Why do I need an estate plan?

Key takeaways

  • Estate plans are not only for the wealthy who have lots of property and investments.

  • Estate plans ensure your estate is wound up efficiently and as quickly as possible so your heirs and beneficiaries do not face unnecessary problems.

  • Estate plans can minimise taxes.

  • Estate plans can protect your minor children or incapacitated dependants.

  • Estate plans can ensure your family does not face problems with assets or investments in other countries.

Estate planning allows you to plan what will happen to your property and investments after you die, and to ensure that your wishes are carried out for the best outcome for your family.

Estate planning is not something that only wealthy people with lots of assets should do.

Anyone who owns any property or investments, or has any debt and family responsibilities should check what will happen should they die.

Planning your estate should not be regarded as inviting death or being morose. You are merely putting a solid plan in place to ensure that if something happens to you, your family will not be burdened with unnecessary administration and problems as they try to adapt to life without you.

You may feel awkward talking about your death or that of a family member, but it is worthwhile doing so to have the peace of mind for yourself and your family that you have done all you can, while you can, to minimise potential problems should you die before you expect to.

Using an experienced adviser or fiduciary expert who can guide you through the things you need to consider, will make it easier for you.


What an estate plan should include

A good estate plan should map out what will happen in the event of your death and ensure that if any outcomes are not in line with your wishes, you are able to correct them while you are still alive.

The plan should explore your family situation, all the assets you own in South Africa and anywhere else in the world, all your liabilities – debts and any obligations in terms of contracts you have signed or court orders to which you are a party.

A good valid will is central to an estate plan and may be enough for some people. Others with more complicated affairs may need to explore other structures such as trusts.

A good estate plan should:

  • Prevent delays winding up your estate

    A good estate plan ensures you have a valid will that can be executed without any problems and without delaying the winding up of your estate. Estates can be delayed for years when issues, such as missing documents, a shortage of cash or disputes over the will or appointment of the executor, arise.

  • Identify and nominate a competent executor for your estate

    A good estate plan identifies and names in your will a competent executor who can be appointed quickly without issues at the Master of the High Court. A good estate plan should also consider the fee to be paid to that executor.

  • Identify all your assets

    A good estate plan will identify all your assets and where they are situated, including digital assets such as cryptocurrencies.

  • Consider your debts and obligations

A good estate plan should consider all your debts and obligations on death and ensure there is enough cash in the estate to cover them.

A lack of cash to settle debts, meet obligations, and pay fees and taxes is one of the biggest causes of delays in winding up estates.

These can include:

    • Obligations in terms of your marital regime as a result of any pre-nuptial or ante-nuptial agreements.
    • Obligations in terms of maintenance or divorce orders.
    • Any loans or debts that you had before you died.
    • Any taxes you owe.
    • Any business loans that need to be repaid.
    • Any sureties you signed to cover the debts of other people or entities.

Any life insurance, group life insurance and credit life insurance that will be paid out should be considered, and if there will be insufficient cash in the estate, using life cover to provide for your obligations should be considered. Read more: Do I need life cover?, What is group life cover? and What is credit life cover?

Checking this will give you peace of mind that the executor of your estate will not have to sell assets to pay your obligations, forcing your family to, for example, leave their family home or give up vehicles or other assets to repay your debts.

  • Identify your heirs

In order to ensure the right people inherit without any problems, a good estate plan will identify your heirs and dependants, whether they are minors, how they may be married and where they live. You should tell anyone assisting you with your will or estate plan about anyone who may potentially have a claim on your estate – for example, children born out of wedlock or from previous marriages.

  •  Make sure those you want to inherit will do so

A good estate plan ensures that you bequeath what you own to those who you want to benefit and that this complements the likely allocation of your retirement fund savings by the trustees to your dependents and nominees.
It also ensures that such bequests are not hindered by debt or any other obligations you may have in terms of marital, divorce, business or other agreements.

It will also ensure that you nominate beneficiaries on any policies or retirement funds to speed up the payout of these benefits and avoid unnecessary costs.
A good estate plan should also force you to consider the implications of simultaneous deaths of yourself and your spouse or life partner, or yourself and other family members, or yourself and your business partner or partners.

  • Ensure minor children and incapacitated dependants are cared for

A good estate plan will ensure that any minor children or other dependants who are unable to care for themselves are taken care of and arrangements put in place to ensure that any money you leave for them is used for their care. This may include:

    • Naming a guardian: Identifying a guardian and naming them in your will. Your estate plan should also consider who will manage money for your children, the competency and trustworthiness of any guardian and requirements that the Master of the High Court may have for that guardian to provide security for any money they manage on behalf of your child. This security may be costly.
    • Ensuring your investments and property are best managed for your dependants’ benefit: You may need to consider setting up a trust for minors (children or grandchildren) or incapacitated dependants who will inherit. In the case of your minor children, you can consider providing for a testamentary trust – a trust that is set up in your will only if you die while your heirs are still minors.

  • Minimise taxes
    A good estate plan will ensure that you minimise the taxes your estate may be liable for when you die. These include:

    -  Capital gains tax (CGT): Your death is regarded as a capital gains tax (CGT) event and you will be deemed to have disposed of all your assets on the day before you died. CGT will be payable on any gains above the CGT exemption on death. Read more: What is capital gains tax?

- Estate duty: Your estate may be liable for estate duty if it exceeds the standard estate duty deduction. Planning your estate and your bequests may minimise that tax.

If your estate is likely to grow in the future, potentially incurring a large amount of estate duty, a good estate plan will consider ways in which you can minimise that liability. For example, you may need to set up an inter vivos trust and move your business assets into it by way of a loan account so that future growth occurs in the trust and not in your own estate. This will be best done with advice from a suitable fiduciary professional. Read more: What is estate duty?

- VAT: If you are a business owner or farmer in your own name, there may be a VAT liability when you die as well.

TIP:  Don’t forget your executor also needs to pay income tax on your behalf up to the day before you die and your estate may also be liable for income tax on taxable income such as interest on investments earned while the estate is wound up.

  • Consider assets that could be excluded from the estate

    A good estate plan will include and possibly plan for assets, such as life insurance policies, that can be paid directly to nominated beneficiaries immediately without going through the executor and attracting executor’s fees. Life insurance assets may still attract estate duty, so this should be catered for in the plan.

  • Consider how anything you own outside of South Africa will be dealt with

A good estate plan will consider whether you need a will in each country in which you have assets. You may need an offshore will if you have property in another country. Your estate plan should also consider whether your assets in other countries are subject to taxes in that country or any heirship laws that contradict your wishes. Any foreign will you should not revoke or contradict any local will you have.

  • Consider succession of any businesses or farms you own

If you own any businesses or farms, a good estate plan should consider any succession plans for those entities and how, practically, your wishes for anyone to succeed or inherit any businesses or farms you own can be carried out. This may include considering a buy-and-sell agreement and life cover and /or keyman insurance. Read more: Does my business need a buy-and-sell agreement?

  • Consider any philanthropic wishes

Your estate plan should ensure that any philanthropic wishes you have are catered for and can be carried out.

  • Deal with your personal possessions

As part of your estate plan, you should check that any personal assets such as jewellery or art works are bequeathed to those you wish to have them after your death.