Protect your legacy with estate planning

1. Estate planning overview

What is estate planning?

Estate planning is about deciding – deliberately and clearly – what happens to everything you care and provide for, after you're gone. For some people, it means leaving financial security for their children. For others, it’s protecting family assets, supporting causes they care about, or ensuring loved ones are not left with unnecessary complexity during an already emotional time.    

It’s generally misconceived that estate planning is simply about ‘making a Will’. A Will is only one component of a comprehensive estate plan. Matters such as your marriage contract/s, capital gains tax (CGT) and any income taxes you owe to SARS must be considered in your estate plan to ensure that the process of winding up the estate is smooth.

Why is estate planning important?

Without a valid Will and a proper plan in place, South African law decides how your assets are distributed, and it may not reflect your wishes. Beyond that, a poorly structured estate can result in unnecessary taxes, lengthy delays, and a significant administrative burden on your loved ones during an already difficult time.

It’s also reported that numerous estates don’t have the liquidity required to settle their debts, which can result in rough financial periods for dependents who need to suddenly fend for themselves.

We can help you with the following key components – separately or together – of the estate planning process, depending on your need:

• Will drafting and safekeeping
  Drafting a legally sound Will that clearly reflects your wishes plus the safekeeping of that Will
• Trusts
  Protecting assets for minor children, dependants with special needs, or future generations 
• Estate duty planning
  Structuring your estate to reduce unnecessary tax liability 
• Beneficiary nominations
  Ensuring your life policies and retirement funds go to the right people 
• Executor and trustee services
  Connecting you with the appropriate specialists to assist with the administration of your estate

When should I review my estate plan?  

A well-planned estate can benefit anyone with assets, but if you’re regularly bolstering your wealth by acquiring assets like houses, cars, bikes, boats, jewellery or art, it’s advisable to discuss your estate plan with an expert.

Your estate planning should take place at least once a year. This means sitting down and reviewing the previous plan to make any alterations based on income growth or asset acquisitions.

You can also make changes if you part with assets or experience a knock to your income.

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2. Financial planning

What role does financial planning play in estate planning?

Estate planning works best when it forms part of a broader financial plan.

A financial adviser can help you assess your assets, liabilities and future goals, while identifying appropriate solutions to help preserve and transfer your wealth effectively.

3. Taxes and estate planning

What is estate duty and what impact can it have on my estate planning?

In South Africa, any person who dies and whose net estate is more than R3,5 million will be levied at 20% by the government. This means that if you have, for example, R5 million in assets or cash to leave behind for loved ones, your estate will owe the government 20% of R1.5 million (amount above the threshold) before your beneficiaries can receive their inheritances.

Even if estate duty is not payable, your loved ones will have to inform SARS that you have passed away. Copies of the following documents must be sent to SARS:

• Death certificate or death notice
• ID of the deceased
• Letters of executorship (J238) (if applicable)
• Letter of authority (J170 in cases where your estate is less than R250 000)
• Certified copy of the executor’s identity document (if applicable)
• Power of attorney (if applicable)
• The name, address and contact details of your executor or representative/s
• Your last Will
• An up-to-date inventory of your assets
• Any liquidation and distribution accounts (if available or applicable)

Once SARS has coded your profile as a deceased estate, the receiver will issue applicable letters to your estate’s executor, advising him or her of what further steps need to be taken. Any applicable estate duty is payable to SARS within 1 year of the date of death, or 30 days from date of assessment, if the assessment is issued within one year of date of death.

What is capital gains tax (CGT) and how does it affect estate planning?

Capital gain arises when your assets are disposed of and the proceeds exceed the base cost. So, if you bought assets (like a house or collectable item) that are sold for more than what you paid, your estate will pay a tax on that gain before any proceeds are distributed to your heirs.

From an international perspective, a foreign country also has the authority to levy taxes on you if you own property situated within its boundaries. This means your estate, which holds offshore property, may also be subject to estate duty in terms of the tax law of that country – resulting in double taxation.

4. Wills and estate planning

Why do I need a Will?

It’s often said that you can’t anticipate what life has in store for you, but you can make sure that your loved ones are taken care of when you are no longer around.

Drafting a professional Will can ensure that upon your death, your wishes are carried out.

A properly drafted Will ensures that possessions of monetary and sentimental value are protected and distributed appropriately.

What happens if I don’t have a Will at the time of my death?

A Will allows you to nominate a trusted executor, appoint heirs of your choice and even nominate guardians for your minor children.

Ultimately, a Will is the foundation of any estate plan. In the case of someone dying without a Will, the Master of the High Court will appoint an executor since no-one would have been nominated.

The executor’s first duty is to locate a Will if there is one; if your Will cannot be found among personal papers, the estate must be administered as if no Will has been drawn up.

Passing away without a Will in place means your estate will be administered under the Intestate Succession Act, Act 81 of 1987.

Note that if you have no living relatives and your assets have not been claimed by a legitimate heir upon your death after 30 years, your estate may be forfeited to the government.

5. Executors

What is an executor?

An executor is someone you select in your Will to carry out the instructions set out in your Will and help to handle the winding up of your estate. 

How do you appoint an executor?
Understanding the role of an executor can help you make an informed decision. You have the option to approach your bank to assist with the executorship function, should you not be ready to choose someone in your family to take on this important role.

6. Guardians

How do I appoint guardians for minors?

If you’re a parent with young children (under the age of 18), it’s advised that you appoint someone to act as their guardian in your Will.

In most instances, the surviving parent is automatically the child's guardian, but you should always nominate a guardian or a substitute guardian in the event of the surviving parent passing away.

Legal experts agree that consideration must be given to appoint someone appropriate who can possibly exercise the same love and care for the child as you would have done yourself; perhaps a close relative can fill this particular role.

7. Trusts and estate planning

What is the role of trusts in South Africa when it comes to estate planning?

It’s widely believed that a trust is one of the most secure ways to protect your assets and ensure that your wealth is preserved for generations – providing continuity of financial support and protection for your loved ones.

We can provide you with the following tailor-made trust solutions:

• Testamentary trust: Established on death and works to protect the interests of minors and other dependents who are not able to look after their own financial affairs.
• Inter vivos trust: Created during your lifetime and is designed to provide protection of the family wealth over generations.
• Settlement trust: Set up to accept proceeds from policies, divorce settlements, the Road Accident Fund, etc.