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Dont’ Add Hassle To Heartbreak

Mar 27, 2024 | Financial Planning, General, Latest News | 0 comments

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As financial planners, we frequently watch the heartbreak of families when their loved ones die – often unexpectedly – and how that heartbreak is compounded by added inconvenience and struggle that could have been avoided. Please give some thought to the below to avoid these common oversights.

Beneficiary nominations (Group schemes)
The devastating experience for families of Group Life members, for example, is made worse when they discover that the deceased had not left the benefit of the life policy to his/her next of kin. Instead of the policy being paid out within a month or two, allowing the family to get on with the grieving process, the money is paid into the estate to be dealt with by the executor. Not only is this a frustrating and time-consuming business to be dealt with at a stressful time, but there will be additional fees of up to 3.99% of the value of the assets.

The family could have been spared this if their loved one had simply double checked to see if a beneficiary had been nominated. All that was required to do was to sign a beneficiary form, leaving the funds to whomever they wished.

Another issue that magnifies a bereaved family’s distress is where there is no signed Will in place. In the event of there not being a Will, the money is controlled by the Master of the High Court (an institution which, currently, is in a disarray). The estate is split equally amongst family members i.e. the spouse and the children get an equal share.

The children’s share is converted to cash and kept by the Guardian Fund, which is run by the Master’s office. Simply put, this scenario is one to be avoided at all costs. Please speak to your financial planner to ensure that your signed Will is in place.

Do I need a Will?
If you have any assets in your name – a property, cash, shares, unit trusts and the like – you need to have a Will. A simple Will helps to get your estate finalised quickly. If you only have life policies and retirement funds, a Will is not required, as they all have beneficiary nominations. Once again, it is vital that these nomination forms are signed.

You will need to draft a Will if you get married. Even if, as it is in most cases, everything is left to the spouse, a Will helps to get the process completed promptly.

All parents should have a Will in place. It is irresponsible for parents to neglect this important duty. Should the parents die simultaneously, they will want to have made sure that guardians have been nominated.

It is important to note that a minor cannot inherit. You may want to set up a Testamentary Trust in your Will to collect all the assets to take care of your children financially. Remember that perfectly healthy people die suddenly all the time; it is so important to take care of these affairs.

When last did you check your Will?
Circumstances change, people get older and different needs become apparent as time passes. You should be revisiting your Will every 2 years.

Very importantly, should you die suddenly, will your family know where your Will is kept? This will be a shocking and confusing time for your loved ones; do what you can now to ensure there is no added suffering.

What if you have offshore assets?
You have two choices in dealing with this:

  • You can have a South African Will that applies to all your assets, but this can be time-consuming and complicated.
    When the local executor is finished with your South African estate, they will send the Will across to the other jurisdiction for another lawyer to wrap up your affairs there. This is not done simultaneously, i.e. the local one is done first and then the offshore one. It is time-consuming.
    Additionally, the local Will might not comply with the requirements of the other jurisdiction in which you own assets. For example, for a Will to be valid in Germany, it must either be notarised or handwritten in full by the testator. The South African-drafted Will might also not consider how inheritance works in that location. For example, in some countries, there is forced heirship, meaning you do not have complete freedom about who inherits certain assets.
  • Alternately, we suggest that you have an offshore Will dealing with that jurisdiction. In this case, the SA executor and the offshore executor can get going at the same time and, hopefully, bring everything to a close that much earlier.

Other issues to be aware of
If you own shares through a South African stock broking account, where the underlying companies are based in the US (think Apple, Amazon, Microsoft, General Electric and so on) and the investment is worth more than $60,000 (R1,1m), those funds will incur US estate duty at a rate of 40%. However, you will not need an offshore Will if the assets are administered in SA, say via the Allan Gray Offshore Platform, or if the investment is held in an offshore endowment – the beneficiary nomination will suffice in these cases.

In summary, do not ignore the dangers of leaving your family with a complicated situation to sort out when they are already dealing with the loss. Make an appointment with your financial adviser to discuss all the above. Sign the forms, write a Will and keep it up to date – a small effort now will make a huge difference to your loved ones.

If you have adult children or grandchildren, please consider passing this on to them so that they, too, are reminded of the importance of having their affairs in order.



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