Do You Need a Second Will for Your Overseas Assets?

January 2025 | Wills and Estate Planning

“Only put off until tomorrow what you are willing to die having left undone.” (Pablo Picasso)

If you own assets outside South Africa, you may have wondered: Is my local will enough? This is a question many South Africans are asking, and the answer will depend on your own unique situation. Let’s break it down.

Why your South African will may not be enough

A South African will can cover all your local and global assets and typically will do so unless otherwise specified. But practical and legal challenges can arise when dealing with foreign laws, tax regimes and regulations:

• Delays and costs: If your executor has to deal with assets in another country this can take considerable time and incur additional legal fees for authentication/translation of documents, applications to recognise appointments and so on.
• Legal conflicts: Many countries have “forced heirship” rules that will override the provisions of your will and require that specified portions of your estate must go to “protected” heirs. In France, for example, your children will inherit up to 75% of your estate. Worse, some legal systems may not recognise your local will as being valid at all. 

The case for a foreign will

You might anyway benefit from a foreign will if:

1. You own immovable property abroad: Immovable property is generally subject to the laws of the country in which it is situated, making a foreign will advisable. 
2. You have significant movable assets overseas: Movables such as investments, shares, bank accounts etc, although likely subject to South African legal principles, could still be easier to manage with a separate will.
3. You spend a lot of time in another country: Regular visits or dual residency could complicate estate administration and make a foreign will an advantage – even if it’s not strictly necessary.
4. You want to minimise your estate’s tax bill: A foreign will might be recommended to you as part of tax planning, which is essential to minimise the risks of double taxation, estate duties and other financial penalties on your foreign assets. This is because we have a residence-based taxation system so SARS will – with few exceptions – be looking at all your assets worldwide. 

How a foreign will works

A foreign will is drafted according to the laws of the country where your assets are located, and should:

• Ensure compliance with that country’s laws and regulations.
• Work alongside your South African will to avoid duplication or conflict.
• Simplify the process for your loved ones when the time comes to administer your estate.

Key considerations

Legal advice is crucial as your South African and foreign wills must align. Contradictions might render one or both wills invalid or open to challenge. When drafting your will(s) be careful to:

• Ensure that your various wills clearly specify which of your assets each applies to.
• Avoid inadvertently revoking your other will/s – specify in each will that it does not replace your other wills, which are to remain valid concurrently. 
• Not allow duplication or conflict to creep in over time – diarise regular reviews of all your wills on an integrated basis.

Remember that drafting and maintaining multiple wills may incur additional expenses – but it can also save your heirs lots of money and time. Separate wills should be structured to streamline and simplify the administration process in different jurisdictions.

Protecting your legacy at home and abroad

Ensuring that your wishes are honoured and that your loved ones are protected starts with the right legal advice. If you’re unsure whether you need a foreign will, let’s talk. A consultation can give you peace of mind – and save your loved ones time, money, and stress in the future.

Disclaimer: The information provided herein should not be used or relied on 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 us for specific and detailed advice.

© LawDotNews

Estate Planning: Why it Matters, and How To Get Started

November 2024 | Wills and Estate Planning

“When the hurly-burly’s done, when the battle’s lost and won.” (One of the witches in Shakespeare’s Macbeth)

Another year draws to a close! If you’re taking a break, now’s a great time to get started on an estate plan – or to update your existing one.

Estate planning is one of the most important steps you can take to protect your assets and to ensure that your loved ones are cared for after you’re gone. It goes beyond just having a will, although that is of course an essential first step when it comes to executing your plan. An estate plan ensures that all your wishes are documented, clear, and legally binding.

Why must you prioritise an estate plan?

Having a well-thought-out estate plan is essential for several reasons:

• Protecting your loved ones: An estate plan ensures that your loved ones are provided for in the way that you choose.
• Structuring your estate: Your planning will help you decide upfront how best to structure your estate, your asset-holding entities, and so on.
• Reducing costs and delays: A proper plan can minimise the expenses and time needed to administer your estate.
• Tax efficiency: Thoughtful planning could help reduce taxes on your estate, preserving more of your wealth for your heirs.
• Avoiding disputes: By clearly stating your wishes, you can help prevent costly and bitter family disputes over your estate. Our law reports are full of them!

