Estate Planning & Wills: 25 Common problems

Estate Planning & Wills: 25 Common problems and what your attorney should be considering.

Most people are aware of the importance of having a will in place, but drawing up a will is not a tick box affair as there are a multitude of factors and options which must be taken into account. Once you have a will in place it is also vital to have your will reviewed as your personal circumstances change and as tax laws change.   

It is also important that the person who drafts your will and winds up your estate is knowledgeable in the requisite areas of estate planning, succession law and tax law. There could be a number of things wrong with the will you have in place and the effect of some of the bequests and directions set out in your present will may not be quite what you had in mind. Here are 25 possible problems with your present will:

• Failing to comply with the legal requirements of a will leading to your will being invalid and resulting in you dying intestate and your children’s money being kept by the Guardian’s Fund;
• Failing to take into the account the accrual claim of a spouse when determining what they should inherit;
• Assuming that your children can create a trust and gain the same benefit for their family as the benefit they would gain if you created the trust;
• Not using the R3,5 million estate duty rebate and R300,000.00 capital gains tax exclusion amount on the death of the first dying spouse;
• Not wording annuities payable to a second spouse correctly resulting in penal income tax and estate duty consequences;
• Assuming that your spouse has no claim against your estate if you do not adequately provide for them in your will;
• Distributing assets in a way which could be unfair to children from a first marriage or to your second spouse;
• Allocating funds to your children proportionately when one is much younger than the other;
• Massing your estates when you are married out of community of property and you and your spouse’s estate values are not similar;
• Bequeathing all your assets to your children, subject to a usufruct in favour of the surviving spouse or second spouse;
• The belief that a child of an heir, who is not a direct descendant of the testator, will inherit his parent’s share if he predeceased the child;
• Not making use of a special trust and its tax advantages where you have a special needs child or grandchild under the age of eighteen;
• Not amending your will when circumstances have changed, e.g. divorce or the sale of an asset which has been bequeathed;
• Not making contingent plans in case of an heir predeceasing you;
• Not utilising the benefit of a testamentary trust thereby foregoing income tax, capital gains tax (CGT) and estate duty benefits;
• Assuming that your residuary heir will inherit the assets bequeathed to him where in fact such inheritance could be completely consumed by income tax, CGT and estate duty leaving no residue;
• In marriages in community of property, bequeathing the whole of an asset in place of only your half share in such asset;
• Not nominating an alternative heir where an heir could, by repudiation, frustrate a bequest to another heir;
• Assuming that a life partner will automatically be adequately catered for;
• Not ensuring sufficient liquidity in the estate to cover debts and costs, thereby creating the need to sell assets or for the heirs to contribute cash to the estate;
• Making bequests of assets, which contradict the nominated beneficiaries in e.g. life policies and certain types of investments;
• Placing loans to heirs on record in the will without having proper underlying loan agreements and keeping accurate records;
• Not taking into account unfulfilled obligations in terms of a previous divorce;
• Making too many special bequests to the extent that there is no residue thereby creating the need for abatement (reduction) of bequests, which could create the need for some beneficiaries to contribute cash in order to take the assets;
• Appointing an executor who does not have the required knowledge as, even after death, there are numerous steps a knowledgeable executor can take which can save your family money.

These are just a few things that could be wrong with your present will or which you may not have taken into account when setting up your will. There are a myriad of other ways that you could unintentionally leave your heirs with a very different reality than you might have anticipated after your passing.

Some of the items listed herein are extremely complex and the average person would not think of them or even understand their consequences. This is why it is important that you obtain advice from an expert when drawing up your will.

Your will is also but one aspect of your estate planning which could involve e.g. donations, trusts, changing investments, which if correctly done could save your family substantial amounts of money in income tax, capital gains tax and estate duty.

One of the best presents you could ever give your family is a properly planned estate and will and relatively speaking the cost thereof is minimal, but many people and their children go through life without ever realising how much they could save if their estate and wills had been planned properly.

This article is a general and should not be used or relied on as legal or other professional advice. We suggest that you always contact an attorney for specific and detailed advice regarding your transaction as it could involve circumstances which are not considered here.

Complete the Online Will Form at www.pagdens.co.za/wills/ or contact 0415027200 to set up a consultation with us.