Beware the will that is too simple for your affairs

Laura du Preez | 14 September 2022

Laura du Preez has been writing about personal finance topics for more than 20 years, including eight years as personal finance editor for two leading media houses. 

Once a year law firms focus on getting more South Africans to draw up a will. More than 70% of South Africans do not have a will and this can cause many problems for their families should they die unexpectedly.

“Not having a will can have detrimental and far-reaching consequences for dependants, whether minor children, a spouse or family members,” Felicia Hlophe, legal adviser at Allan Gray, says.

 “If you die without a valid will, your assets will be distributed according to the Intestate Succession Act. This may result in your assets being inherited by people other than those you would like to leave those assets to. The winding up of your estate could also take longer and cost more,” Hlope says. Read more: Who will inherit if I die without a will?

Legal guardians

You also need a will if you have minor children, so you can appoint a legal guardian for them in case you and your spouse, or life partner, die simultaneously.

Hlope says a will can also help you avoid leaving assets to minor children that may be transferred to the government’s Guardian’s Fund until the children turn 18. 

“Claiming from the Guardian’s Fund on behalf of a minor is an administration-heavy process and not ideal when funds are required immediately for your children’s needs,” Hlope says.

Free wills

During wills week, lawyers who participate offer their services to draft a will for you for free.

You can also often get a will for free from the wills and trust divisions of banks and life insurers. This typically comes with the proviso that you appoint that company as the executor of your estate at the maximum fee for an executor – 3.5% of the value of the estate excluding VAT (4.025% including VAT).

The other problem with free wills is that they can cause problems for you if your affairs are more complex.

Johann de Vos, a member of the Fiduciary Institute of Southern Africa (FISA) and fiduciary practitioner at Sentinel International Trust, says when you accept a free or low-cost will, an inexperienced person may take instructions and fail to ask you enough questions to identify potential pitfalls.

The result is insufficient information to enable proper planning of your will and the problems arise only after you die, he says.

This can lead to unnecessary delays in the winding up of the estate to the frustration of the family.

Critical info

De Vos says it is critical that who ever drafts your will collects the following information:

  • How are you married: do you have an ante nuptial contract, are you married in community of property or out of community of property and under which laws?
  • Where is your permanent home?
  • What assets do you have and where?  This includes any policies or contracts in which beneficiaries are named.
  • Where in the world are your assets? Will it be necessary to have your will authenticated in another country before those assets can be distributed to the heirs?
  • Where in the world are your heirs or beneficiaries?

De Vos says a consultant who does not ask the right questions might assume, for example, that a black couple married without an ante nuptial contract, is married in community of property.

However, depending on when they were married, this assumption could be incorrect. This is because couples married before December 2 1988 are in terms of the Black Administration Act assumed to be married out of community of property unless they agreed to be married in community at least one month before the marriage.

Where are your assets?

De Vos refers to the real-life example of a South African man who did construction work in Saudi Arabia and bought a villa while he was there. Shortly after his return to South Africa he died.

He was survived by a wife and two daughters in South Africa and his will clearly stated that it pertained to his assets in South Africa and the United Arab Emirates (UAE).

Lawyers had the will translated and certified and worked with a lawyer in UAE, but two years after the man’s death the UAE declared Shariah law applied and the will was not recognised.

A common scenario

De Vos says another common example of how simple wills can fail families applies to people who work overseas and invest in property as well as mutual funds in that country.

Later, however, that person returns to South Africa, possibly with a spouse, and starts a family in this country.

The returnee wishes to leave his or her assets to his or her spouse, and failing that, to their children.

If the returnee was in the UK, he or she would need a will dealing with his or her South African assets and any worldwide assets, but the assets in the UK should be excluded and dealt with in a separate will.

The UK assets will not attract inheritance tax in the UK if they are less than £325 000, but the returnee should expect these assets to be included in the South African estates when estate duty is calculated.

It is different elsewhere

If the home comer was in Germany, he or she will need a will dealing with their South African and worldwide assets but excluding those in Germany, De Vos says.

Anyone now in South Africa who has assets in Germany should draft a Statement of Domicile and check the extent to which the forced heirship laws in Germany will override or recognize the stipulations of their will and that statement, he says.

There may be some planning possible if forced heirship applies to property in Germany, he adds

A will drafted to deal with German property will need to meet the requirements of the German Court before it can be regarded as a valid will, De Vos says.

When heirs are not in SA

Many South African families now have at least one member who has relocated abroad, Theunis Ehlers, a FISA member and a director at Citadel Fiduciary, says.

Formal emigration through the SA Reserve Bank is not a requirement anymore as emigration is now handled by the South African Revenue Service (SARS) and coincides with ceasing to be a tax resident.

Ehlers highly recommends that that those who emigrate follow the required process so that SARS notes and confirms that they are not resident for tax purposes.

If a beneficiary of your will has emigrated and is no longer resident in South Africa, an inheritance of South African assets, may be transferred abroad, he says.

An authorised dealer must, however, ensure that SARS has formally noted and confirmed that the beneficiary is a non-resident, he says.

If a beneficiary of your will has not been noted by SARS as a non-resident, they are considered to be a “South African resident temporarily abroad” and they will have to use the usual channels to transfer assets abroad, Ehlers says.

This means using the discretionary allowance of R1 million a year or the R10 million a year investment allowance that requires tax clearance from the South African Revenue Service, he says.

Inheriting offshore assets

Ehlers says that, until February this year, if the beneficiaries of your estate were resident in South Africa but your assets are offshore, the executor had to:

  • Repatriate the assets to South Africa, or
  • Apply for an exemption from exchange control regulations

However, since February 23 this year, South African residents may now retain foreign assets, inherited from a South African estate, offshore without approval from the South African Reserve Bank, Ehlers says.

Ehlers recommends that if you own assets, situated in a foreign jurisdiction, you may need to execute a will in that jurisdiction. You should get advice from someone who understands the law of that jurisdiction, he says.