Common mistakes when drafting a Will

Common mistakes when drafting a Will

This edition we have focused on Wills and some of the common mistakes we have seen in our experience.

After a life of hard work, one of the key documents that will require some serious thought is the drafting of your Will. It goes without saying that you will not be available to clarify mistakes or ambiguities when you are gone. Please note we cannot draft Wills, but we are equipped to review and recommend a Fiduciary Specialist where needed.

As the old saying goes: “You cannot think out the box at this time”.

Here are some of the more common errors we have seen over the years. Obviously, this list is by no means exhaustive, but may highlight important factors to take into consideration:

1.Executor
Does the Testator (and the Family) have a relationship with the nominated Executor in the Will?

A trusted friend or family member can be appointed as the executor, and they in turn have the right to outsource this to a suitable experienced professional as “Agent”.

The executor can also negotiate fees with the Agent. The default position for many years was to appoint the large banks as Executors, but we strongly advise against this.

2. Beneficiaries
Wills (and money) have for centuries split families apart. Ironically most people draft Wills to avoid exactly this, yet vague language and ambiguous clauses are more common than people think. Potential beneficiaries often look for any such loopholes to exploit.

It is VITAL to make it very clear (with correct identity numbers) who is to inherit what. This clarity can also be established when updating the balance sheet (discussed further below). In the case where beneficiaries are living overseas, such details must be accurately captured. It is worthwhile to go the extra mile and even state the relationship to the Testator.

Sadly, often the reverse is also true – a testator goes to such lengths (and inserts so many clauses) that the true intention becomes vague. The infamous “Ruling from the Grave” holds true here.

3.Witnesses
Very importantly, a witness cannot be a beneficiary, executor or trustee in an estate. NO person mentioned in the Will can be a witness. This would also preclude the spouse of such witness from inheriting, and in certain circumstances may even make the Will invalid.

It is important that two (or more) mentally competent adults over the age of 16 be present when a Testator signs their will. Also, each page must be signed (NOT initialled) by each witness.

4.Updating details
It seems obvious, but many people do not update their details on a regularly enough basis. Life events such as getting married (or divorced), having children or grandchildren, buying significant assets or property are not updated to often reflect their actual status.

5.Minor children and handicapped beneficiaries
Bear in mind that minor children can inherit money, however, any money left to them must be paid to the “Master of the High Court’s Guardian Fund”. The child will only receive this money (with minimal interest) when they turn 18.

It is advisable to create a “Testamentary Trust” for such children. We recommend naming the Trustees for this Testamentary Trust in your Will. You need to nominate the trustees for this trust who should, if possible, be familiar with your family dynamic and know your children.

They will need to be making decisions concerning your children’s financial wellbeing until the assets are distributed directly to them at the age specified by you.

The same would apply to any other beneficiary who is mentally incapable of looking after their own money through factors such as disability, age or dementia.

6.Appointing a guardian
Should you pass away with minor children and a Testamentary Trust has been formed, who will actually be the child’s guardian? You should nominate the minor child’s guardian who may be a trustee of the TT, but it may not necessarily be so. You should always ask your prospective guardian’s permission before naming them in your will.

7.Signing a “Living Will”
This would apply mainly to medical treatments, especially which medical treatments should not be administered.

The testator directs which type of medical treatments should be given, and under what circumstances. This is a separate document and its existence and whereabouts are important before you pass away so should be left with family not necessarily the professionals.

It may also direct who would be responsible for making such decisions where circumstances are not clear.

8. Life Insurance Policies
Generally, Life Insurance Benefits are dealt with outside of the Will, but it is vitally important to update the beneficiaries at the same time as updating Wills.

Often the testator updates their Will but keeps old beneficiaries on numerous policies and Retirement Annuities.

9. Liquidity at Death
If there are insufficient funds to pay both Estate Duty and estate expenses as well as income taxes, then assets will need to be sold. A basic “Estate Liquidity” calculation is often a good idea. Our financial advisers at PSG Wealth Sandton Grayston can assist you with this.

In addition try to answer: “Where will the cash come from to support my family while the estate is being wound up”?

This is especially relevant with the current state of the “Master of the High Court” in South Africa.

10.Update your Balance Sheet
As you update your will, it is a good idea to update your balance sheet. This is especially the case if there are multiple beneficiaries.

11.What about offshore assets?
South Africans are taking more and more money offshore. A simple “Worldwide Will” is often sufficient to deal with these assets, but NOT in relation to immovable property internationally.

If this clause is not dealt with correctly, then probate may apply – this is the appointment of a legal expert in the country where assets are situated. This process is expensive and time consuming.

12.Keeping documents central
We always recommend that clients keep their important documents in a safe place where someone else can access them. This will often be done when drawing up the balance sheet mentioned above.

It is obviously a good idea for the Will to “talk” to this file and the assets of the estate.

13. Trusts
If you have a Trust ensure that your Will and Trust Deed are aligned. Replacement Trustees can be nominated in your Will if the Trust Deed allows.

We cannot place enough emphasis on how often we encounter poorly drafted wills. Scribbling a few thoughts down and sticking this in a draw is not the solution for the allocation of your lifetime assets.

Again, we do not have the Fiduciary Licence to draft Wills, set up Trusts or manage Estates. But we can certainly assist in the process and point you in the right direction.

Through careful planning, we aim to ensure your loved ones are not faced with the shortcomings we have witnessed in this time.

The opinions expressed in this document are the opinions of the writer and not necessarily those of PSG. The information in this document is provided as general information. It does not constitute financial, tax, legal or investment advice and the PSG Konsult Group of Companies does not guarantee its suitability or potential value. Since individual needs and risk profiles differ, we suggest you consult your qualified financial adviser, if needed.