Akhona Matshoba outlines the key considerations investors should be aware of when drafting, reviewing or updating a will to ensure their wishes are properly reflected and their loved ones protected.
National Wills Week, which takes place from 14-18 September this year, is a good time to draft a will if you do not have one or to review your existing will and broader estate plan to ensure they still align with your wishes.
The importance of a will
A will is an enduring expression of care for the people who matter to you. It allows you to determine the conditions under which they can benefit from your estate and appoint critical roles – such as guardians for minor children and someone you trust to administer your estate according to your wishes. However, despite its importance, many delay taking the necessary action for different reasons, leaving loved ones to deal with potentially costly and complex consequences.
The following considerations can help guide your process.
Is your will valid?
A valid will allows you to choose who you would like to inherit your assets and how. An invalid will strips you of this power and subjects your estate to the rules of intestate succession. This means that your estate will be divided according to a set formula and may not align with your wishes. Additionally, the process of winding up your estate will likely take longer to complete, possibly leaving those who are dependent on you without the necessary support.
For your will to be valid, it must:
- Be signed by you, in the presence of two competent witnesses older than 14. If your will is more than one page, make sure to sign or initial each page and include your full signature on the last page. Witnesses are only required to sign the last page of the will and must sign in your presence.
- Exclude witnesses (or their spouses) as beneficiaries, executors, guardians or trustees. A witness will automatically be disqualified from benefiting in terms of the will, unless a court declares otherwise.
- Be in writing – whether handwritten or typed. If another person writes the will on your behalf, neither they nor their spouse can stand to benefit from your estate, and they cannot be named as executor of the will, guardian of your minor children or trustee of a testamentary trust.
Is your will fit for purpose?
Your will should reflect your financial position at any given time
As a foundational part of your financial planning, your will should change as your assets, circumstances, and beneficiary and/or dependants’ needs change. Therefore, it is a good idea to review how you have distributed your assets, as well as the circumstances of inheritance, as and when significant life changes occur.
Your will should address practical matters
A well-crafted will does more than set out your wishes. It should also address a number of important practical matters, including:
- Appointing a suitable executor
When appointing an executor, many people naturally turn to someone they know and trust, such as a spouse, family member or close friend. It is equally important to consider whether that person will have the emotional, mental and practical capacity to administer your affairs when the time comes.
Serving as an executor can be a complex and time-consuming responsibility, requiring attention to legal, administrative and financial matters. Choosing someone with the ability and willingness to carry out these duties helps ensure your wishes are implemented efficiently and effectively. - Providing immediate liquidity for loved ones
It can take months, and sometimes years, to administer an estate. During this period, beneficiaries may need access to funds to cover day-to-day expenses and other financial commitments. It is prudent to consider how some of your assets can provide financial support in the interim.
For example, if you are invested in a life policy and have nominated beneficiaries, the death benefit of these investments can generally be paid directly to beneficiaries once the death claim process has been finalised. Certain restrictions may apply for some products, so it is worthwhile seeking professional estate-planning advice to determine which of your investments can best provide for your loved ones while they wait for the estate administration process to run its course.
Your will should consider the rules that govern your investments
When it comes to investments, it is important to familiarise yourself with each product’s rules. Some investment products, such as unit trusts, form part of your estate. Others, including the Allan Gray Tax-Free Investment, Endowment and Living Annuity, are structured as life policies and allow you to appoint beneficiaries who will receive the proceeds directly on your death, without having to wait for your estate to be wound up. Retirement products work differently. While you can nominate beneficiaries, the fund’s trustees are ultimately responsible for allocating the benefit among your dependants and nominees according to section 37C of the Pension Funds Act. This is discussed in more detail below.
Ensure that you review the beneficiaries for your investments regularly
You can review and update your beneficiary and/or nominee details for investments that permit these appointments at any time via your secure Allan Gray Online (AGO) account.
Understand how your retirement investments fit into your estate plan
As mentioned, retirement fund benefits are treated differently from other assets in your estate, with your fund’s trustees being responsible for deciding how death benefits are distributed.
What is the role of the trustees?
While you can, and should, nominate individuals to receive the benefits of your retirement investments, these nominations serve only as a guide for the trustees and are not binding. Trustees are required to identify and consider all your dependants before allocating the benefit.
Dependants may include spouses (including ex-spouses, where applicable), children and any other individuals who were financially dependent on you prior to your death. Trustees must consider their respective needs and circumstances to ensure the death benefit is distributed fairly. Refer to the Understanding the death claims process of retirement funds document to learn more about the process.
To help trustees understand your wishes and identify potential beneficiaries, keep your list of nominees up to date. You may also provide a letter of wishes to give more context to your desired outcome.
Taking control now ensures certainty for your loved ones
A will is more than a legal document, and estate planning is not a once-off exercise – both need to be revisited as your life, loved ones’ needs and financial circumstances change.
During National Wills Week, many qualified legal practitioners provide will drafting services for free. Visit the Law Society of South Africa’s website to find participating attorneys who can help you get started.
If you already have a will, take this time to review it and ensure it remains valid, up to date and aligned with your intentions. This way, you can reduce your loved ones’ uncertainty as they navigate loss and ensure your wishes are carried out as planned.