Estate planning in South Africa: Essential questions answered
Estate planning is a critical part of financial planning, yet it often gets overlooked. This process involves drafting a will, assigning assets to beneficiaries, and understanding how a deceased estate will be administered. To shed light on this topic, here are answers to some frequently asked questions about estate planning that might assist in helping you navigate the complexities of estates. What happens if I pass away without a will? When a person dies without a will (or with an invalid will), their estate is settled according to the laws of intestate succession. This scenario is far from ideal, causing potential delays and administrative issues during an already difficult period for your loved ones. The straightforward solution to avoid such circumstances is to create a legally valid will. Can my partner and I create a joint will? It is possible to create joint wills, particularly when the intention is for the estate of the first spouse to be transferred to the surviving spouse. However, it is recommended to seek guidance from a fiduciary expert when setting up a joint will. Do I require a separate will for my foreign assets? Generally, your South African will covers your worldwide assets. However, depending on the type of assets and their locations, you may need a foreign will. For instance, owning immovable property or shares in an overseas company may require a foreign will. Am I free to bequeath my assets to anyone? South African law does grant testators freedom of testation, meaning you can bequeath your assets to any individual or organisation, with a few exceptions. For instance, your will must not contain any provision that’s illegal, against public policy, or impossible to fulfil. Should I include my policies in my will? Life policies or endowments are directly paid to the beneficiaries you have nominated, and there is no requirement to include them in your will. Mentioning them in your will could potentially create confusion. Similarly, benefits from pension, provident, preservation, or retirement annuity funds are distributed to your financial dependents by the trustees of the respective funds. Will my spouse have access to our bank accounts after my death? Bank accounts are generally expected to be frozen upon your death, but there is typically a delay before this takes place. However, your executor can work with the bank and make suitable arrangements to enable your spouse to continue conducting transactions without interruption. Can I leave my primary residence to my child while allowing my spouse to live there after my death? Yes, there are mechanisms available that allow you to leave your primary residence to your child while ensuring your spouse can retain the right to live there. However, this aspect of estate planning can be intricate, and it is advisable to seek guidance from an expert when dealing with such situations. Should I establish a testamentary trust in my will? If you wish to protect and preserve assets for minor children, mentally or physically disabled beneficiaries, or a surviving spouse, setting up a testamentary trust in your will can be an effective solution. Can I nominate my spouse as my executor? Although it is an option to designate your spouse as the executor of your estate, it’s worth considering that the responsibilities and time commitment involved can be burdensome, especially during a time of grief. It may be beneficial to appoint a fiduciary expert as a co-executor alongside your spouse to alleviate the load and ensure efficient management of your estate. Estate planning is a multi-faceted process that requires careful thought and expert advice. While this article provides a general overview, it’s always recommended to seek professional guidance when drafting a will, bequeathing assets, or dealing with any other aspects of estate planning. Don’t leave your estate planning to chance. Secure your legacy and the future of your loved ones by seeking expert advice today. While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither writers of the articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes and should not be construed as legal advice. Powered by SucceedGroup
Will solar power increase the value of your home?
The upfront investment is high, which you’ll want to recover when you sell. Stage 6 loadshedding is now firmly in effect, many South Africans are without power for up to 12 hours each day, and the threat of Stage 8 blackouts looms large on the horizon. It’s no wonder then that many households are turning to ‘off-grid’ power sources to keep the lights on and return to some semblance of normality. Solar power has emerged as the most popular alternative energy option due to its relatively quick installation, soundless efficiency (unlike a noisy generator), environmental benefits, and the prospect of lower future energy bills. However, the upfront costs associated with a solar installation may be prohibitive for the average middle-class homeowner with options ranging between R59 000 to R289 000, according to the pricing from solar provider Solana Energy. Luckily, the increased popularity of solar power has given rise to a variety of innovative financing options to make solar more accessible and affordable. These include: Outright purchase: Buying the system outright using one’s own funds. Financing the system through a home loan provider: Some of the major banks now offer the ability to add the cost of solar installation to one’s home loan. Rent-to-own: Various solar financing companies have popped up in recent years, offering consumers the option to pay a monthly fee for solar with the understanding that you will own the equipment after a certain period of time, usually five to seven years. A subscription service: Solar providers such as GoSolr offer a fixed-monthly subscription to solar power using their equipment. Prices generally start at R1 580 per month. What’s also important is to take into account whether the significant initial financial investment is justified by considering the value it will add to your home in the long term. According to South African home loan experts, ooba Home Loans, solar panels can increase the value of a property by around 3 to 4%. However, taking into account the current electricity crisis in South Africa and with no long-term solution in sight this estimate is actually rather conservative. Ability to sell the buyer long-term peace of mind: The majority of the country is still experiencing a buyer’s market, meaning that many well-priced and well-designed homes are sitting on the market for far longer than they usually would, due to an oversupply of homes. Solar power is definitely a Unique Selling