By Dennis Conway RFP™
Your Last Will & Testament is one of the most important documents that you will ever sign. It is more important in its own way, than the hundred or more contracts and documents that you will sign in your lifetime. We all die sooner or later. Through our wills, our wishes we have legal force in what we want for our loved ones or special causes we may care for.
Your estate, to which your will refers, is everything you own and owe – whether you are living or not.
Reviewing your will is essential over time, especially as we accumulate or sell off assets. Our children grow up and marry, or form partnerships, becoming less – and sometimes more – dependant. We also gather new or less obligations in different parts of our lives. All of these have an impact on what we want to, or can leave in our will.
So, before anything else, recognize that your Will is a written wish. It can only have legal force and protection if it is clearly written and there are enough assets and cash, to carry out your wishes.
If you fail to frame your Will properly and provide for demands on your estate, your wishes will be nothing but empty promises, with no legal force or protection for those near and dear to you.
Here is an example of how various rights and obligations will affect your estate – and which factors need to be taken into account when framing your will:
A. Debts, Mortgage Bonds
- Mortgage bonds need to be settled in cash, before property is freed for transfer or distribution. Even if bonded property is jointly owned and a joint bond is signed for, the whole bond amount is too often called up for settlement.
- Proven Debts
B. Marriage Structure Obligations:
- ANC with or without Accrual or Community of Property
- ANC with no Accrual means what is yours is yours and what is your spouse’s is theirs – and that you are free to give away what you want.
- ANC with Accrual has the impact that your spouse has a 50% claim on any gains made during marriage – and that is an additional liability in an accrual estate.
- Community of Property – sharing of assets and liability obligations. Your spouse owns half of your estate (and liabilities)
- However the Matrimonial Property Act recognizes a spouse’s material contributions to your estate over time – and this could be a claim against your estate.
C. Capital Gains Taxes (CGT) & Estate Duty
- Capital Gains Tax is calculated in an estate, with currently 13.3% on the growth of personal assets, as if your assets were sold at the time of death.
- The first R2 million gain on personal residential property (as per the 2014 Budget) is exempt from CGT.
- A further R300 000 CGT once-off exclusion (exemption) against the gain, in the year of death.
- Estate Duty is 20% on assets greater than R3.5m.
- Assets left to a spouse are exempt from Estate Duty, but that then becomes the surviving spouse’s problem in his or her estate, further down the line.
- Assets left to a recognized charity are exempt from Estate Duty.
D. Debts, Maintenance & Alimony
- Debts, which are proven, are valid claims against your estate.
- Outstanding taxes are a significant debt, having priority over all others, except for secured debts, such as those secured by pledge or mortgage bonds.
- Personal guarantees, signed for business or other loans, when called up, can be valid claims against an estate.
- These are valid claims against an estate, depending on the children’s needs (such as education) and or ex-spouses who need the maintenance court order complied with.
E. Special Bequests
- Special bequests need to be carefully considered as they could complicate the estate in two ways:
- a) Can add to an Estate Duty cost.
- b) Cash needed to pay for the bequest could affect the amount of cash needed to pay the estate’s taxes and other debts.
F. Estate Cash
- Cash/ Liquidity is essential for settling debts, taxes and even executors fees (where a professional executor is used). Should the estate be short of cash, then assets need to be sold by the executor to meet these obligations.
- Should not enough assets be found, the estate will be declared insolvent. With an insolvent estate, Bondholders and taxes are first paid, after which a liquidation dividend is paid to remaining claimants and creditors.
- Life insurance is essentially cash on the death of the insured. However it is not always paid into the estate; highlighting the need for proper advice.
THE NEED FOR PROFESSIONAL ADVICE
We live in an age of wonders. The price for this modern age comes with increasing complexity, rules, taxes and regulations. In each field we increasingly need specialist advice, be it in computers, travel, or administration of our day-to-day affairs.
The question is not whether you need your will (revised) or not. The questions are how correct it is to your wishes, how strong it is to meet your wishes – and how valid it is in law.
Our field of expertise is to assess what is needed – and use our specialist resources available to us through our institutional connections.
It’s your call.
Contact us today for a Free of Charge Review of your WILL
011 768 1022