Have you ever wondered what happens to your property and assets when you die? This is where Estate Planning comes into place. It’s different for everyone, especially in today’s modern environment of potentially blended families!

It’s essential for you to protect your family’s financial future and inheritance protect your family against debt liabilities and understand how to save on estate duty.

 Did you know that 70% of the working population in South Africa do not have a Will in place?

It’s critical to be prepared for the distribution of your wealth on your passing, especially if you have children. When you carefully structure your assets and finances, it will allow the protection of your loved ones from legal hassles and financial uncertainty after your death.

What is Estate Planning

Estate planning allows you to conserve and control its distribution according to your desires, goals, and objectives after you have gone.

This includes:

• Assets Restructuring: separating your business and personal interests.
• Buy and Sell Agreements: protecting partners if one partner passes away or is disabled.
• Offshore Investments: evaluating if offshore structures will be to your benefit.
• Succession Planning: making sure that your business can continue to operate if you are no longer there to run it
• Tax: considering donations tax, estate duty, and capital gains tax implications.
• Trusts: forming trusts to manage your assets effectively to the benefit of your beneficiaries.
• Wills: drafting a legally binding will.

How to plan your estate?

Personal Details

Have you ever wondered what happens to my social media when I die or how will my family cancel my Netflix subscription? You need to create a document a personal details document and share it with a close friend or family member. This needs to include instructions for what must be done, eg: Deactivate my Instagram, keep my Facebook as a memory page, or give my phone to my niece.

You can add your banking details, passwords, login details, insurance policies, etc. only known by the deceased, which ensures that surviving partners and/or executors have access to this vital information easily.

 Take stock of what you have

On the same Personal Details document, you will find a list of all the things I own and the money I owe. Taking an inventory of what you have is an important step in the estate planning checklist. After all, you can’t create a plan for your assets if you don’t know what your assets are. You can make a list of your tangible and intangible assets.

Tangible assets include physical possessions such as your home, car, collectibles, and more. Intangible assets include less obvious things such as your checking account, life insurance policy, retirement plans, business interests, and more.

Of course, the list of assets you amass will be a unique reflection of your personal finances. Make sure to think through all of your valuables when creating this list.

Offshore Assets

 If you should have offshore assets when you die, you’ll also have a foreign estate that will have to be administered. Each country has its own legislation dealing with inheritance and the signing of Wills. 

Your South African Will won’t necessarily meet the legal requirements of the country where your assets are situated. A solution is to execute a separate Will in the foreign jurisdiction dealing only with those assets.

 Draft a living will

A living will allow you to specify the medical treatments you do and do not want in the event you can’t express your wishes and it can also appoint someone to make these decisions for you.

Prepare a Will

A will is a legal document that spells out your wishes regarding the distribution of your assets after your death.

In the case of someone dying without a will in South Africa, the Master of the High Court will appoint an executor since no-one would have been nominated. This means your estate will be administered under the Intestate Succession Act, Act 81 of 1987.

Intestate succession concerns matters around ‘blood’ relationships. It’s noteworthy that illegitimate children are eligible to inherit, and a legally-adopted child is also considered a ‘blood’ descendant of his or her adoptive parents.

Understand Estate Duty

Estate duty refers to a tax of 20% that is levied on the estate of a deceased person in accordance with the provision of the Estate Duty Act (the “Act”). Estate duty is levied on the dutiable portion of the deceased estate.

In estate planning terms, estates worth less than R3.5m attract no estate duty. It pays to be wise and tax-wary! Do your estate planning early and make sure that SARS (the taxman) gets as little as possible of the assets that you want to pass on to your heirs.

It’s highly recommended that you speak to a financial advisor about this!

What happens to my property when I die

Property can be owned by one or more persons and/or entities. The more people involved, the more reason to have a plan about what happens to the property, should one of the owners pass away.

• If there is one owner, the property becomes part of your probate estate. This means it will be managed according to your will, if you don’t have one, it will be administered under the Intestate Succession Act, Act 81 of 1987.
• If there is joint ownership (ie: married in community of property), it passes directly to the surviving joint owner(s) upon the death of an owner.
• If the property was bought under a trust, it passes to the beneficiaries designated under the trust agreement.

How to draft a will in South Africa

Drawing up your will in South Africa involves certain formalities, some of which are the same as in many countries.

For example, you will need to appoint an executor to administer your estate in the event of your death. The executor will perform duties such as dealing with creditors and debtors and paying costs such as estate duty and funeral bills out of the estate account.

The best place to go for a will is your bank. They will help you to draft one and they will store it for you for a small annual fee. Alternatively, you can speak to your attorney about drawing up a will that they will hold on your behalf, but remember to keep it somewhere safe.