Why you need a will

Fri, 13 Jan 2006

Source: http://mymoney.iafrica.com

Dying without a will has major implications for both the deceased person as well as the family they leave behind. Fiduciary specialist Jan Coetzee spells out exactly why you need to have a will.

Dying intestate (without a will) has major implications for both the deceased person as well as the family they leave behind.

“A will can be defined as a legal document, which contains wishes of the person making it (aged 16 years or older) regarding the distribution of the assets in their estate on their death,” says Jan Coetzee, fiduciary specialist at BoE Private Clients.

“But amazingly, many people don’t have a will and simply don’t realise just how many problems can arise from dying intestate.”

Here are 10 reasons why you should have a will drawn up:

1.      A will is the only way in which a person can ensure that their estate will be divided according to their wishes after their death.

2.      If there is no valid will at the time of death, the estate will simply be inherited according to intestate rules. These rules can be both impractical and inflexible. Assets cannot be distributed until all the rules regarding intestate succession have been adhered to, which can lead to delays and extra costs.

3.      With intestate succession, the wrong people may inherit and it may not be possible to effect the wishes expressed while the deceased was alive.

4.      If there is no will and the value of the estate is more than R125 000, the Master of the High Court will convene a meeting of family members in order to appoint an executor. This causes a delay and is a costly and time-consuming process. Remember that the estate is frozen while it is being wound up, and dependant heirs may not have access to funds during this time.

5.      The Master may also require the executor to provide security. This will usually take the form of a security bond from a short-term insurance company for the value of the assets reflected in the preliminary inventory. This causes further delays and costs. A will usually contains a clause specifically exempting the nominated executor from having to furnish security.

6.      A person still in distress over the death of a loved one is faced with many requirements from the Master and often has no idea where to start. While he or she may administer the estate unassisted (provided the Master agrees, which does not happen easily) or if the estate is less than R125 000, there is no substitute for a competent executor. If the deceased left a will, the task of winding up the estate is made so much simpler. If there is a will, the instructions of the testator will be followed and the appointed executor will assist the family.

7.      Inconvenience and unpleasant situations of heirs squabbling over who gets what could easily arise if there is no will.

8.      Where a person leaves no will and has minor children, their inheritance must be paid into the Guardian’s Fund until the child reaches majority. Not only can the rate of interest be low, but other difficulties may arise. For example, if a husband dies leaving a valuable property, the wife and major children may be forced to sell this asset in order to raise the money to be paid into the Guardian’s Fund.

9.      An heir may be immature or handicapped and, in a will, the testator can set up a testamentary trust which stipulates that the assets are to pass to him or her at the age of 25 or 30. However, where there is no will, the assets are automatically paid out when the child turns 21. This may be a disadvantage.

10.   For the more sophisticated planner, the will can be used as a tax planning tool. For example, the deceased’s estate duty position can be reduced by means of bequests in the will to a surviving spouse or charities as well as the optimum use of the R3.5 million abatement.

The type of disposition left to the heirs in the will, for example, a usufruct, fideicommissum, an annuity charged personally, or a discretionary trust, can in turn impact directly on the income tax and estate duty position of those heirs. Of course, if you do not have a will, you cannot benefit from these planning strategies.

Read about the things you should consider when preparing a will.