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Category Life Insurance

Planning for the worst

09 February 2010 Gareth Stokes
Gareth Stokes, FAnews Online Editor

Gareth Stokes, FAnews Online Editor

Benjamin Franklin was an American inventor, journalist, printer, diplomat and statesman who passed away in April 1790. Few of us can remember any of his inventions, but his name frequently appears in articles about death, taxation and matters of the estate. The reason can be found in his infamous quote: “Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.” We’ve certainly repeated the italicised phrase on a number of occasions. We repeat it today in response to the Fiduciary Institute of South Africa (FISA) press release titled A Will for every South African.

FISA, which represents in excess of R200bn in local fiduciary assets, has ambitious plans “for every South African to have a will regardless of the size of their estate. Speaking at a media presentation in Johannesburg, FISA EXCO member Graham McPherson said there were currently only five million wills registered in South Africa. Allowing for the double counting of documents, McPherson estimates less than one in ten citizens have wills.

Death is a certain event – plan for it

The vast majority of adults dying in South Africa bequeath estates worth less than R125 000. These estates can be wound up without a professional executor in accordance with the Administration of Deceased Estates Act. As soon as an estate exceeds R125 000 – which is the case in approximately 30% of adult deaths – the Master of the High Court demands a full executor appointment. Producing accurate statistics on the value of deceased estates is a tricky affair. Wealthy individuals tend to protect their wealth by moving assets into trusts before death, while life insurance claims are often settled outside the estate.

Rich or poor, you should draw up a will to ensure the assets you’ve accumulated over a life-time go to your intended beneficiaries. “A will is not only an instrument of high net worth individuals,” says McPherson. People should be encouraged to draw up wills to reduce the administrative burden caused by intestate estates. Clear instructions on how to deal with your assets in the event of your death eliminate the chance of these assets ending up in the state-run Guardian’s Fund. Wills also make it easier for trustees to distribute death benefits in terms of Section 37C of the Pension Funds Act!

If you are one of the thousands of South Africans relying on do-it-yourself wills you should reconsider. A poorly prepared will can be declared invalid, in which case your estate will be divided up according to the law of intestate succession!

How to draw up a will

You should thus seek professional assistance before drawing up your will. The best person to approach for assistance in planning your will is your financial planner. Once you’ve assessed your financial situation and determined the best way to divide your assets on death you need to have a will drawn up. This activity can be performed by a FISA accredited practitioner who can advise on critical issues such as appointing Executor and negotiating Executors’ fees. FISA members include practitioners with fiduciary responsibilities, such as lawyers and accountants active in estate planning and taxation and financial advisers looking after clients’ assets. An alternative is to approach your bank which would usually draw up the will in return for you appointing it as the Executor of your estate.

A will must be signed by yourself and two witnesses (not beneficiaries of the will) to be valid. You should make sure that your next of kin are aware of the location of the original will. It makes sense to place the original with a professional Executor for safekeeping and to keep a copy at home. Best practice would also include reviewing your will on an annual basis to take account of legislative and tax changes as well as changes in personal circumstances. South Africans with large offshore investments should consider drawing up an offshore will to handle theirs assets in different jurisdictions.

If Franklin hadn’t coined the ‘death and taxes’ phrase we might remember him for his more practical contributions to science. The inventor was credited with the lightning rod, glass armonica, Franklin stove, bifocal glasses and the flexible urinary catheter among others. Instead we think of Franklin every time we turn to estate planning. Death is a certainty, so take the time and effort to plan for it thoroughly.

Editor’s thoughts: There are many mistakes you can make in living; but only one in dying. Dying intestate can cause untold hardship for the family you leave behind. Before dying you should decide on how your assets will be divided up, draw up a will and ensure enough cash is available (outside your estate) to tide your spouse and children over while the estate is being wound up. Are you a financial planner? If yes, do you instruct your clients to prepare a last will and testament as part of the financial advice process? Add your comments below, or send them to gareth@fanews.co.za

Comments

Added by Clara, 19 Apr 2010
May I have a list of Executors of estates in the Pretoria area? I would not know whom to approach thanks
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Added by J D, 09 Feb 2010
This is putting the cart before the horse. Until the corruption and inefficiencies in the Master's Offices have been sorted out, there is no guarantee that the wishes one expresses in a will will ever be complied with. FISA's strongest efforts should be addressed in this direction
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