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.
  15. 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.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© LawDotNews

Be Prepared for The Cost of Dying

“No matter how much you’ve been warned, Death always comes without knocking” (Margaret Atwood)

No one wants to contemplate their own passing, but the reality is that sooner or later it is inevitable, and particularly in these dangerous times we need always to be prepared.

The loss of a loved one is always distressing. It can however be compounded by the challenge of dealing with their assets. 

Few people appreciate all the costs involved in settling an estate. Understanding these expenses and planning for how to deal with them can make a big difference to those left behind.

Executor’s fees and costs

Every estate must be wound up by an executor. Ensure that in your will you nominate an executor you can trust to act with integrity, professionalism and speed.

An executor can charge a maximum fee of 3.5% plus VAT. That equals 4.025% of the value of the estate. Depending on the size and complexity of your estate this fee may be negotiable. 

The executor will also incur costs such as advertising to find any outstanding creditors, bank charges, accounting fees, conveyancing on the transfer of property and paying the fees due to the Master of the High Court. Together, these could run into tens of thousands of rands.

Taxes and estate duties

The South African Revenue Service (SARS) levies 20% estate duty on the value of any estate, but there is no estate duty payable on an estate with a net value below the R3.5 million abatement (allowable deduction). Any amount above R30 million will be taxed at 25%. An estate worth R40 million will therefore have to pay estate duties of R7.8 million (R5.3 million on the first R30 million, after the R3.5 million abatement, and R2.5 million on the next R10 million).

These taxes will not, however, be paid on any assets left to a surviving spouse. In that case they effectively ‘roll-over’ and will only be charged upon the spouse’s death.

The estate will also have to pay capital gains tax on any assets that are sold. SARS will also conduct a final income tax assessment.

In addition, South Africans need to consider that if they have assets in other parts of the world, they may be liable to pay estate taxes in those countries as well. There are double taxation agreements in place with many countries that prevent most assets from being taxed twice, but where taxes elsewhere are higher than in South Africa, the estate will still have to pay the difference. Inheritance tax in the UK, for instance, is 40%.

Outstanding debt

The estate will have to settle any debt such as credit cards, loans, or bonds on property. Interest on these debts does not stop accruing when someone passes away, so it is best to deal with them as early as possible.

It is most critical to consider how to handle home loans, especially if they are held over a property in which surviving family members are still living. Sometimes these individuals may not qualify to take over the bond due to their own financial position, which means that the house may have to be sold if the debt can’t be settled.

Being prepared – check what cash the estate will have 

Even though an estate may have sufficient assets to meet all of these expenses, it can still be a problem if it doesn’t have enough available cash. That is because the executor may have to sell assets to free up money.

This not only leads to potential extra costs and taxes but can be traumatic if something like a house where a loved one is living or a car that someone needs for transport has to be disposed of. This is why it is important to prepare an estate to make sure that there is enough cash available.

One way of doing this is to take out a life insurance policy that will pay cash into the estate. This will ensure that your family members aren’t left with a potentially major financial burden and face additional stress after your death.

The above is of necessity just a summary of the cost considerations involved, so speak to your attorney about how your will and estate are structured and how you can plan to meet all the costs.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© LawDotNews

Is Your Will Valid?

“Death knocks at all doors alike” (John Dunton 1692)

Sooner or later we must leave our families to face life without us, and of course these are particularly dangerous times for us all. 

Make sure that your own affairs are in order now – 
  1. A valid will is the only sure way to protect your loved ones after you are gone. 
  2. If you have an old will, check whether it needs updating or changing.
  3. Leave a file with all the important information and documents that your estate’s executor will need. 
Five mistakes which can invalidate your will 

The last thing you want is to leave your loved ones grappling not only with the tragedy and grief of your passing, but also with a bitter feud over the validity of your will. Avoid these mistakes in particular –

  1. Not complying with all the required formalities when making your will: Although our courts do have a discretion to order the Master of the High Court to accept as valid any document not complying strictly with the various required formalities (the court must be satisfied that the document “was intended to be [your] will or an amendment of [your] will” you will want to spare your loved ones all the delay, cost and risk of dispute involved in a court application. 
  2. Not complying with formalities when changing your will: The same applies if you want to change or revoke your will. In addition, a court can declare your will to be fully or partially revoked if you did anything (such as leaving something written on your will, an action on your part, or another document) that satisfies the court of your intention to revoke the will. Again a scenario to avoid at all costs with a properly-drawn replacement will or codicil.
  3. Leaving any doubt as to your “testamentary capacity”: Anyone aged sixteen years or more may make a will “unless at the time of making the will he is mentally incapable of appreciating the nature and effect of his act”. Although it is up to anyone challenging your capacity to prove that you were mentally incapable at the time, there are grey areas here and our law reports are full of bitterly-fought disputes over the question of testamentary capacity. So if there is any chance at all of that sort of challenge arising ask your lawyer to advise on the best way to leave proof of your capacity at the time of signing.
  4. Leaving any doubt as to fraud or forgery: All too often our courts have had to decide disputes over whether the signature on a will is genuine or forged, or over allegations of fraud. Again if there is any risk of that happening, get legal advice on how to put the genuineness of your signature, and of the correctness of your will, beyond doubt.
  5. Leaving any doubt as to coercion or “undue influence”: As with the previous two warnings, this isn’t likely to be a danger for most people, but on the “better safe than sorry” principle don’t risk any chance of someone challenging your will with accusations that you were subjected to some form of duress (threats perhaps, anything that would cause you to act unwillingly or against your better judgment) or undue influence.

