Estate planning – It’s more than just a will  

Planning for the future of your loved ones

Estate planning is essential for ensuring the future well-being of your loved ones. By taking the time to create a comprehensive plan, you can specify how your assets should be distributed, designate guardians for your children and even outline your wishes regarding medical care. This proactive approach not only provides financial security, but also facilitates easier decision-making for your family during a difficult time. Effective estate planning is a thoughtful way to protect those you care about and provide them with peace of mind for the future.

Appointing an executor is an important step in the process to ensure that your estate is managed according to your wishes, any debts and taxes are settled, and your assets are distributed to your beneficiaries in accordance with your instructions. While we tend to focus on the duties of the executor of a deceased estate, we should also recognise the privilege that comes with it, namely, honouring the fulfilment of a person’s final wishes.

 

The freedom of testation

Freedom of testation is not only a fundamental legal principle, but also a right which is guaranteed by the Constitution of the Republic of South Africa. As per a 2013 Supreme Court of Appeal judgement: “[N]ot to give due recognition to freedom of testation will…also fly in the face of the founding constitutional principle of human dignity.

The right to dignity allows the living, and the dying, the peace of mind of knowing that their last wishes would be respected after they have passed away.”

This extract from the legislation essentially explains that you have a legal right to decide how your estate will be distributed after your death, which is not something to be taken for granted. There are many countries around the world that limit the rights of the testator through what is known as ‘forced heirship’ or mandatory succession rights.

Mandatory succession rights are designed to ensure that certain heirs, referred to as ‘protected heirs’, are guaranteed a portion of the testator’s estate regardless of the contents of the latter’s will, specifically when it comes to making provision for a spouse and/or children (as well as parents, siblings and other relatives depending on the country or jurisdiction).

Countries that follow the Shari’ah law also have mandatory succession rights in place – though these generally include a more complex distribution system.

Although freedom of testation cannot be taken away from a person – even by a court of law – there are some limitations to keep in mind. Most of these are legislative limitations, one of the most common of which is contained in Section 37C of the Pension Funds Act, and which gives the trustees of a retirement fund the discretion to determine how to distribute death benefits in an equitable manner among the deceased member’s dependants.

The courts have also imposed some limitations on the freedom of testation. These include that a provision in a will cannot be enforced by the courts if it is impossible to execute or too vague, is in conflict with the law, is deemed to be unconstitutional, or is contra bonos mores (that is, ‘against good morals’).

As far as unconstitutional wills are concerned, this does not mean that all clauses in wills that differentiate between different groups of people are invalid, but it does mean that the testamentary provision can be declared invalid if, in that specific set of circumstances, it discriminates unfairly on the grounds of race, gender and religion.

The matters described above illustrate the importance of drafting a will in consultation with a specialist and ensuring that it is updated regularly, especially if the testator owns offshore assets. It is equally important to ensure that your will is drafted as part of a well-structured estate plan.

 

Ensuring your wishes are honoured while maximising tax benefits

A proper estate plan determines how your assets will be preserved, managed and distributed after your death, ensuring it’s done in the most tax-efficient way possible, while still giving effect to your wishes.

This could entail incorporating structures like a testamentary trust to protect vulnerable heirs, or endowments, the distribution of which is not subject to the winding up of the deceased estate. It could also entail taking advantage of tax benefits associated with the winding up of deceased estates, including bequest to surviving spouses and public benefit organisations which are not subject to estate duty.

 

Seek expert guidance

Estate planning isn’t just about having a will, it’s about carefully considering all aspects of your financial situation to ensure your loved ones are taken care of. Speak to a financial adviser today to connect with a specialist you can trust to carry out your final wishes with competence and respect. Secure your loved ones’ future and your peace of mind by acting now.