Before we start… This is part 2 in my Legacy Series; you can find part 1 here.
One of the most important decisions when drawing up a Will is the choice of Executor. Let’s just look at some of the uncomfortable truths behind ‘The Executor’. One of the nuances that you need to understand is thatjust because someone is nominated as the ‘executor’ of the estate, they do not have to do the winding up and the administration of that estate; the nominated executor can delegate those responsibilities to a professional person/company. The maximum fee allowed by an executor is 3.99% plus VAT, so if you appoint an institution, you may have given away any ability to negotiate that fee and that small detail, usually brushed over by FSPs, Lawyers and other ‘interested parties’, could be costing your future estate hundreds of thousands in unnecessary costs.
I am not saying that the executor should wind up an estate for nothing; to the contrary, I am a great believer in win-win. It is a lot of work to be an executor/estate administrator, and they deserve to be compensated. In a small estate, 3.99% (ex VAT) is probably fair.
On a large, well-organised estate where the fee can run into hundreds of thousands of rand, it just isn’t. Just because you nominate an executor, don’t assume that the Master will accept them, especially if they are unqualified and inexperienced. My preference is to make the surviving spouse the executor, with the caveat that they are fully apprised and educated on what they need to do in the event of a death, specifically regarding the appointment of a professional estate administrator. I include a simple, ’notes to the executor’ addendum in the Wills I draw up for my clients so that they know what to do.
Before you even get to drawing up a Will or getting someone to do it for you, you need some estate planning; you need to know exactly what assets and liabilities are in the estate. It’s a matter of at least getting your ducks in the same pond, even if they’re going to need a lot more work to get them in a row and quacking the same tune. Those of you who have been following my blogs are probably already familiar with my RedFile organisational template (still free on request), where copies of the Will are kept right at the top. The last thing your loved ones want to do while they are grieving is to go through mountains of files and paperwork looking for a Will.
Don’t assume the Will is safely lodged with a professional. If your financial planner has prepared a financial and estate plan with you and knows the complexity (or otherwise) of the estate, then he or she will be able to help negotiate a reasonable fee with the executor for you.
One very important tip: Double-check the spelling of names and ID numbers for everyone in the Will. On the death of a person, IDs and banking details, etc., are submitted to the executor, and you don’t want something as silly as a spelling mistake derailing the process. This includes company registration numbers, Trust numbers and Charity registration numbers.
I am often asked – once you’ve drawn up a new Will – what should you do with the old one?
To start with, dating the Will is extremely important (even if not technically required). One of the first clauses in the new Will should cancel any old Will – but you need to go further than this. My preference is for the old Will to be destroyed, or at the very least defaced in such a way that it is clear to anyone that the Will has been cancelled. If you really must have a memento of the old one, scan in a digital copy (with clear cancellation marks) and destroy the original.Another important point: if you are named as a beneficiary or executor of a Will, or are asked to be a witness, and you have doubts about the “cognitive ability” of the person at the time they are signing the Will, vocalise your concerns to the person drafting the Will, the author. If your concerns are ignored, document your objection to the author of the Will for posterity, not necessarily the Testator or Testatrix (as the ‘owners’ of the Will are called – today the gender-neutral term Testator is used irrespective of gender identification).
The Beneficiaries are probably all we really think about when it comes to the Will, and can I just give you one piece of advice upfront – don’t try and rule from the grave. Trusts are one way ‘ruling beyond the grave’ can be achieved. Testamentary Trusts are usually put in place to safeguard the interests of minors and adults who do not have the capacity to manage money. In my experience, choose your trustees carefully – make sure they have the right education, experience and background, then let them manage the estate with their discretion within a broad framework of guardrails (what the capital and assets can and cannot be used for, for example).
If a Testamentary Trust is triggered by the Will, the framework of that Trust will be guided by the Will. It effectively becomes the ‘Trust Deed’ of that Testamentary Trust.
You can handle bequests that may go to minors in several ways: In a small estate, you can leave it up to the discretion of the executor whether to form a Testamentary Trust (expensive) or to use regulated beneficiary funds (that are not controlled by the government). If you ignore the potential formation of a Testamentary Trust for minors in your Will (or have no Will), the funds could fall into the (government’s) Guardian’s fund, and we all know how well government bodies run. In larger estates, Testamentary Trusts are probably a no-brainer, and you can push the eligibility date to proper adulthood – their 20s or 30s rather than 18. Laws, regulations and markets change – let the Trustees manage the investments as the world evolves after your passing. Your primary consideration should be your spouse, financial dependents and minor children – if you have none of these ‘obligations’, then you can do as you please. You can, theoretically, cut ‘dependents’ out of your Will, but if there is provable financial dependence, divorce obligations, or spousal/ child support, they can take this to court. Trustees of Retirement Investments will also consider all financial dependents.
Be aware that laws around your marital regime can impact your estate, especially the Community of Property and ANC with accrual, which will also automatically allocate the other party’s share of the estate to the surviving spouse, whether you like it or not. While we’re talking about marital dysfunction. If you get divorced, you have 3 months to change your Will and beneficiaries, or the existing Will shall prevail (Section 2B of the Wills Act 7 of 1953). Remember that anything left to a spouse is estate duty-free (in terms of section 4q of the Estate Duty Act – see below).
In your Will, you should also put in alternate beneficiaries should you die at the same time or within 3 months of the other primary beneficiaries. It is often a good idea that a clause similar to the following be used: ‘estate is to be divided among their descendants in equal shares per stirpes’. You can read more about it here. This clause means that if a beneficiary of a Will is no longer alive, then their share of the proceeds of your estate will be disbursed according to this ‘per stirpes’ principle (to their progeny essentially). This only applies to the ‘first generation’ and does not work like the ‘intestate laws of succession’. If you don’t add this simple phrase, then potentially his or her share will go back into the pot to be divvied up between the other, surviving beneficiaries– potentially cutting their progeny out of the estate.
I also have a free ‘Will checklist’ (summarising most of the key points here) available on request.
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Next year – Vision, Mission etc NEW
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Next Year – Consolidation
Abdication or diversification?
Carbo-loading your retirement
Spoiled for choice
Who needs a plan anyway
8 questions you need to ask about retirement
What to do when interest rates drop
How to survive volatility in your investments
What to do when interest rates drop
Difficult Financial Conversations
Financial Implications of Longevity
Kick Start Your Own Retirement Plan
You matter more than your kids in retirement
To catch a falling knife
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2025 Budget
Apportioning blame for your financial state
Tempering fear and greed
New Year’s resolutions over? Try a Wealth Bingo Card instead.
Wills and Estate Planning (comprehensive 3 in one post)
Pre-retirement – The make-or-break moments
Some unconventional thoughts on wealth and risk management
Wealth creation is a balancing act over time
Wealth traps waiting for unsuspecting entrepreneurs
Two Pot pension system demystified
Cobie Legrange and Dawn Ridler,
Rexsolom Invest, Licensed FSP 45521.
Email: cobie@rexsolom.co.za, dawn@rexsolom.co.za
Website: rexsolom.co.za, wealthecology.co.za