ESTATE PLANNING
Why it is important to have a Last Will and Testament?
Having a Last Will and Testament in place will ensure your chosen and trusted executor is appointed, your assets are distributed as per your wishes, and ease the burden on your grieving loved ones. When you die, without a Last Will and Testament in place, you are considered to have died intestate. Intestacy distributions often do not reflect what the testator would have wanted – as such follow rigid legal prescriptions, where usually only the current spouse's blood relatives inherit irrespective of their needs and capabilities.
Exactum Executers Trust will help you set up and structure your own customized Last Will. Click here to contact us
What is a Last Will and Testament?
Your Last Will and Testament determine how your estate will be divided upon your death and identifies the persons you choose to administer and distribute your estate upon your passing to your identified beneficiaries. Failing to execute a Last Will and Testament could result in your assets passing to individuals, that you do not wish to receive an inheritance or passing to the Guardian’s Fund until such time that the minor heirs become eligible for their inheritance.
Exactum Executers Trust will help you set up and structure your own Last Will and Testament. Click here to contact us
PREPARING A WILL
The necessity of a Last Will and Testament and the steps to follow to get yours in place
Creating a Last Will and Testament is an essential step for anyone, even if you do not have substantial assets. Having a will in place ensures that your wishes are carried out and, in the inevitable event of your death, and causes less strain on your loved ones.
The following steps can help you prepare for a consultation with an estate planner:
1. Determine your assets
The first step is compiling a list of all your assets and liabilities. Once you determine the value of your home, your investments (including retirement plans, life insurance death benefits, and all other assets), you may be surprised how much your estate is worth. This is the important first step.
It is important to determine your liabilities, to make sure there is enough cash/liquidity in your estate to cover all your debt, administration costs, and fees in the estate.
2. Designate an executor and beneficiaries
Determine who your beneficiaries are and decide how you wish to divide your estate amongst your heirs. Remember that you may already have designated beneficiaries in accounts like your retirement plans and life insurance policies. These are known as non-estate assets and fall outside the purview of the Will so make sure they are taken into consideration when determining distributions in your Last Will and Testament.
3. Assign guardians for your children
If you have children who are minors, choose who their guardians would be in the event both you and your spouse pass away before the children reach the age of majority. A court will appoint a guardian if you do not make a designation in your Last Will.
4. Write the Last Will and Testament
After the Will is written, you will need to sign it in front of two competent witnesses as prescribed by Law to make it official.
If Your Will does not conform with all the legal prescriptions, it may be invalid, and your estate will still be administered in terms of the intestate rules.
What is Estate Administration?
Estate administration is the process of gathering all assets of a deceased person, paying all debts and administrative costs, and distributing these assets to beneficiaries in accordance with a Last Will and Testament, under Court supervision. Someone must be appointed by the Court as Executor or as the Master’s representative in the case of Sec 18(3) estates (estates where the value of the assets in the estate is less than R250 000,00).
Exactum Executors Trust will help you with the Estate Administration process. Click here to contact us
Consider setting up a trust
Contact our team at Exactum Executors Trust. We assist clients with Will and trust drafting, trustee and executor services, as well as estate administration. Click here to contact us
Pros and cons of trusts - a summary
• “Growth” assets can be transferred to a trust. This can be done by lending money to the trust to buy your assets from you. The trust owes you the money and the loan account (amount owed by the trust) forms an asset in your estate. By transferring the asset to the trust in this manner, you peg the value of the asset for estate administration purposes. Any future growth of the asset will take place in the trust. Thus, you save on Estate Duty. The value of the loan account can also be reduced by using the R100 000 that can be donated annually free from the consequences of Donations Tax. The trustees can use this R100 000 or part thereof to repay the outstanding loan account.
• A person, who already has a substantial estate, can create a trust, and request his parents, for example, to bequeath his inheritance to the trust, rather than to his estate. Through this arrangement, the value of his estate is not increased, and no Estate Duty will be levied at his death on the assets that were inherited by the trust.
• The assets in your trust are not regarded as being disposed of when you die. Capital Gains Tax can be saved in this manner.
• Assets in your trust cannot be attached by your creditors if you are declared insolvent.
• A trust can provide a measure of custodial protection of assets. The assets of beneficiaries, who are unable to manage their own financial affairs, can be kept and managed in a trust. These beneficiaries can also include surviving spouses who are either, by way of inexperience or incapacity unable to manage their own financial affairs.
• The annual exemption on interest earnings can be used to the advantage of the beneficiaries of the trust when income earned by the trust is distributed amongst the trust beneficiaries (conduit principle).
• A trust can be used to manage your assets on an ongoing basis. Assets can be kept within a family and be passed on from generation to generation.
• In certain circumstances a trust can be created, which has the same characteristics as a partnership, but it has greater continuity than a conventional partnership.
• A trust can make provision for sufficient funds for the dependants of a deceased, during the administration of the estate of the deceased, when the assets of the deceased are usually “frozen”.
• A trust can be used to curb the consequences of the restriction on the subdivision of agricultural land.
• Instead of using a usufruct, a trust can be used to obtain the same result.
Cons
• When assets are transferred to a trust, you lose control and ownership of the transferred assets. Your protection lies in the wording of the trust deed.
• Many trusts are created in isolation and do not form part of a holistic estate plan.
• Trusts are taxed for Income Tax purposes at a flat rate of 45%. It is not cost-effective if you are in a lower tax bracket (unless you avail of the advantages of the conduit principle).
• Assets held in your personal capacity will enjoy more tax exclusions than those held in trust. For example, the capital growth in assets in a trust will be taxed at an inclusion rate of 80% as opposed to individuals at 40%. The maximum effective rates are thus 18% for individuals as opposed to 36% for trusts.
• Trusts do not qualify for the primary residence rebate for Capital Gains Tax purposes.
• Section 7 of the Income Tax Act may deem the income of the trust to be taxable in the hands of another party, such as a settler/donor for example.
• It is required to include the amount of trust assets in the value of the accrual, for the purpose of marriages with the accrual system (Sec 4 of the Matrimonial Property Act 88 of 1984).
• The offshore transmittable allowance (for exchange control purposes) is reserved for natural persons only. Trusts are in this case extremely limited regarding direct offshore investments.
• A trust can be accessed by the authorities as it is an entity that must be registered.
• There is a general perception that if a trust is filed with the Master’s office then it must be valid. Unfortunately, this is not always the case.
• The choice of trustees can lead to difficulties if not enough consideration is given to the future choice of trustees.
• Be extremely cautious of off-the-shelf trusts. Every trust deed must be tailored to fit your specific needs.
• It can be expensive to form a trust. Preferably the services of a trust specialist should be used to ensure that the trust is established in accordance with the latest legislation.
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- Contact our team at Exactum Executors Trust. Click here to contact us