This week , 11-20 September, marks National Wills Week in South Africa, and it’s the time of the year when an emphasis is put on the drafting of a last will and testament. A will is a written document containing details of your final wishes of what should happen to everything you own when you die.
Ecsponent Financial Services supports National Wills Week by offering much-needed estate planning information and a free wills drafting service during the month of September. A will is only one aspect of a broader estate plan, which is a strategic plan for managing your assets while you are alive and after you have passed on.
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The importance of a will
A valid will is the best way to make sure your final wishes as the testator (person who drew up the will) are honored as to how you want your assets to be divided after your death. But a will does not only look at your assets. A will can also give directions about how you want to be buried, or how you want your remains to be dealt with. "You can specify if you want a 'normal' burial or cremation. Others use a will to donate their organs, such as kidneys and heart, to hospitals for research or to save a life," says Amos Khumalo of Amos Khumalo Attorneys Inc.
Here are some helpful tips to consider when dealing with the main aspects of putting together an estate plan:
Estate duty
This applies to a net estate in excess of R3,5 million. “The primary importance of estate duty is to tax the transfer of property from the deceased’s estate to the beneficiaries”, says Marietta du Preez, general manager at Ecsponent Financial Services.
Assets or property in an estate consists of, but is not limited to:
· Any property that the deceased was competent to dispose of whether in South Africa or abroad
· Loan accounts
· Unpaid salaries
· Leave pay
· Investments such as shares, unit trusts and bank deposits.
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Living trusts
A living trust is a trust that’s created while you are still alive. The creator of the trust is referred to as the founder and is responsible for appointing one or more trustees as well as the trust’s beneficiaries. The benefits of this trust include intergenerational wealth preservation. “Put simply, if you work hard your whole life and accumulate wealth that you’d like your children, and their children’s children to enjoy, the living trust provides a vehicle to enable this,” Du Preez adds.
Retirement annuities
Retirement annuities are excluded from the assets in your estate and cannot be frozen between death and the winding up of your estate. All retirement annuity contributions not deducted from income tax during your lifetime will not be taxed in the hands of your beneficiaries. If your estate is declared insolvent before your death, money in a retirement annuity is largely protected from creditors. As such, people often make lump-sum payments to their retirement annuities to make use of healthy estate planning options available to them.
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Donations
For South African residents, donations are subject to donations tax, which is 20% on the initial R30 million and 25% on any amount that exceeds R30 million. However, current legislation states that donations of less than R100 000 during a tax year are exempt from donations tax. Du Preez explains that you can therefore donate R100 000 per tax year to a living trust without attracting donations tax. By doing this, the estate of the donor is reduced by the donated amount as well as by all future growth generated on this amount.
