Category Life Insurance

Avoiding unnecessary hardship in case of serious illness

12 March 2019 Willie Fourie, Head of Estate and Trust Services at PSG Wealth
Willie Fourie, Head of Estate and Trust Services at PSG Wealth

Willie Fourie, Head of Estate and Trust Services at PSG Wealth

For children with aging parents, or for those whose spouse or siblings become ill, dealing with a will or estate planning can be the last thing on their minds. However, in many instances it can be better to encourage the relative in question to act sooner rather than later and get their affairs in order while there is still time.

The law determines how an estate is dealt with and understanding the basics can be valuable when faced with the prospect of someone you love being diagnosed with a dread disease or debilitating illness, especially one that can cause rapid decline. Here are some points to be aware of.

What if there is no will at all?

The Intestate Succession Act applies here. This effectively means that the Act will determine where any accumulated wealth will go. Perhaps the person without a will is too ill to speak or unable to draft one. A person’s ability to draft a will is not something that can be delegated to another person, especially if that inability is due to a mental illness that precludes that person to understand the nature of his actions. Where the testator (the person who needs a will) is physically unable to sign a document intended to be a will, it can be signed by someone on behalf of the testator. This, however, has to be done in the presence of a commissioner of oaths who includes a certificate at the end of the will to certify the identity of the testator, and the fact that the contents of the document are intended to be that person’s will.

What about power of attorney?

Because Section 2(3) of the Wills Act requires that a document must exist that was intended to be the will or an amendment to an existing will of a person, it is not lawful to try to get power of attorney to draft a will from scratch if the testator is mentally unable to understand and convey his instructions to the wills drafter. You may feel that the person without a will is trying to communicate, but it is inconceivable to think that if someone were to wink their eyes, for example, that it could be construed as giving instructions on a will.

What happens in the case of dementia?

The mental health of an elderly parent is one of the biggest concerns for children, who often have to deal with the trauma of mentally debilitating diseases like dementia. While an elderly parent is mentally able to understand the nature of their actions, they can grant a power of attorney to a child, or other person, to deal with their financial affairs.

However, a problem arises when the elderly parent loses that mental capacity to understand the nature of their actions. At such point, the power of attorney becomes null and void, and the only remedy is to approach the High Court of South Africa to appoint a curator to the estate of the mentally handicapped person. South African law does not permit an enduring power of attorney – which would allow children to continue to manage their mentally disabled parent’s financial affairs.

How are testamentary trusts structured to help?

A testamentary trust can be set up in the estate of a spouse for the benefit of the surviving spouse and can also be structured to make provision for children. This structure ensures that the trustees of the testamentary trust have full control over the assets of a parent, without the associated problems with outdated or illegal powers of attorney. The rights of beneficiaries can be contingent on the trustees exercising their discretion in favour of a beneficiary, depending on the circumstances at the time. The discretionary nature of the trust means that the ownership and benefit of assets can effectively be withheld subject to the trustees’ discretion to determine when and in what proportions a beneficiary will benefit.

If a situation is left to deteriorate too long, it may practically no longer be possible to put a valid will or power of attorney in place. Consulting a fiduciary practitioner in good time and ensuring a legally valid will is drafted while the person is still able to make their wishes clear, can avoid a lot of hardship down the line.

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