Point (USP) and a way for sellers to distinguish themselves from the competition. Homeowners are thus encouraged to make the transition now while they can afford it, as it can be a lifeline should they become financially distressed in the future and need to make a quick sale. By investing in solar power, owners are also able to market the ‘peace of mind’ that their property will offer prospective buyers, both in the short- and long term. The buyer has the assurance that they will be able to work from home and perform daily household tasks such as cooking without interruption. Another positive selling point is the prospect of lower electricity bills and resilience against unforeseen tariff increases. Eskom was recently approved to implement an 18.65% tariff hike come April 2023, which is yet another blow to South Africans dealing with interest rate hikes and the rising cost of living. In contrast, most solar providers’ annual price increases are in line with annual inflation, giving consumers the ability to plan and budget accordingly. Five factors to maximise your solar investment: Choose your financing option wisely: If you’re investing in solar power with the goal of adding to the value of your home, make sure that you own the equipment outright. If you’ve opted for the ‘rent-to-own’ (and haven’t completed the contract) or solar subscription option, the new owner will have to carry the costs of the contract. Take the size of the installation into account: The more solar panels on your roof, the more electricity can be generated. Make sure that you purchase a hybrid solution: A hybrid system consists of solar panels, a smart invertor, and a battery. The battery is what keeps your electricity running during loadshedding, using the power generated from the solar panels during non-loadshedding periods. Choose a reputable service provider: Make sure that your provider is accredited, uses the highest quality materials to increase their lifespan, and that they offer a warranty should something go wrong. Finally, remember that location is key: If your roof is constantly in shade, the solar panels will receive very little sunlight to generate electricity, making a costly installation essentially useless. Solar power has the potential to greatly increase the selling potential of your home, but all factors must be considered to maximise your return on investment including whether you can recoup the investment costs in your eventual selling price. WRITTEN BY GRANT SMEE Grant Smee is a property entrepreneur and the managing director of Only Realty Property Group. While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither writers of articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes.
Think twice before choosing an executor
The nomination of an executor is an important aspect of a Last Will and Testament. An executor is nominated in a Last Will and Testament and, upon death, he or she administers and distributes the estate in accordance with the testamentary wishes of the deceased. Importantly, although a person can nominate an executor, the executor is appointed by the Master of the High Court through the issuing of Letters of Executorship. The executor is responsible for, amongst other things, interpreting the Last Will and Testament, collecting information on all the assets and liabilities of the deceased, and distributing inheritances to beneficiaries in accordance with the Last Will and Testament. Although it is possible to appoint a family member as executor, it should be kept in mind that, not only is executorship an onerous and complex task, but the Master may in some cases refuse to appoint a nominated executor, or only grant Letters of Executorship if the nominated executor is assisted by a fiduciary professional or provides security, normally by way of an insurance policy, to the satisfaction of the Master. It is also important to keep in mind that, should a family member be nominated, the family member will have to make decisions about the administration of the estate during an emotionally difficult time, and it may become difficult for the family member to remain impartial and objective. In a recent case in the Western Cape High Court it was found that the executors, the daughters of the deceased, were conflicted and not in a position to exercise their fiduciary duty as executors properly. The facts in the matter of Brimble-Hannath v Hannath & Others were as follows: Hannath was married to Brimble-Hannath when he passed away. Hannath’s daughters were, in terms of his Last Will and Testament, the nominated executors of his estate and were appointed as such by the Master of the High Court. In terms of his Last Will and Testament, his surviving spouse Brimble-Hannath receives a lifelong right to inhabit and use the residence where she lived with the deceased, while the residue of his estate was bequeathed to a trust of which his daughters are trustees and beneficiaries. The Last Will and Testament did not provide any settlement on the surviving spouse to provide for her maintenance. She submitted a claim under the Maintenance of Surviving Spouses Act, amounting to more than R6m. It was not disputed that she is entitled to make a claim against the deceased estate. Hannath’s daughters, in their capacities as trustees of the trust, instituted a claim of R4m against the estate based on a loan extended by the trust to the deceased to finance the purchase of the residence in question. Brimble-Hannath brought an application for the removal of Hannath’s daughters as executors in their late father’s deceased estate. The Court emphasised the basic principle that nobody should be the judge in his/her own case and that because the executors had to take decisions about two competing claims which would influence their own interests, they were insurmountably conflicted. “I am accordingly satisfied, in the context of the applicant [Brimble-Hannath] disputing of the trust’s claim against the estate, woolly as her grounds for doing so might appear to be at this stage, that it is undesirable that the first and second respondents [Hannath’s daughters], who are the co-trustees and beneficiaries of the trust, should remain in office as executrixes of the deceased’s estate,” judge Binns-Ward found. The judge ordered the Master to appoint a substitute executor to wind up the estate. In view of this, it is advisable for you to consult your attorney or a fiduciary expert before deciding who to nominate as the executor of your estate in your Last Will and Testament. Reference list: Brimble-Hannath v Hannath and Others (3239/2021) [2021] ZAWCHC 102 (25 May 2021) This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)
How do our courts interpret wills and testaments?