What you’ll want to include in your estate plan

Everyone’s situation will be unique, but a comprehensive estate plan typically encompasses:

• Your will (“Last Will and Testament”): This is your essential first step, setting out who your executor will be, who will inherit what, appointment of guardians and trustees and so on. It’s the central hub around which the rest of your plan revolves.
• Trusts: Trusts are tools for controlling how and when your assets are distributed to your heirs. They are especially useful for minor children or anyone who needs special care. They can also be used in planning for tax efficiency, but this is a specialised subject requiring advice tailored to your situation.
• Power of Attorney: This authorises someone you trust to make financial or legal decisions on your behalf if you need them to. Bear in mind that it will fall away when you die, or if you lose mental capacity.
• Living Will/Healthcare Directive: This outlines your preferences for medical treatment if you cannot communicate, helping to guide loved ones and healthcare providers.
• Beneficiary nominations: Certain assets, like living annuities and life policy proceeds, will be paid out directly to the beneficiaries you nominate. It’s also a good idea to nominate beneficiaries for all your pension products – fund trustees will not be bound by your nominations but they will at least be made aware of your wishes.

9 steps to creating your estate plan

With that list in mind, it’s time to get started! Here’s how…

1. Define your goals: Determine what you want your estate plan to accomplish, such as providing for specific loved ones, the welfare of your pets, charitable donations, the preservation of family heirlooms and so on.
2. Family dynamics: Be mindful of potential issues that could arise, such as blended families, estranged relatives, minor children, and any other loved ones with special needs or circumstances.
3. Take stock of your assets and liabilities: List all your assets, debts, financial obligations and the like. Remember that if you are married, your chosen “marital regime” (matrimonial property system) will determine which of your marriage’s assets are yours to bequeath.
4. Consider cash: Deceased estates can take a long time to finalise, so make a plan for your family to have access to funds in the interim – life policies, family trusts, and separate bank accounts are common recommendations.
5. Tax implications: Our tax laws can seriously impact your estate, so it’s crucial to understand how to minimise taxes. If you have assets in multiple jurisdictions, it gets even more complicated.
6. Choose your representatives: Appoint trusted individuals as executors, trustees, guardians, and agents for powers of attorney.
7. Draft your plan with professionals: Work with us to draft and review all the necessary documents, ensuring they correctly and clearly reflect your wishes, and that they comply with all our laws.
8. Leave an information and documents file: It will help your executor and heirs a lot if you leave them a comprehensive file of all the important information and documents they will need.
9. Review everything regularly: Life changes, so diarise regular reviews and updates of your estate plan to reflect any significant changes. These could include marriage, divorce, the birth of a child, the death of a beneficiary, changes in assets and liabilities, changes in business operations, any new laws and taxes. The list goes on…

If you need any help getting started, feel free to reach out – we’re here to help you every step of the way.

Disclaimer: The information provided herein should not be used or relied on 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 us for specific and detailed advice.

© LawDotNews

How Can You Protect Your Heirs’ Inheritances from Their Creditors?

September 2024 | Wills and Estate Planning

“The only person who sticks closer to you in adversity than a friend is a creditor.” (Unknown)

You’ve done everything you can to leave your loved ones financially secure after you die. You’ve left enough assets to set them up in their own lives, made a valid will (“Last Will and Testament”), and chosen a trustworthy and efficient executor to wind up your deceased estate. You think you’d done everything you can to help and safeguard them.

But what if you missed something – something that could be a real gamechanger for your heirs?

Insolvency and attack by creditors

We’re talking here about one or more of your heirs getting themselves into serious debt. It really can happen to anyone. As the out-of-the-blue pandemic lockdowns confirmed, even the most prudent of people can find themselves unexpectedly in the dwang. The danger is that if your heirs’ personal estates are sequestrated, or if their creditors execute against their assets, their inheritances could be attached – and lost to your family forever.

