What Is a Will and Why Do I Need One Now?
The document spells out who should get your assets after your death.
A will is a legal document that sets forth your wishes regarding the distribution of your property and the care of any minor children. If you die without a will, those wishes may not be carried out. Further, your heirs may be forced to spend additional time, money, and emotional energy to settle your affairs after you’re gone.
Wills can vary in their effectiveness, depending on the type, though no document will likely resolve every issue that arises after your death.
Your will and other estate-planning tools
A common misconception is that one needs to have accumulated substantial wealth and assets before compiling an estate plan.
Anyone over the age of 18, regardless of the size of their estate, can prepare an estate plan.
By its very nature, estate planning is a fluid process that changes as one’s personal circumstances change, and a review can be triggered by a birth, death, property sale, divorce, adoption, marriage or any other event that affects how you wish to structure your legacy.
Estate planning aims to protect your wealth while you’re alive and ensure the maximum amount is transferred to beneficiaries after your death.
Far from just drafting a will and reducing estate duty, there is a lot more to estate planning than many people realise. It is a complex area of financial planning that requires financial, legal and tax expertise if you intend doing it correctly.
Essentially, estate planning is the process of creating and managing a programme that is designed to create and protect your wealth, and which ensures that your intended legacy comes to fruition after your death. It is a multi-disciplinary approach to structuring one’s financial, economic, social and psychological needs in relation to one’s estate, spouse, loved ones and beneficiaries.
When contemplating your estate plan, consider the following questions:
- What would the estate duty implications be in your estate?
- What capital gains tax (CGT) would your estate have to pay?
- Would there be enough liquidity to pay the different costs that would arise?
- Would your loved ones have enough money in cash to keep going until your estate is wound up?
- Would your spouse and children receive what you had intended them to receive?
- Is there any ambiguity in your will that could lead to confusion regarding a specific bequest?
- Who would be responsible for managing the winding up of your estate and do you trust them implicitly?
- Where is your will, and do your loved ones know about it?
Estate planning is a highly-specialised area of financial planning and requires the involvement of an advisor (or team of advisors) who has expertise in the legislative, tax and financial intricacies of all its aspects including: wills, trusts, insurance, retirement funds, matrimonial property regimes, donations, bequests, business succession planning and taxes.
As personal circumstances change, different tools and strategies may need to be employed in the estate plan to mitigate costs and ensure that one’s wishes are fulfilled.
Why You Should Have a Will
Some people think that only the very wealthy or those with complicated assets need wills. However, there are many good reasons to have a will.
- You can be clear about who gets your assets. You can decide who gets what and how much.
- You can keep your assets out of the hands of people you don’t want to have them (like an estranged relative).
- You can identify who should care for your children. Without a will, the courts will decide.
- Your heirs will have a faster and easier time getting access to your assets.
- You can plan to save your estate money on taxes. You can also give gifts and charitable donations, which can help offset the estate tax.
What happens if there is no will?
If the deceased did not leave a will or a will cannot be found, the state is tasked with the job of appointing an Executor Dative to the estate. The Executor Dative is responsible for trying to locate a will by enquiring at places such as the deceased’s bank, financial planner or accountant. If they cannot locate a will, the estate will be wound up according to the law of intestate succession. It is important to bear in mind that where the deceased was married in community of property, one half of the estate belongs to the surviving spouse and will therefore not devolve according to the rules of intestate succession. Only the deceased’s half of the joint estate will be available for distribution among the heirs.
estate planning is a fluid process that changes as one’s personal circumstances change, and a review can be triggered by a birth, death, property sale, divorce, adoption, marriage or any other event that affects how you wish to structure your legacy.
Who can draft a will?
Anyone aged 16 years and older who is of sound mind is considered competent to make a will. A person who is mentally incapable of appreciating the consequence of their actions at the time of drafting a will is considered not competent. Any person aged 14 years or older who is of sound mind and capable of understanding the consequences of his or her actions and can testify in court, is capable of witnessing a will.
There is a lot more to estate planning than drafting a will and calculating estate duty – minimise the burden on your loved ones and to expedite the winding up of your estate.