the Administration of Deceased Estates Act and do not require a professional executor unless stated in a will. The remaining 30 percent of adult deaths are estates worth in excess of R125 000, for which the Master of the High Court requires a full executor appointment which may or may not have been provided for in a will.

McPherson said: “A will clarifies the devolution of assets to family members at a time of grief. A will is not only an instrument in estate planning for high net worth individuals. If every South African had a will, this would reduce the number of intestate estates to be administered. A will can furthermore be invaluable in guiding trustees of retirement funds in determining dependants when deciding on death benefit distribution in terms of Section 37C of the Pension Funds Act. Over time, this could make an impact on the large number of unclaimed benefits in the country.

Annual review ideal

Through its practitioner training and consumer awareness programmes, FISA is tackling the need to educate and inform the public about the importance and intricacies of a will. Individuals need to know that their marital regime takes precedence over their will and that ongoing legislative and tax changes mean that a will needs to ideally be reviewed once a year.