If you don’t have an updated will in place contact your attorney now – one of the commonest (and most tragic) mistakes people make is thinking “I’m too busy right now, it can wait”. It can’t!

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© LawDotNews

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Electronic Signatures in Property and Other Transactions

“To sign a document means to authenticate that which stands for or is intended to represent the name of the person who is to authenticate” (quoted in the case below)

We all know that verbal agreements, although fully binding for most types of transaction, are a recipe for uncertainty and dispute. It’s not just a question of trust – even if no one is deliberately dishonest about what was agreed, innocent misunderstandings are common. We have a natural tendency to hear what we want to hear and to remember what we want to remember, and a properly-drawn written agreement avoids that.

So even when a written and signed document isn’t required it is always wise to insist on one. Note that the parties themselves can require a document to be in writing and signed. Or it could be required by law – the most common examples of the latter are property sale agreements, wills, suretyship agreements, ante-nuptial contracts, and credit agreements (there are other less common examples – take professional advice in doubt).

But that’s not always easy to achieve, and the COVID-19 lockdown in particular has highlighted the challenges of getting everyone together for an old-fashioned original “paper and ink” signing session. Even when social distancing is no longer required and ceases to be the norm in society, the convenience and benefits of being able to sign documents remotely (whether you and the other party/ies are in different houses, cities, countries or even different continents) are obvious.

Firstly, when is a digital agreement “in writing”; and can property sales and wills be electronic?

Fortunately our law, in the form of the ECTA (Electronic Communications and Transactions Act) recognises the general validity of digital documents. A “document or information” is “in writing” if it is –

  • “In the form of a data message; and
  • Accessible in a manner usable for subsequent reference.” 

As a result, perfectly valid and enforceable agreements are now often entered into online, by email, WhatsApp and the like. 

Note that there are some specific exceptions where a physical (“wet ink on paper”) as opposed to an electronic format is still required – most commonly property sale agreements, “long” (10 or more years) leases and wills (there are others – take advice in doubt).

Secondly, is “signature” always required?

Formal “signature” isn’t always essential as the ECTA provides that if the parties to an electronic transaction don’t specifically require an electronic signature, “an expression of intent or other statement is not without legal force and effect merely on the grounds that –

  • It is in the form of a data message; or
  • It is not evidenced by an electronic signature but is evidenced by other means from which such person’s intent or other statement can be inferred.”
Thirdly, how can you sign a document electronically?

Where “signature” is required, the ECTA recognises the concept of “electronic signatures” (defined as “data attached to, incorporated in, or logically associated with other data and which is intended by the user to serve as a signature”. They are valid except in cases where either a law (like the laws relating to property sales etc mentioned above) or the parties themselves require actual physical signatures.

An electronic signature can take many forms. Where it is required by the parties but they haven’t agreed on a particular type of electronic signature to be used, it is valid if –

  • “A method is used to identify the person and to indicate the person’s approval of the information communicated; and 
  • Having regard to all the relevant circumstances at the time the method was used, the method was as reliable as was appropriate for the purposes for which the information was communicated.”

That definition will often be wide enough to include names on email messages, scanned images of physical signatures and the like. But remember the parties can specify what formats are and aren’t allowed, plus our courts may well look at all the circumstances of a case and decide for example that an actual manuscript signature is required even when transmitted electronically (see for example the “R804k” judgment discussed below).

“Advanced” electronic signatures

This is a concept of authentication designed to make an electronic signature more reliable and it is used when a law requires signature for specified documents or transactions but doesn’t require another particular type of signature.  

For example the Deeds Registries Act requires documents like the Power of Attorney to Transfer Property to be signed, and that can be done either physically or electronically – but if electronically the electronic signature must be an advanced one. The Credit Agreements Act provides other good examples. 

Even when not specifically required, a big advantage of advanced electronic signatures is that they are presumed to be valid. That means anyone attacking one would have to prove its invalidity and not the other way round.

Security and fraud; with an R804k example

Cyber criminals are as always waiting to pounce so all the normal warnings in regard to electronic communication apply here, with the added need to ensure that electronic documents cannot be altered after completion/signature. 

