A Will forms a crucial part of responsible financial planning
A death of a loved one is never an easy aspect for one to deal with. There is the emotional pain of having to deal with the finality of the situation but what happened if not only if there was an emotional pain but a financial pain as well associated with it Financial pain-what am I talking about?
Someone very close to me passed away 14 months ago. A woman who had a very tough life but always managed to save a little at the end of the month. By the end of her life she had accumulated a large amount of savings.
Where am I going with this story…? When she passed away, she had no Will and as a result she died interstate. Her investment vehicle was a Unit Trust. Just to clarify you cannot appoint a beneficiary with a unit trust so as there was no will the account falls into the estate. Had there been a will the
estate could have been wound up within 12 months and the investment paid out to the beneficiary.
Instead here is the reality…. No will means you have to apply to the master of the high court to appoint an executor. This process has taken 14 months to complete. You may ask well just appoint a family member. It used to be that easy but new legislation stipulates that an executor needs to suitably qualify to do the work.
Finally, the process has begun but there is still at least another 12 months ahead. In the meantime, the beneficiary has fallen on very hard times and has had to sell his house. Yes, the money will be received but it will be too late.
In South Africa the statistics are frightening. In 2013 1 000 000 deceased estate went through the master’s office of which only 100 000 had wills that is a frightening 10% of people have wills.
(Masters branch performance 2013/2014)
A question I get asked daily is what happens to my children’s inheritance if they are below 18 years of age.
This is another discussion on its own however a testamentary trust would be set up to ensure your minor children are looked after until a certain age that you specify by then they will be entitled to their inheritance.
So, what happens if there is a will in place without mention of this or as previously discussed no will is in place.
Funds will be left in the guardian’s trust. The justice department of south Africa outlines the way in which you can access the funds in the trust. You must please remember it is far more difficult for the guardian of your child to obtain funds from this fund as opposed to a testamentary trust. As we
know with our judicial stem things take a long time and there is a fortune of red tape.
But it is not all bad…Clients are often reluctant to do a will as they feel there are large fees that are incurred in drafting the will. In truth a will can cost you as little as going to your local news agent and buying one off the shelf.
The important thing is to ensure it is written up correctly. Yes, the executors will charge fees but these can always be negotiated.
How do we avoid such a situation as mentioned in my article?
Ensure there is a proper will in place and secondly ensure you have enough liquidity in your estate to ensure 24 months of expenses whilst the estate is being wound up. And what easier way to do this then by purchasing life cover through one of the large insurance companies.
Mike Becker CFP ®
Published on Moneyweb 03/Aug/2015
https://www.moneyweb.co.za/news-fast-news/where-theres-a-will-there-is-a-way/