Wills Week: Why Experience matters?

Would you go to a dentist for your knee problem?

Where free wills are standard, you may think that you have won a prize by receiving something for nothing, but this approach could cost you a lot of money.

A will and estate plan are extremely important to your family. A will is personal and should be tailored that way. The correct estate plan and will can have  a dramatic impact on the income and capital you ultimately enjoy during your retirement and how you can, on your passing, legally ensure that SARS only gets what is due to it and your family benefits as much as possible.

Attorneys can elect, as members of the Legal Practice Council, to offer free wills for one week a year. This is an ideal opportunity to see whether your present will is structured correctly or whether you need to draw up a new will.

The person you trust with your will and estate planning should have a thorough knowledge of the law, especially in respect of wills, trusts and estate duty. In addition, they should have practical experience of winding up estates, a working knowledge of – among other things – income tax, capital gains tax and VAT, various policies, usufructs and how to deal with assets overseas.

At Pagdens we have, collectively, in excess of fifty years practical experience of winding up estates and two directors who have done advanced courses in estate planning and trust and estate administration. We have drawn wills for people who, one would think, could draw their own wills, but, being prudent, they have accepted that they do not know enough in this regard.  They have consulted with us because we are involved in estate planning and will drafting on a daily basis.  As a result of this we have drawn wills for judges, advocates, attorneys, accountants, financial planners and even tax consultants!

Statements like: “if I am dead, taxes cannot hurt me as they will be my children’s problem” or “my children can restructure their own lives” are often heard. These statements are not entirely correct. Just estate duty and capital gains tax can reduce your estate by 34,4% once your joint estate exceeds R7million. This makes an enormous difference to the lives of those you leave behind.

Here are just two examples of ways we have saved clients and their families money by properly structuring their estate plans:

• Mrs X‘s son inherited a farm worth R10m but it was subject to his ninety year old grandmother’s usufruct (Usufructs create penal capital gains tax and estate duty consequences). The grandmother was advised to sell her usufruct to her grandson a few weeks before she died, which she was happy to do. This saved the family almost R1,3m in estate duty. It also increased the grandson’s base value of the farm for capital gains tax purposes should he ever sell the farm.

R1,3m saved!

• Mrs Y, who inherited R5m from her husband and had R2m of her own, would be facing a substantial estate duty problem on her death in say 10 years time. This would occur even though, prudently, a testamentary trust of R3,5m had been created by her late husband. She was advised of various further options such as a trust, donations and interest free loans. The end result will result in her being liable for no estate duty and almost no capital gains tax compared to the possible R1,8m in capital gains tax and R1.74m estate duty she would have been liable for in ten years’ time if her assets doubled in value and had she not done the correct estate planning.

R3,74m saved!

A specialist in wills and estate planning can point out these types of pitfalls and introduce numerous  ways to capitalise on substantial income tax, capital gains tax and estate duty benefits of which a non-specialist estate planner would not be aware.

Even those who feel their estates aren’t ‘big enough’ for this type of structuring can benefit from making small changes and putting less complex structures in place now.

So why not use this window of opportunity to consult people in the know? Take full advantage of National Wills Week and call us today at 041 502 7200 or email ilse@pagdens.co.za. You can also complete our Online Will Form and we will make contact with you.

This article is for general information should not be used or relied on as legal or other professional advice. The amounts quoted were correct at the time of publishing. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact an attorney for specific and detailed advice. Errors and omissions excepted (E&OE)