Does your (free) will complement or contradict the trust deed?

Are you one of the people who feel happy about getting a free will from a so-called professional? In South Africa, people are great targets to receive free products. Is there such thing as a free product, or are you signing up for a future cost? The saying goes “if it is too good to be true, it probably is”. It is no different with a free will, which is most of the time not adapted to your personal circumstances.

It is estimated that the average person spends 76 800 hours to build his/her estate, yet very few people spend any time ensuring that their estates are not diluted by more than 30% upon death, through death taxes. More emphasis is usually placed on investment strategies and the creation of wealth than on estate planning, despite the fact that estate planning forms one of the key supporting pillars of a sound financial plan. Your estate plan should take the following into account: your will, your trust, all your assets and liabilities, “deemed property”, such as your life policies, and liquidity to fund Capital Gains Tax, Estate Duty and Executor’s Fees (where applicable).

It is astounding that many people are happy to accept a (free) standard will that does not take their personal circumstances into account, including trusts set up, as part of their estate plans. It may be because it is uncomfortable to talk about death, and it is certainly not priority amongst all the daily demands. When one actually considers the importance of probably the most important document in your life, more effort should be made than just accepting a free, stock-standard will, that often does not even recognise a trust set up by you, never mind complementing your estate plan.

Most people delay addressing their wills because it is an emotional document to prepare. Your will should always be up to date and reflect your current wishes in terms of how you would like your assets to be distributed upon your death. Your will is a living document and should be reviewed whenever your circumstances change, but at least once a year.

Important things to consider:

• Perform an Estate Duty calculation for the various options that you may consider to ensure that your will wording supports the most tax efficient option. This is especially true where you need to decide who (your spouse or others) should receive the residue of your estate. In many cases, it may be more efficient to nominate your spouse to inherit the residue of the estate, rather than others, should you bequeath similar amounts to them. You need to have an indepth discussion with a professional when you do this exercise.
• If you are married, it is preferable to have individual wills rather than a joint will. The problem with a joint will is that when the surviving spouse dies, it can take a long time to locate the original will at the Master of the High Court’s office. If the original joint will cannot be found, the surviving spouse will die intestate. Intestate succession is based primarily on blood relationship, whereby the estate will be distributed amongst family members in a certain order. The assets will therefore be divided in terms of the Intestate Succession Act, and this may not be how you wanted your assets to be split.
• If you have assets abroad, you may require a separate will for your offshore estate.
• If you set up a trust, be careful to dictate in your will and the trust deed how trust assets should be dealt with after your death, as such a testamentary reservation my cause your estate to be inflated by all the trust assets.
• If you set up a trust, remember to name follow-up trustees in your will, and also ensure your trust deed allows for that.
• Be mindful of blindly setting up a testamentary trust (as part of a vanilla, free will). You probably do not need another (testamentary) trust, if you already have a trust structure in place. A testamentary trust does have a place, but it has its limitations, such as limited prescription as to how the trust should be managed – it merely consists of a couple of paragraphs forming part of your will - and its inflexibility to cater for any changes required, as the only way to amend a testamentary trust is to go to Court. 
• Always draft a will that clearly demonstrates your intentions. 
• Although a will does not have to be dated, dating it makes it easy to identify which is the most recent will. 
• Always have a revocation clause in your will to replace previous wills (where relevant).
• For a will to be valid, it has to be signed by two independent, competent witnesses who do not stand to inherit from the will and who will not exercise any undue influence. A child as young as fourteen can witness a will in terms of the Wills Act.
• Include special instructions in your will such as whether you would like to be buried or cremated.
• Name an executor. The executor is the person who will be responsible for administering your estate. By nominating this person in your will, you will avoid any unnecessary delays in the administration of the estate. The executor’s role is to control the estate’s assets, pay debts and to distribute what is left. Appointing your spouse (or anybody else) as the executor does not mean that he/she has to wind up your estate; he/she can appoint an agent to handle this, and he/she can negotiate the fee for this service. It is a good idea to name an alternative person as executor just in case the person you nominate is unable to take on the task, or is no longer around. If no executor is appointed, the Master of the High Court must appoint an executor. Such appointment will take place with the involvement of the estate’s beneficiaries and creditors. This will delay the finalisation of the estate. Professionals often offer to draw up your will for free, but it may end up costing you much more due to the fees they charge. The Administration of Estates Act prescribes a tariff equal to 3.5% (plus VAT) of the value of the gross assets of the estate being administered as Executor’s Fees, as well as a commission of 6% on all income collected by the executor from date of death to date of finalisation of the administration process. This fee may be negotiable in certain circumstances. 
• Ensure that your will contains a clause that any assets left to your child would not form part of that child’s matrimonial regime. If, for example, you leave a property to your daughter, who marries in community of property, including this clause in your will ensures that the property will not form part of your daughter and her spouse’s joint estate. You may even achieve a better solution to transfer assets into a trust for your family, as the same amount of death taxes will be payable, whether you transfer assets into your children’s hands, or transfer it into a trust for their protection. 
• If you have minor children, specifically state that no money will be paid into the Guardian’s Fund.

The aspects discussed above make it clear that a will is not some standard template, where just names and identity numbers are changed. Make sure you consult a reputable professional. It may be the best investment you made for yourself and your family, to leave a legacy of love.