Alan Finlay
“There’s a couple of butts left on the dresser.” – Hans Magnus Enzensberger, from his last will and testament
Many people don’t want to talk about their own death, let alone sit down with themselves and decide how to plan for the eventuality. It is a daunting task, filled with a sense of foreboding. But by drafting a clear and concise will with the help of experts, you could save money and time – even if you’re not around to enjoy it.
While how to make the most of your estate with as little as possible of it disappearing on the way is the aim, there are a few costs and deductions you’re not going to get away from. Administrative fees, or fees a lawyer can charge, are defined by law, as is estate duty, or the chunk the government gets when you hand on your belongings.
Anyone can write a will and store it at the local bank. All you need are two witnesses, and to make sure the three of you sign each page. But wills have to be clear and concise to be executed properly, so unless you have a legal background or understanding, the money you save now could end up costing more further down the road.
A lawyer, a major bank or reputable financial services group will provide you with the necessary advice and know-how to put pen to paper.
Absa Trust charges a mere R228 to help you write a will. It charges R456 if it is not the nominated executor. These are market average costs, although Fairheads International, a financial services group, says it has not yet properly calculated the costs of writing up a will and rather includes them in the bigger package related to the estate. With First National Bank you can apply for a draft will online, although you will obviously have to meet with your local branch to sign the final product.
To administer your will you need to appoint an executor, which is an important decision. “Your executor should be someone who is familiar with you and your heirs and, above all, a professional person who is suitably qualified to attend to the administration and distribution of your estate,” says Mandy Dix-Peek from Fairheads. In most instances, the executor will be a lawyer, a financial services group like Fairheads, or a bank.
The law says the administrative fees of executing a will can at the most be 3,5% of the total assets. So, if your estate is worth R1-million, you could pay as much as R35E000 in legal fees. There are some exceptions. If the value of the estate is less than R50E000, the court could decide that a legal executor is not needed. This fee can also be negotiated with the lawyer or bank.
In certain instances, the court can decide that the fee is too high. For instance, if most or all of the inheritance is in property and not cash and the estate is relatively simple, it may be unsuitable that the fee be applied in its entirety.
“The fee is not exorbitant,” says Absa’s Gert Pretorius. “Sometimes we have to deal with an estate of low asset value but with numerous problems. In the end we do the job at a loss. What we lose on the swings we gain on the roundabout.”
One could save on some legal fees by nominating a friend or relative as the co- executor. Experts say this will take care of the “emotional” aspects of the proceedings. In most instances the executor’s fee is then split among the executors. If a friend or spouse is nominated as the sole executor, he or she will have to approach a legal representative and negotiate the fees.
The master of the court will seldom allow someone without a legal background to be nominated as sole executor.
Estate duty – that big, black cloud that many try to avoid – is currently set at 25%. However, the first R1-million of your estate – which is calculated by a valuator when you die – is not taxed. Inheritance passed from one spouse to another is also not taxed, even if the estate is worth R100-million. There are also certain assets that are exempt from tax over and above the R1-million, although determining which ones are exempt is a relatively complicated procedure.
Normally spouses nominate each other as the beneficiary of a will. But if you have children, it is worthwhile nominating a guardian and allowing for the estate to be placed in a trust, in case you die simultaneously, say, in a car crash.
Oddly, you need to be only 16 or older and “of sound mind” to write a will. Although you are still a minor, it is considered a likely age that you might need to decide what to do with your assets should you die.
Should you die intestate – without a will – there are no additional legal costs or penalties. The estate will normally go to a surviving spouse, or if there are children involved, split between the spouse and the children. The spouse will receive a minimum of R125E000. So, for instance, if the estate is worth R400E000, a child and mother will receive R200E000 each. If the estate is worth R200E000, the mother will receive R125E000 and the child R65E000.
Lawyers, however, warn that unbundling an estate where there is no will can be a bureaucratic nightmare and cost more.
If the children are minors, their portion of the inheritance will be placed in a Guardian’s Fund – a trust set up by the state – and administered by the master of the high court. The court is only entitled to invest the estate in long-term deposits, which means minimal returns.