A blueprint for your legacy

by | Jun 4, 2021 | Advisory Services

You would never hand over your investment portfolio to a stranger offering to manage it for free, so why would you do the same with your Will? It’s a crucial document that affects your entire financial strategy.

By Simon Turner, CEO, for  Sentinel International

Most people know they need a Will, but surprisingly few know just how important it is – and how relevant it is even while you’re still alive. A simple Will might be fine for some people, and there are numerous free templates available that you can use, but what if your life doesn’t fit into a template? How would you even know if it doesn’t fit into a template? That’s when you should enlist the help of a professional.

Which professional, you ask? A quick Google search reveals dozens of financial service providers, financial planning and estate practices – small and large – offering to do your Will for free. Saving money is never a bad idea, but in this case you should think twice. A Will done for free is often not much better than a template, and the ulterior motive is that it is often linked to a product being sold, or the firm who drafts your Will will assign themselves as executor of your estate  – without asking – thereby earning a healthy percentage of the value when you pass away.

Instead of thinking of your Will as a necessary evil – something you’d rather not spend money on – consider it an integral part of your entire estate planning strategy. Done right, it doesn’t only save money, it can prevent family disputes, hassles, unexpected invalidities and other complications.

The dangers of dying intestate

The last thing you want to do is die without a Will, because your estate will then be subject to the law of intestate succession. Beneficiaries you might never have wished to inherit might benefit, and those you genuinely cared about might have no legal right to any inheritance at all. Even if the right people do benefit, leaving the important decision-making to the state can cause unnecessary delays and complications as a result of very long and costly probate processes. A surviving spouse might have to sell the family home, for example, so that the proceeds can immediately go to the children. Worse still, those proceeds could be put into the government Guardian Fund if the children are minors. This will likely not be in anyone’s best interests.

Even more scary is the prospect of dying while your children are still minors. With no Will in place, a court will appoint a guardian and the state will take over management of any funds due to them. An executor will be appointed to wind up the estate, who might have no special interest in the welfare of your family. And you can bet that the appointed executor’s fee will not be up for negotiation…

Freedom of testation: You decide

Under South Africa’s mixed legal system, one of the major benefits of a Will is that it gives you freedom of testation – the right to decide what you want to do with your assets when you pass away. As long as what you are asking for is legally permissible and structured correctly, the sky is the limit. This is not the case in other countries that are predominantly governed by civil law, like France, Italy, Spain, Japan – even parts of the USA. In those countries, ‘forced heirship’ is applied: succession is viewed as the right of the heir, not the testator, and there are laws stipulating that certain family members must inherit, regardless of your wishes. Do you know whether this might apply to you? The only way to know is through proper evaluation of your estate with a professional.

Freedom of testation is therefore a massive privilege, but the only way you can use it to its full potential is if you put effort into thinking about your legacy, with a professional to guide you. You can even go as far as deciding how to deal with significant gifts to heirs that you might have given in the past. If you bought a car for your son, for example, his inheritance can be reduced accordingly so that your daughter inherits fairly, too.

Another superpower built into a Will is the ability to set up a testamentary trust, which is established in accordance with your Will and goes into effect immediately upon your death. It’s a way to safeguard capital and ensure that the beneficiaries of the trust are looked after according to your wishes when you are gone.

Of course, there are also a legion of personal decisions that you can include in your Will. These might not have direct financial implications, but they speak to you as a person – to your moral code and belief system. You can decide whether you want to be cremated or buried, for example, and you can even specify funeral arrangements. (Although, in practice, the Will is often read some time after the memorial service, so it’s advisable to also convey wishes regarding funeral arrangements to close family or friends.)

In short, the more decisions you make while alive, the easier it will be for your loved ones during their time of deepest grief.

Other important considerations

Estate planning is where investment, insurance, tax and the law intersect. It’s even more complex when there are multiple jurisdictions involved – bank accounts, investments or properties in other countries, or relatives living abroad. Here are some important considerations when you’re drafting your Will:

  • Estate duty can end up costing hundreds of thousands of rands, even millions. When consulting with your professional, this is one of the exercises they will do with you to see exactly how much the estate duty might be, and how it can be reduced. Did you know that there are certain estate duty exemptions? For example, bequests to your spouse and charitable organisations are exempt from estate duty and can significantly reduce the value of your dutiable estate. These kinds of considerations would then be taken up with your financial advisor.
  • If you’ve been through a divorce, remember to make sure you update your Will within three months of the date of your divorce. Not doing so could result in your ex-spouse benefiting from your estate, legally, without this being the intention.
  • Have you got offshore assets? Or maybe you’re thinking of investing in some? A professional can ensure that these are adequately provided for in your Will, in the most tax-efficient and legally beneficial manner.

A Will can help you save

Along with everything mentioned above, a professional can also help you structure your assets in a way that will limit estate duty and executor fees when you pass away. Your eyes will also be opened to the ways in which your heirs’ potential inheritance will affect their own estates, and how they can save a bit there, too.

One way of limiting executor fees is to make use of beneficiary nomination forms on any policies you may have. This results in the proceeds being paid directly to your nominated beneficiaries when you die, thereby bypassing your estate. When an asset doesn’t come into your estate, it is not subject to executor’s fees, which can be as high as 3.5% of the gross value of your assets.

When it comes to reducing estate duty, you might want to set up an inter vivos trust, also known as a ‘living trust’, and donate assets to the trust throughout your lifetime. There are other tax considerations to take into account with this kind of structure, but the main benefit is the intergenerational continuity offered, and the fact that these assets do not form part of your estate, even though they are administered for you and your family’s benefit.

Don’t leave it too late

As you can see, drawing up a Will is not as simple as filling in a template. If you live boldly, if you invest boldly, if you love your family boldly… Then you need a Will that ties all of that together, drafted by a professional who is well-versed in everything mentioned above – and more.

A wealth manager recently told us that the wealth management process should start with drawing up a Will. It’s the best way to really get to know your client and his or her family dynamics. People often hide assets or are too ashamed to talk about family issues, but when you’re preparing a Will, you can’t hide from those things. With all the information on the table, the wealth manager can build the best and most resilient financial plan possible, and bring in a professional who can build an equally resilient estate plan. The client will also feel much better getting everything out in the open.

Don’t leave it to the last minute. Speak to us today and get your Will drafted – not only exactly how you want it, but in the best way to achieve what you want.