In recent weeks, I have had to deal with the deaths of people close to me and as a financial advisor, I had to get involved with the estates and offer guidance. It is at times like these that you get to realise the importance of a Will and more importantly the correct wording of a Will and getting guidance on estate planning.
Policies only pay out as per the nominated beneficiary
Case in point, in one of the estates, the deceased’s intentions was that all her possessions including investments and life cover were to go to the spouse. She believed by changing her will, that on her death, this would happen. However, what she didn’t account for was that on policies that have beneficiaries, they pay out as per the nominated beneficiary and not as per the will. The will was only implemented a month or two after her death and by that stage, all beneficiaries had been paid. The will was done via the bank with no financial advisor giving guidance at the time on estate planning. The result was a spouse with bills to settle and no monies paid to him and other beneficiaries benefiting that weren’t intended to benefit.
Without proper planning, the spouse was left with bills to settle and no monies paid to him, while the wrong individuals benefitted.
Different laws apply when dealing with assets in more than one country
Another consideration is when assets are located in more than one country. It is advisable to have a will in each country where assets are held because different countries have different rules regarding estates and opening the client’s family or estate to legal issues after his death if not accounted for.
Spain as an example states that you need to leave a certain proportion to members of your family, namely children. This is very different to South African law, where this is not enforced.
Furthermore, a will needs to state which country or countries it applies to; an estate is always based upon the last dated will, and if you don’t specify the country it must apply to it will apply to your worldwide assets.
Putting structures in place to control your estate
In the estate planning industry, there is a saying, “You can’t rule from the grave…” which means that sufficient structures need to be put in place for clients.You can, for example, grant a beneficiary access to a property while putting that same property in a different beneficiary’s name. This is called usufruct and can be used to allocate responsibility for maintenance and/or other costs.
Another way of having wishes carried out after death for beneficiaries who are financially irresponsible, is to leave their portion of the inheritance in a trust. Trustees are then accountable to make provisions for the nominated beneficiary in a responsible manner.
Selecting an executor
Another factor in deciding when drafting a will is who to appoint as Executor. To decide this, one must look at what you want from an executor. My belief would be that I would want a professional, accountable person who can implement the wishes I want to be carried out on my death, which is why I would advise against appointing Uncle Bob, a family member as the executor.
Appointing an FSB approved service provided, means they can be held accountable with the Ombud or FSB, which Uncle Bob, would not be.
One can appoint a lawyer, but I recommend appointing an institution that deals with estates on a daily basis rather than a general practising attorney. An attorney that deals with criminal law and family law as an example may take a little longer to finalise the estate as it’s not their main focus. Appointing an attorney is still better than Uncle Bob, but I believe an attorney that specialises in estates or an institution that does would speed up the process.
Location of the executor can also play a role; an institution that has a national footprint has the advantage of dealing with the beneficiaries in various locations.
Fees associated with settling of your estate
A will is one aspect of your estate, but for your instructions to be carried out, it may require capital to cover the liabilities and the actual cost of the estate such as taxes and executor’s fees. Where products, such as life cover can provide for this, again, another reason to involve a financial planner or advisor.
Fees for the winding up of an estate can also be negotiated before death.
Once a person passes on, fees are set, traditionally they cannot exceed 3.5% ex-vat, but if Uncle Bob appoints an attorney to assist with the estate when he takes on the responsibility, that attorney is not limited to the 3.5% and can charge by the hour, which may lead to costs far exceeding the 3.5% rate.
I think the point I am making is clear; make use of a financial advisor or planner when drafting a will. The saying “Penny wise, pound foolish” is very much applicable here. Also, proper planning will lessen the stress when a loved one is lost. Leave a legacy not a hornets’ nest
Stringfellow offers this service at no charge to its clients. If this is something you are interested in please contact us before it’s too late.