Question: There has been a lot of advertising for wills lately. My husband says it is just a money-making racket for lawyers to get fees. Is a will really necessary?
Answer: We all have a will by default. If you die and do not have your own will, then the state’s default, namely the Intestate Succession Act, takes effect.
With intestate succession, there are clear rules about how your estate will be divided up. If you die without a will and were married with three children, then in terms of the rules of intestate succession, your spouse and each child would get 25% of your estate. This has some serious financial consequences, which I will discuss below.
If all your assets are bequeathed to your spouse, no estate duty is payable until your spouse dies.
In the example above, 75% of your assets will go to your children. This will attract estate duty, which will have to be paid immediately.
A death is deemed to be a capital gains tax event, so capital gains tax will have to be paid on all your assets. If your assets are bequeathed to your spouse, this tax is rolled over until he or she passes away.
With the intestate example above, 75% of your assets will go to your children. Capital gains tax will have to be paid immediately on these assets.
If you have any foreign assets, you should consider moving them into a structure that deems them to be part of your South African estate. The other option is to have separate wills drawn up for your South African assets and your offshore assets. This will reduce the time taken to finalise your estate by months or possibly years.
Standard executor fees with VAT come in at 4.025%. If you have a large estate, or one that is simple to finalise, you can negotiate with your executor to have a lower fee applied.
Please avoid the temptation of nominating a family member as the executor. I have seen countless family arguments break out over trivial issues in the execution of a will. If you like, you may make a family member coexecutor and use the services of a professional executor.