Estate Planning and Wills: A Checklist to Protect Your Family
“Don’t fear death, plan for it” (Anon)
Amazingly, here we are in the middle of a deadly pandemic yet still some 70% - 80% of working South Africans are said to have no will in place.
That’s crazy for two reasons –
1. Without a will your loved ones are exposed
When you die your grieving family must start learning to cope without you, don’t expose them to the added uncertainty and worry that they will face if you haven’t left in place a valid will (often referred to as a “Last Will and Testament” to distinguish it from a “Living Will”).
Without a will, your estate will be wound up in accordance with our laws of “intestate succession”. You have forfeited your right (and duty) to ensure that your loved ones each receive what they need from your estate, that your children and their inheritances are properly looked after, and that your estate is wound up by someone you trust.
2. Estate planning is essential
Estate planning in this context is the process of arranging your financial affairs in such a way that the legacy you leave is as large and as well-structured as possible. This needn’t be overly complicated or expensive, and everyone should have their own estate plan regardless of age, health or financial position. In a nutshell you are looking to maximise assets, to reduce estate costs and the taxman’s cut, and to streamline the process of winding up your estate so your heirs are paid out as quickly as possible.
No will means no estate plan, and no estate plan means unnecessary worry, cost and delay for your grieving family.
How to protect your family with a 15-point checklist
Use this checklist to make sure you provide for your family’s happiness and financial wellbeing long after you are gone -
1. Make a will: See above – a will is a no-brainer! The consequences of dropping the ball on this one are so serious, and it is so easy to make a proper will, that endangering your family’s security and happiness by not having one just makes no sense at all.
2. Don’t Procrastinate: Procrastination is human and, when it comes to contemplating one’s own mortality, entirely understandable. But it’s not forgivable - death is inevitable, and absolutely no one, no matter how healthy or young, can assume that they will be alive tomorrow. All too often death comes without knocking, so don’t fear it – plan for it. Now.
3. Beware the DIY route: As tempting as it may be, going the DIY route (online will templates are easily found) is a bit like packing your own parachute for your first jump without assistance – great if you are an expert, but for most of us getting professional help makes a great deal more sense. It’s not you but your loved ones who have to live with any mistakes you make now!
4. Ensure validity: Your will to be valid must comply with all legal formalities, and although the courts have a discretion to declare a “defective” will valid that process is uncertain, slow and expensive. Rather get it right upfront.
5. Avoid ambiguity and dispute: Any lack of clarity in the wording of your will is fertile ground for dispute, and our courts are regularly called upon to sort out bitter, divisive and expensive family feuds that could have been avoided with a professionally drafted will setting out clearly and concisely exactly what the deceased’s wishes and intentions were.
6. Foreign assets: If you have assets in another country, you may need a foreign will as well as a South African one – ask a professional.
7. Consider business continuity: If one of your assets is an operating business, or an interest in one, put a continuity plan in place so it can be carried on without interruption.
8. Review your will regularly: This one is easily (and commonly) overlooked. You finally get a will in place and think “great, that’s it then”. Not so! Personal circumstances change, laws change, taxes change – diarise to review and if need be update/replace your will no less than annually.
9. Choose your executor wisely: This can be make or break for your family. Choose someone you can depend on to wind up your estate quickly and professionally.
10. Pay special attention to your minor children’s needs: Firstly, this is your chance to leave each of your children what they will need financially. You could split your estate in equal portions, or you may decide to differentiate based on each one’s situation and needs (a tip here to avoid a family feud – explain to everyone upfront the reason for your decision). Now is also where you nominate your choice of guardian for your minor children – don’t leave that choice to others! Ensure also that your minor children’s’ inheritances are held in trust for them, with your choice of trustees.
11. Reduce costs and taxes: To maximise what your heirs receive you need to look at all the costs your deceased estate will have to pay out. A professional can guide you through the process of minimising estate duty, executor’s fees and costs (beware of false economy here – “cheap” could also be “nasty”!). Taxes - income tax and capital gains tax in particular - can take a sizeable chunk of your estate without proper planning.
12. Nominate beneficiaries whenever you can: Where you are able to, nominate beneficiaries for your life policies, annuities, tax-free investments etc to ensure payout directly to chosen recipients, without all the delay inherent in the process of winding up your estate and in many instances reducing costs and taxes. Take professional advice here – different rules apply to each of these categories.
13. Plan for liquidity issues. Plus, what will your family live on? You don’t want the executor to be forced to sell an asset (your house or business perhaps) that you have left to a particular heir, but that will happen if there is insufficient cash in the estate to meet the various costs and taxes of winding it up. Similarly, your bank accounts and the like will be frozen once the bank becomes aware of your death, so you need to find another way to ensure that your family has cash to live on whilst your estate is being wound up (it can be a lengthy process with all the red tape). Separate bank accounts, life policies (see above), family trusts and the like might work in your particular circumstances, but specific professional advice is key here.
14. Leave your loved ones an “Important Information” file: This is critical. There are too many heartbreaking stories of grieving spouses and children floundering in a sea of confusion and worry because they have no idea where the deceased’s will is, how the estate is structured, what assets there are, what debts, how to access password-protected computers, where important documents are kept, who they should contact for help. Sometimes they are even at sea as to what assets they have in their own names. The list is endless.
What should be in the file? In short, everything that your survivors might need, starting of course with details of where your will is. Put yourself in their place - what would you need to know if you were the survivor? What information and documents would make it easier for you to get on with life? Once again, professional advice and assistance will save your loved ones a mountain of trouble and concern.
A last thought on this aspect – have “that conversation” with your family as soon as possible. It’s not easy but they deserve no less. Ideally bring them in at the start of your planning and the creation of your “Important Information” file. At the very least they must know about it, where it is and how to use it.
What else? No generalised estate planning checklist can ever be comprehensive. Tailor your plan to your particular needs. Brainstorm, ideally with family and professional input, what else needs attention.