Important Considerations related to Estate Planning and the Drafting of your Will

Estate planning is basically the starting point of the process and it is extremely important that this exercise is undertaken before a Will is drafted. Estate planning would take into consideration your assets (whether based offshore or in South Africa), liabilities, any Trusts that you may have or be involved in, your familial structure versus the division you wish to make of your assets in your Will, tax implications in your estate, such as Capital Gains Tax (CGT) and Estate Duty, liquidity of your estate and the calculation thereof, whether you hold any foreign assets and whether a foreign Will is potentially required to cover those assets.

This exercise is of cardinal importance as, if not attended to properly and especially if your estate structure is a more complex one, poor estate planning can lead to a Will being drafted that, on the face of it would appear in order and efficient but, could potentially lead to even bigger problems than not having a Will at all, when the estate is reported and the Will can no longer be amended. Therefore it is imperative that proper estate planning is attended to prior to the drafting of any Will.

There are also various other administrative difficulties that can unintentionally be caused in the drafting of a Will. These are easily avoided by creating awareness and consulting a professional to draft your Will (after the estate planning has been attended to).

The following five problems can occur relatively easily and should definitely be avoided. As you will note they may seem trivial on the outset, but can lead to big administrative problems that cannot always be overcome after death.

1. Not having valid witnesses

Your Will has to be signed in the presence of two or more competent witnesses, who must be present simultaneously. If your Will consists of more than one page, each page needs to be signed by you and your witnesses at the end of that page. Witnesses must also be 14 years of age or older, must be mentally competent and cannot be beneficiaries to your estate. If they are both a witness and beneficiary they will automatically be disqualified from inheriting.

2. Not updating your Will when your life circumstances change

Reviewing your Will regularly is essential and if something drastic changes in your life, such as getting divorced, you need to update your Will accordingly. To illustrate the importance an example with regards to the effect of a divorce on your Will is now explained. At the time that you are getting divorced your spouse may be listed as a beneficiary. An individual is granted a 3 month period from the date at which the divorce order is granted to update / amend their Will. In the event that the testator passes away within this 3 month period, the previous spouse will be regarded as if he or she had died prior to the date of dissolution of the marriage which means that they will not benefit from the estate. However, if the Will is not updated within the 3 month period, it will be assumed that the Testator was still of the intention to have their previous spouse benefit from their estate.

3. Specifically bequeathing more than you actually have

When the executor distributes the estate, there is a hierarchy to be followed in that administration costs and liabilities are settled first (which would include estate duty and other taxes). Thereafter the distribution to beneficiaries can be attended to, with the specific bequests (whether asset or cash) to be attended to first, with rest and residue only being applicable and distributable if there is sufficient net assets left after the administration costs, liabilities and all bequests have been paid. If the administration costs and liabilities exceed the amount available in the rest and residue of the estate then the executor will be forced to ‘abate’ specifically bequeathed assets. The result of the abatement will be that each beneficiary entitled to an asset by way of a special bequest will have to contribute a pro rata amount to the estate (there is a specified calculation utilised in order to ensure that the division is fair) in order to actually receive the asset they are entitled to. The funds contributed to the estate are then utilised to settle all the administration costs and liabilities for which there was insufficient rest and residue. Thus it is very important to have a clear and concise picture of your estate structure when your Will is being drafted.

4. Not listing names of beneficiaries correctly

When listing beneficiaries, they should be listed as they appear in the relevant beneficiary’s identity document – being their full names and, if possible, their ID or Passport numbers. The reason for this is simply that, where the name in the Will and/or the identity document do not correspond, the executor will have to provide confirmation to the Master that the person listed in the Will and the person referred to in the identity document is the same person after they have done a due diligence to actually confirm this. A Will is a professional, legal document and full and complete details and correct information is therefore of the utmost importance.

5. Referring to a group / class of people instead of listing them separately

Where a class of people are referred to in a Will instead of listing them by name it can lead to administrative problems in that a Next-of-Kin Affidavit would have to be lodged confirming the individuals who make up the class of people. To illustrate - if for example, you want to leave R5 million in equal shares to your grandchildren and refer to the ‘group’ instead of listing all your grandchildren by name, a Next-of-Kin Affidavit would have to be lodged proving who they actually are. This is required by the Master to prove that every grandchild is in fact receiving its benefit in terms of the Will and is the only way for the Master to confirm that the distribution is correct and fair simply due to the Will not mentioning them by name.

6. Marital Regime and its Effect on your estate

Your marital regime can also have an effect on your estate one day and therefore this is also extremely important to take into account when estate planning is attended to and before the Will is drafted. When parties are married in community of property they will not have separate estates – even if the one passes away before the other. When the first-dying has passed away the estate of both the deceased and surviving spouse will be considered as a joint estate and the assets of both parties will form a part of that estate and will have to be dealt with accordingly by the estate administrator. 50% (or a half share) of the joint estate would then automatically be awarded to the surviving spouse by way of the marriage with the only the remaining 50% balance being dealt with by way of the Will of the deceased. I have often seen a badly drafted Will that does not take the above into account cause extreme problems with the administration of those estates and the division

of the assets which are difficult to overcome after death and was avoidable had the marital regime been taken into account at the estate planning stage. Just to advise how the other marital regimes could affect a deceased estate – when parties are married out of community of property (without accrual) each party will have their own estates and only their personal assets will form a part of that estate. The surviving spouse would potentially have a marital claim against the estate depending on their dependency on the deceased, terms of the Will and the content and terms of the Antenuptial Contract. With a marriage out of community of property (with accrual) the assets would still be held completely separately and the survivor’s assets will not form a part of the estate of the deceased. The difference here is that there could be a potential accrual claim that can be lodged by the surviving spouse (or even the estate) against the party whose estate showed the biggest accrual during the marriage. The calculation to be utilised for this is quite complex and one would normally have to utilise the services of an accountant or actuary to attend to the calculation of an accrual claim. The content of the Antenuptial Contract is also extremely important when attending to this calculation as it is possible that certain personally owned assets prior to the marriage were specifically excluded from the marital assets subject to the accrual and the Antenuptial Contract will reveal this.

The above listed problems are only a few examples of what could occur and it should be clear that there is a benefit to making sure your estate planning is attended to and your Will is constructed properly and also reviewed regularly. The types of issues discussed in this article are also easy to avoid with the assistance of a professional when attending to your estate planning and drafting your will, as they are equipped and skilled to identify and avoid these problems.

19/08/2021