Fret not! There are ways to manage this risk whilst still ensuring that your heirs are looked after. Which route is best for you calls for specific legal advice. But here are the main options:

1. Set up a discretionary trust: You set up a trust to which you leave everything, or just a portion of your estate, or specified assets. This ensures that the inheritance is managed by trustees for the benefit of your heirs, and out of reach of their creditors – if you do it correctly.

   Choosing the right form of trust (the most commonly encountered types being living or “inter-vivos” trusts and will or “testamentary” trusts) needs careful consideration with professional guidance. It’s equally critical to use the best structure for the trust, its assets, and its management.

   Tax and other practical aspects also need careful consideration. In the context of protecting assets from creditors, it’s vital to make the trust a “discretionary” one, because the trustees in a discretionary trust can distribute to beneficiaries at a time of their choosing, rather than the inheritances automatically vesting in your heirs (and being attached).

2. Insert an “insolvency clause” into your will: This one calls for particularly careful drafting by a professional. Our courts have previously held that it is not permissible to simply include a clause or condition that’s intended to prevent creditors from pursuing an heir’s inheritance once that heir “has acquired rights to the inheritance.”

   Rather, the clause needs to create a “gift over” such as a provision stating that if your heir is insolvent at the time of your death, the bequest must accrue to another person. Or perhaps you could allow your executors a discretion to divert the inheritance? Clearly, crafting such a clause to both benefit your heirs and withstand attack from a creditor or the trustee of an insolvent estate requires specialist help.

3. Create a usufruct or fideicommissum over assets: If you want to leave an asset (typically, but not always, immovable property) to your heirs, you could create rights for them under a “usufruct” or “fideicommissum” – technical terms which again require specialist advice and consideration of all the legal, practical and tax angles.

The last option, of course, is to leave it to your heirs to repudiate (reject) their inheritances after you die. That’s not a first prize solution as it requires your heirs to both understand the legal position and to repudiate at exactly the right time.

A will is only as good as its most recent review

There are many good reasons to diarise regular reviews of your will: changing circumstances; new laws and taxes, the list goes on… But we’ve just added another reason. While conducting these reviews, consider whether any of your heirs could be at particular risk of financial distress and if so, how you can manage that risk. Let us know if we can assist!

Disclaimer: The information provided herein should not be used or relied on 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 professional adviser for specific and detailed advice.

© LawDotNews

Sibling Showdown: How One Missing Word in a Will Divided a Family

August 2024 | Wills and Estate Planning

“From small mistakes come great catastrophes.” (Justin Cronin)

We’ve all seen how even the smallest mistake can have huge consequences down the line. A recent High Court spat between siblings over a poorly-drafted will confirms once again that when it comes to important documents (and it doesn’t get more important than your will!), every word counts.

The joint will and the “30-day survivor” clause

In their joint will, a wealthy couple had left everything to each other. When the husband died, his wife inherited their whole joint estate. Things started to come unstuck when she was then found to be unable to manage her own affairs and placed under curatorship – before she had a chance to make her own new will.

When she died 3 years later, only the original joint will remained. Her three children quickly came to blows over whether that joint will still applied to their mother’s estate, or whether she had died without any will (“intestate”).

• At issue was a “30-day survivor” clause in the joint will reading (as translated from the original Afrikaans): “Only if we die simultaneously or within 30 (thirty) days of each other, in such circumstances in which the survivor does not make a further will, then in that case we will bequeath the entirety of our estate as follows…”.
• Did that wording mean that the joint will no longer applied? For the children, that was a critical question, because in their joint will the couple had left the lion’s share of their estate (a property and the family businesses) to the son. No doubt that was because he had played a “central role” in the management and funding of the businesses. But it left his two sisters to inherit only the “residue” of the estate – clearly an unattractive proposition to them.

Unsurprisingly, the son, hoping to keep his “lion’s share” of the estate, argued that the joint will was still valid and applied to his mother’s estate. Equally unsurprisingly, his sisters, hoping for a three-way split of the total estate, argued the opposite – that the joint will had fallen away and that their mother had died intestate.

“And” or “Or”? One missing word, a world of difference

As is all too common when sibling heirs fall out over the “who gets what” aspect of their parents’ passing, swords were drawn, and the High Court had to adjudicate.

