Drawing up a will is a key part of estate planning – one which you should not delay. If you have minor children or a special needs dependant, you could also consider establishing a testamentary trust to protect and preserve assets you wish to bequeath to them.1 When having your will drafted, it is important to also consult a professional who specialises in estate planning, such as a financial advisor.
Gathering the relevant information beforehand will make the process of drafting your will easier and save time. The firm who will be helping you with your will, may provide you with a checklist to complete before your appointment. This will typically include a list of your physical assets such as property, vehicles and jewellery, as well as financial assets such as unit trusts and tax-free savings accounts. You will also have to list your dependants, name your heirs, appoint a guardian(s) if you have minor children and name an executor for your estate. While this may seem daunting, you will be guided by the firm drawing up your will.
If you have investments with nominated beneficiaries, these will be distributed directly to the named persons/entities and thus will fall outside your will. Examples include long-term policies such as endowments and sinking funds, and living annuities. Where you have such products, it is important to nominate beneficiaries because if you have no beneficiaries, the proceeds will be paid into your estate should you pass away. We encourage you to make use of the beneficiary option as it offers a number of advantages:
If your nominated beneficiaries predecease you, the proceeds of these products will be paid out to the estate. In the case of living annuities, the proceeds will be taxed according to the retirement tax table. Capital gains tax will be payable on the proceeds from endowments and sinking funds. It is therefore crucial to ensure that your beneficiary nominations are kept up to date.
The Ninety One Investment Platform also offers the option of nominating alternative beneficiaries2 for its Ninety One Life Portfolio, Ninety One Global Life Portfolio and Ninety One Living Annuity. This provides peace of mind as it mitigates the risk of having no surviving nominated beneficiaries in place when you pass away.
If you are a member of a retirement fund – a retirement annuity, pension/provident fund or pension/provident preservation fund – ensure you have completed the beneficiary nomination form and keep it up to date. However, the nominated beneficiaries of a retirement fund will not necessarily receive the benefits on the member’s death.
The trustees of a retirement fund have to adhere to Section 37C of the Pension Funds Act. This means that they need to determine who the dependants and nominees are and allocate the benefit in a fair manner. This can be a lengthy process as trustees may take up to 12 months to conduct an investigation and to allocate the benefit. Where no beneficiaries were nominated and no dependants were found, the proceeds of the retirement fund(s) will be paid out to the estate as a last resort.
It is important to consider how each investment/product applies to estate planning, looking at aspects such as liquidity, beneficiary nominations, estate costs and taxes within a holistic legal and financial planning framework. Therefore, your will should not be drafted in isolation. The professionals drafting your will should take into account your broader financial plan.
A financial advisor can help you to determine the optimal mix of investments and products that will not only enable you to build a secure financial future but also ensure the successful transfer of wealth to your loved ones.
1 A testamentary trust is established after your death, according to what you have stipulated in your will. Setting up such a trust can take time and it is important to seek professional advice to ascertain what would best suit your personal circumstances.
2 An alternative beneficiary will only stand to inherit on the simultaneous death of the investor and primary beneficiary(ies), or if the primary beneficiary(ies) predeceased the investor and were not replaced before the investor passed away.