Two really good reasons to have a will drawn up

By Kenny Meiring

29 Sep 2024

Unless you are happy with the rules of intestate succession, there are very good reasons you should have a will.

Question

A lot of companies are offering free wills at the moment. What is the catch and is a will really necessary?

Answer

Take a look at who is offering the free wills and their motivation for doing so. It may be part of an altruistic national initiative to educate and improve your financial wellness. On the other hand, there may be a business motive (which is not necessarily bad).

Companies that offer free wills are typically looking for one of two things:

They would like to become the executor of your estate when you die and receive the executor’s fees.

They want to use this as an opportunity to check that you are adequately insured so that your family will not have to sell any major assets to pay your final expenses and taxes when you die.

As to whether a will is really necessary, South Africa has rules (the rules of intestate succession) on how your assets should be disposed of when you pass away. So, in theory, you do not actually need a will.

However, in South Africa we also have freedom of testation. This allows us to overrule the intestate succession rules through the use of a will. This is a wonderful benefit and you would be foolish not to use it.

Not all countries offer this benefit, so you would have to comply with their laws of forced heirship. As a rule of thumb, if a British flag has flown over a particular country then you will have freedom of testation. (As a side note, I have seen many people buying property in countries with forced heirship in order to get a golden visa. I would urge you to check the inheritance rules around these properties and to ensure that your will takes this into account.)

If you are happy with the rules of intestate succession then it’s not actually necessary to have a will. However, there are a couple of really good reasons you should have one:

If you are married, you can bequeath all your assets to your spouse. This will result in estate duty and capital gains tax (CGT) only being paid upon the second death. If you do not have a will, your spouse will inherit half your assets and your children will inherit the other half. The children’s half will trigger the immediate payment of CGT and estate duty. This could result in your family having to sell assets like your family home in order to pay these taxes. This is not an ideal situation.

If you have a minor child and do not make provision for the establishment of a testamentary trust in your will, the assets that will go to the minor child will be invested in the Guardian’s Fund, where the returns are only 5.4%. Again, this is not an ideal situation.

As you can see, there are significant benefits to having a will.

Insider tips

The Master’s Office will only work off an original will, so you need to ensure that your will is stored safely and that a number of people know where it is. If the will cannot be found, then the rules of intestate succession will apply. As you can see, those rules may not give your family the best possible solution.

Many life insurance salespeople will try to scare you into taking out significant amounts of life insurance to pay for your final costs and estate duties. I prefer to go the route where we restructure your assets in such a way that executor’s fees, CGT and estate duty are minimised. By making a series of small changes every year, you can end up with a situation where you do not need massive amounts of life insurance to cover the estate liquidity issues. DM

Kenny Meiring is an independent financial adviser. Contact him on 082 856 0348 or at financialwellnesscoach.co.za. Send your questions to [email protected].

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.

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