The Court found itself having to decide between two possibilities. Had the couple meant to say:

1. “Only if we die simultaneously or within 30 (thirty) days of each other, or in such circumstances in which the survivor does not make a further will…”. That “or” would mean that the joint will was still valid, and the son would get his lion’s share;

   OR

2. “Only if we die simultaneously or within 30 (thirty) days of each other, and in such circumstances in which the survivor does not make a further will…”. That “and” would mean that the joint will no longer applied, that the mother had died intestate, and that the estate would be split three-ways.

The Court described the will in question as “an inelegant and very badly drafted document.” But it also noted that a will is “held void for uncertainty only when it is impossible to put a meaning on it” and that “any document must be read to make sense rather than nonsense.”

The Court decided that it could make sense of the sentence in question and duly held that the couple must have intended their joint will to survive if the surviving spouse did not subsequently make their own new will.

The end result – the joint will stands and the son “wins”. But of course, all three siblings are “losers” when you consider all the familial conflict, angst, time-wasting and costs that surely accompanied this litigation.

Avoid all that uncertainty and family conflict

No one wants their loved ones fighting over their estate after they are gone. But as this unhappy case so clearly shows, even the slightest inelegancy in wording can lead to just that. Let us help you draft a will that is clear, concise and fully reflective of your last wishes.

Disclaimer: The information provided herein should not be used or relied on 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 professional adviser for specific and detailed advice.

© LawDotNews

In the Land of the Will, Clarity is King

April 2024 | Wills and Estate Planning

“The golden rule for the interpretation of testaments is 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 we are prevented by some rule or law from doing so.” (Quoted in the judgment below)

When drawing up your will (“Last Will and Testament”), remember that “clarity is king”. Ambiguity is one of the cardinal sins of will-drawing because it exposes your loved ones to the risk of uncertainty, dispute, rancour, and quite possibly expensive litigation.

Worse, if in the end a court has to try and decipher what you actually intended, there is no guarantee that it will be able to correctly ascertain your true wishes.

A case of different interpretations and a bitter dispute

A recent SCA (Supreme Court of Appeal) case confirms once again the need to express your wishes clearly and unambiguously in your will –

• A bitter dispute between a widow on the one hand and her three step-children on the other had its roots in a deceased father’s ownership of two plots. On the one plot the father had built houses for his two daughters, with his son building flatlets for renting out on the same plot. He and his wife lived in their house on the other plot.
• The dispute centered on two different interpretations of a clause in the father’s will in which he had left both plots to his daughters, but subject to a right of habitatio in favour of his wife. That, said the executor of the deceased estate, gave the widow the right to live in, and to rent out, the buildings on both plots.
• The widow’s step-children on the other hand argued that it could not have been their father’s intention to give his wife such rights to the plot in question in light of all the “surrounding circumstances”. They made much of the fact that their parents’ ante-nuptial contract referred only to the other plot (the one with the marital home) in that context. They also pointed out that they had all agreed informally to each of the siblings being allocated a “portion” of the disputed plot.
• The siblings accordingly refused to pay out any rentals to the executor, and the dispute eventually found its way into the courts – first the High Court and then the SCA.
• In confirming the widow’s right to live in the buildings and to let/sub-let them out and receive rentals from both plots, the SCA confirmed that a court will establish the intention of the deceased from the language used “in its contextual setting”. In other words, “the will must be read in the light of the circumstances prevailing at the time of its execution.” Thus, in this case it was relevant that the father had not changed his will to reflect the informal allocation of “portions” of the disputed plot between his children, and that he had probably intended his wife to benefit from the receipt of rentals for her financial well-being and maintenance.
• But beyond that, there is no place for the introduction of “extrinsic evidence” or “surrounding circumstances” if the wording of the will is clear and unambiguous – as it was in this case.

Bottom line – it is critical that the wording of your will be drawn professionally to correctly, clearly, and concisely set out exactly what your wishes are.

Disclaimer: The information provided herein should not be used or relied on 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 professional adviser for specific and detailed advice.

© LawDotNews