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Estate planning: the importance of having a Will

Your Will should detail how your estate should be divided when you pass away.

Estate planning

Article summary

  • Drafting a legal Will is an important part of the estate planning process.
  • It serves to spell out who inherits assets such as property and how these assets should be transferred to beneficiaries.
  • Keep your Will in a safe but accessible place.

What is estate planning?

“The estate planning process involves the structuring of assets in the most tax-effective way in order to ensure protection and preservation of assets from one generation to the next. It includes the drafting or reviewing of your Will.” – The Fiduciary Institute of Southern Africa

Why must you have a valid and up-to-date Will?

The function of a legal Will includes making sure that your wishes for your property are carried out on your death. This allows you to safeguard your family’s financial future and inheritance, and to help you save on estate duty. Your Will can be drawn up by a fiduciary services specialist or an attorney to ensure legal compliance.

What should your Will cover?

Of the aspects necessary to include as regards your assets, the Fiduciary Institute of Southern Africa suggests the following:
– Ensuring that the structuring of assets in the estate and the Will are synchronised to make the execution of your wishes feasible;

– Providing for sufficient liquidity in the estate after death. More than 30% of deceased estates in South Africa do not have sufficient cash available for all debts, costs, cash bequests, taxes, etc.

– Taxes payable during life and at death, including income tax, capital gains tax, and estate duty.

Where does property fit in in terms of estate planning?

According to independent financial services group PSG, your Will should detail how your estate should be divided when you pass away. Part of that stipulation covers who will inherit what property and how your property will ultimately be transferred to your beneficiaries.

What can you expect to pay for the administration of a deceased estate?

Following the 2018 budget speech, in an article published for, Brenthurst Wealth lists these costs that form part of the administration of a deceased estate:
– “An executor is entitled to remuneration as per the current set tariff of 3,5% of the gross value of the estate’s assets.

– If an executor is a VAT vendor, the vendor is entitled to claim the VAT amount due from the estate…” There must be sufficient cash in an estate to cover all administration costs, not just the executor’s fees, which include property transfer costs.

Estate duty

“Estate duty is levied on worldwide assets,” writes Brenthurst Wealth in the same article. “Simply put, and not considering circumstances where an entire estate is bequeathed to a surviving spouse: an individual might have an extensive offshore investment and property portfolio with very few assets in South Africa. As a South African tax resident at death, that entire worldwide estate is levied for estate duty by SARS. After taking into account all deductions and abatements, a dutiable estate up to the value of R30 million is liable for 20% estate duty, which is R6 million. Any amount over R30 million will be levied at 25%… Part of effective estate planning is to ensure there is sufficient liquidity in the estate to cover all administration costs and duties payable on death. If the intention of the testator is to maintain offshore assets abroad without having to repatriate or liquidate those assets, you may want to consider a life policy that will pay out to the estate and ensure estate duty and subsequent executor’s fees are provided for by the cover to avoid having to sell any international assets.”

Keep important documents safe and accessible

To avoid delays in winding up an estate, keep documents that the executor will need in a safe place – and tell somebody close to you where they are so that they can be found easily. These include your ID, marriage certificate, death certificate and estate duty return from a predeceased spouse’s estate, original title deeds, etc.

If you are looking to buy a home, South Africa’s leading home loan comparison service – ooba home loans – offers a range of home loan calculators to help you work out what you can afford. Click here to access ooba home loans’ free, online prequalification tool, the ooba Bond Indicator. Then, when you’re ready, you can get prequalified or apply for a home loan with ooba home loans. Remember to ensure that any property you own is specified in your Will, and that your Will covers who will inherit what property and how your property will ultimately be transferred to your beneficiaries.

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