It is trite that the law of succession aims to give effect to the wishes of the testator. Accordingly, when a person passes on and leaves a will or a testament, it is the duty of the court interpreting the will or testament to make an order that obeys the wishes of the testator as far as legally possible. This article will look at the two competing approaches taken by courts in the interpretation of wills and testaments – namely the golden rule and the use of armchair and extrinsic evidence – and attempt to identify the current approach taken by our courts. I The Golden Rule The starting point for the interpretation of wills and testaments is the golden rule established in the case of Robertson v Robertson’s Executors 1914 AD 503. In this case, it was held that courts are to “ascertain the wishes of the testator from the language used. And, when these wishes are ascertained, the Court is bound to give effect to them, unless it is prevented by some rule or law from doing so”. In other words, the golden rule holds that courts must ascertain the wishes or intentions of the testator by merely looking at the language used by the testator. Accordingly, this rule makes no provision for courts to have regard to external factors when interpreting the testator’s language. The rationale for restricting courts to the words used by the testator in their will or testament is because the testator’s words are the primary indication of their intention. Therefore, the courts are often reluctant to depart from the ordinary or literal meaning of the words used by the testator. However, there have been some significant developments in the approach of our courts to the interpretation of wills and testaments since the golden rule was established. One such development is the use of armchair and extrinsic evidence in the interpretation of wills and testaments. II Armchair and Extrinsic Evidence Armchair evidence sees a court placing itself in the position of the testator in order to determine their intention. In other words, a court puts itself in the armchair of the testator to understand their thought process in the creation of their will. Extrinsic evidence is evidence that is obtained elsewhere, i.e. not from the will itself. Extrinsic evidence, therefore, refers to the surrounding circumstances or factors accompanying the will. In Cuming v Cuming 1945 AD 201, it was held that armchair and extrinsic evidence may only be used if the wording of the will is ambiguous or uncertain, and the intention of the testator cannot be determined merely by examining the wording used in the will. In other words, when armchair and extrinsic evidence is used in situations where the testator’s use of language is ambiguous, the courts can step into the shoes of the testator and investigate the surrounding circumstances of the creation of the will in order to determine the testator’s intention at the time of creating the will. However, this line of reasoning has been challenged. In Allen v Estate Bloch 1970 (2) SA 376 (C), the court held armchair evidence to be admissible in cases where there is no ambiguity or uncertainty regarding the words that the testator used in their will. In this case, the court held that the correct approach is that a will should not be analysed in isolation. It is seen as a more practical approach to ascertain the intention of the testator, as it takes into account all the relevant factors surrounding the creation of the will. III Conclusion: What is the Approach of Our Courts? The case law regarding whether or not the golden rule is still adhered to by courts remains inconclusive. The magnitude of case law seems to suggest that, to a large extent, our courts do not follow the golden rule, but rather follow the reasoning of the Cuming case, which allows for the use of armchair and extrinsic evidence only where the wording used by the testator is ambiguous. To summarise, it is evident that our courts still use the golden rule as the starting point for interpreting wills and testaments, but it is generally no longer used in isolation. Reference List: Robertson v Robertson’s Executors 1914 AD 503. Jamneck, et al The Law of Succession in South Africa 2 ed (2012). Cuming v Cuming 1945 AD 201. Allen v Estate Bloch 1970 (2) SA 376 (C). This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)