Relying on vis major clause in a contract in times of COVID-19
July 13, 2020Is it still a buyers’ market out there?
July 13, 2020We’ve all seen it in movies and novels: A young unsuspecting person wakes up one day to find out that they had been left an extraordinarily large estate from a distant relative that they hardly knew existed. We chalk it up to an absurdity. Something like that would never happen in real life, would it?
Although it may seem farfetched, intestate succession happens far more often than one might realise. Statistics from the Master of the High Court in September 2019 showed that 70% of working South Africans do not have a will (or by extension, estate plan). Apart from the emotional distress caused by the death of a beloved, the families of these South Africans are in for a tough time should they pass away.
When somebody over 16 years of age dies, their property will be distributed according to a will or estate plan. If there is no will to speak of, the estate of the deceased is distributed in accordance with the Intestate Succession Act 81 of 1987.
In many respects, intestate succession is a complex and unnecessary complication in the distribution of an estate after death. Although somewhat clear cut regarding who is included in the distribution of the estate, the Intestate Succession Act leaves much of the how of the distribution and transfer of the estate to the inheriting parties.
In the case of intestate succession, the estate of the deceased will be distributed in accordance with a predetermined line of succession, which usually includes their spouse, children and/or parents. Intestate succession can lead to procedures that take time, money and energy, which are luxuries for those who are mourning and settling the estate.
One should keep in mind that the largest part of any estate is often real and private property. Without a plan for the distribution of one’s estate, it means that the physical property of the deceased also becomes part of a plan for distribution, which can take extremely long to settle (since assigning a monetary value to physical assets depends on valuation).
As for the how of the distribution of the estate, it ends up falling on the shoulders of the heirs to the estate to nominate someone to act as executor, failing which an executor is appointed by the Master of the High Court. For this reason, family disputes are a commonplace in intestate succession as the fair distribution of the estate is brought into question.
More often than not, there is very little liquidity in the estate to cover debts and taxes related to the property to be inherited. Since most of the real and private property does not have an immediate monetary value, any possible liquidity in these assets are locked up until the executor makes a decision on how the property is to be managed.
Having a will is one thing, but estate planning goes further than a mere will, in that it gives direction for the management of the estate in preparation for when you die. Where a will only gives an indication of how assets should be distributed, a complete estate plan will give guidance as to how money is made immediately available to those who need it and how investments and financial assets are to be managed.
Issues of custody, settling of debt, the continuation of school fees, and management of digital assets, among many other urgent matters, can also be simplified through a well-developed estate plan.
The purpose of an estate plan, then, is to guide the management of your assets in a way that a will cannot. Good estate planning can speed up the processes that take so long when executing a will and comprises a holistic strategy to ensure that your loved ones are cared for after you die.
In the case of estate planning, the adage holds true: Failure to plan is planning to fail. Don’t leave your dependents in a vulnerable position while they mourn. Instead, give them the best chance to live the life you’ve always hoped for them.
References:
- Wills Act 7 of 1953
- Intestate Succession Act 81 of 1987
- https://www.moneyweb.co.za/financial-advisor-views/no-will-in-place-it-will-have-consequences/
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your adviser for specific and detailed advice. Errors and omissions excepted (E&OE).