A recent example of “forged electronic signatures” is an online fraud that went horribly wrong for a firm of financial advisers who were sued for R804,000 when their client’s Gmail account was hacked by fraudsters – 

  • Using the investor’s authentic email credentials, the fraudsters sent three emails to the financial advisers instructing them to transfer a total of R804,000 to the fraudster’s accounts. Two of the emails ended with the words: ‘Regards, Nick’ while the third ended with ‘Thanks, Nick’.
  • The financial advisers made the transfers and the investor sued them on the grounds that they had paid out contrary to the written mandate he had given them which stipulated that ‘All instructions must be sent by fax to [011 *** ****} or by email to [***@***.co.za] with client’s signature.’
  • The financial advisors argued that they had complied with the mandate in that the email endings “Regards, Nick” and “Thanks, Nick” were valid electronic signatures in terms of ECTA.
  • The SCA (Supreme Court of Appeal) however upheld the High Court’s ruling that the financial advisors were liable. They had not complied with the mandate which “requires a ‘signature’ which in every day and commercial context serves an authentication and verification purpose … The word ‘electronic’ is conspicuously absent from the mandate …  The court below cannot be faulted for concluding that what was required was a signature in the ordinary course, namely in manuscript form, even if transmitted electronically, for purposes of authentication and verification.”

Play it safe – have your lawyer draw and manage your agreements for you to minimise this sort of risk, and ask also about using an external service provider for secure, authenticated and verifiable electronic document signing and storage. If you do come to blows with the other party down the line, the integrity and evidential value of your electronic documents and signatures could be make-or-break.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© LawDotNews

In Times of Great Change, Make Sure Your Will is Updated!

“Death always comes without knocking” (Margaret Atwood)

Particularly in these times of pandemic, deadly infections and uncertainty, no one can ever say with any confidence that we will still be alive tomorrow, or next month, or next year.

Now more than ever having a valid and updated will in place is no luxury to be attended to “when I have the time” or “when I am older”. 

The risk is that without a proper will (your “Final Will and Testament”) you die “intestate”, in which event the law and not you decides which of your heirs gets what from your estate. You have forfeited your right to ensure that your loved ones are properly looked after when you are gone. You have lost your right to decide how your assets will be distributed on your death. And you have no say in who will wind up your estate as Executor. Executing a valid will is the only way to avoid all that.

Then – just as importantly – once you have your will done and dusted, avoid the very common mistake of forgetting to update it regularly. 

Nine events to trigger an update review

Don’t leave your loved ones struggling with an outdated will. Firstly diarise frequent review dates. Then keep in mind the many changes in circumstances that will require interim review –

  1. Times of great change in your health risk profile: The current COVID-19 pandemic exposes us all to the threat of a sudden and radical change in our health status, and that (or indeed any new diagnosis or other actual change to your risk profile) calls for an immediate review of your will. Now more than ever it has to be fully up to date.
  2. Marriage: Have I or any of my heirs married, re-married, changed marital regime (in or out of community of property, with our without accrual), entered into or left a life partnership or the like? Does my will tie in with my marital regime and ante-nuptial contract if any? 
  3. Divorce: Have there been any divorces? This is vital because so many couples leave everything to their spouses. And if for example that applies to you and you divorce, you have only a three month window period within which to change your will. For three months your ex-spouse is effectively disinherited; but if you don’t change your will within that window period your ex-spouse inherits everything.
  4. Birth or adoption: Have there been any births or adoptions, do you have new children or grandchildren? This is particularly important if your will specifically names all heirs without a catch-all phrase that will include new children/grandchildren.
  5. Death: Has anyone died and if so must any specific bequests or anything else change?
  6. Other changes in personal circumstances: Have any of your heirs undergone a relevant change in circumstances, perhaps become more financially vulnerable for whatever reason (serious illness or motor vehicle accident causing disability, loss of bread-winner for example)?
  7. Changes in assets, liabilities, financial and business structures etc: Have you sold any assets named in your will, or acquired assets that you would like to bequeath specially to a particular heir or that necessitate a re-allocation of bequests? Perhaps existing assets have changed dramatically in value? What about new liabilities, such as perhaps a new bond over a property which will reduce its value to a particular beneficiary?   

    Have you formed or deregistered any trusts or asset-holding structures? Have you started or acquired or sold a business to be earmarked for a particular beneficiary? Do you have any new assets overseas that may call for a separate foreign will?
  8. Executor, Trustees, Guardians: Is there any need to review your appointments of Executors, Trustees, Guardians? 
  9. Changes in the law: Have there been any changes in relevant laws, either through legislation or new court decisions? Tax laws in particular can change unexpectedly and affect the continued suitability of your estate planning.
How to update your will

If you plan major changes to your will, consider making an entirely new one but if the changes are minor a codicil may suffice. In both cases you need to comply with important legal requirements so professional advice is critical here!

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

© LawDotNews