YOUR MONEY: Why you really need to set up a will for your kids

Question:

I have been thinking about drawing up a will but have no idea how to structure it, or what to specify when it comes to my children.

I have two properties, for example, that I bought a few years ago, which I rent out, and which I would like to leave to my two sons as part of their inheritance (my pension fund and life insurance policies I will allocate to my wife).

Is it enough to simply state that I would like to leave these properties to my sons or do I have to draw up some sort of trust — and how would I go about doing that? How specific do I need to be? A friend recently told me that if it’s not specific, the assets could end up in the state guardian’s fund — which I really don’t want to happen. Any insight would be appreciated.

— Name withheld 

Answer:

Well done on thinking about your will! About 75% of South Africans don’t get their wills sorted, which can lead to disastrous consequences for their families.

There’s a couple of assumptions we need to make when considering your question. First, that your children are currently minors (under 18) and second, that you’re married in community of property (which is the most common marriage regime in South Africa still). Your marriage regime greatly affects how your estate will devolve.

It’s important to note that in South Africa, minors cannot inherit without the assistance of a legal guardian. If you passed away without a will in place, leaving your wife and two sons, the law of intestate succession would apply. This is basically a set formula that the state would apply to distributing your assets to your surviving spouse and children, and it probably wouldn’t be as you would have wanted it.

What’s worse is that without a will, your minor children’s inheritance will pass to the government guardian’s fund, and they will only receive this when they are 18. Your surviving spouse, as their legal guardian, would need to apply to the fund to draw down finances for them when required until they become majors.

We’d also need to establish how you own your properties. In your personal name, in a company or trust? If in your personal name and you’re married in community of property, this would mean that you could only pass on your half, which starts to get complicated.

The beauty of drawing up a will is that it gives you the opportunity to plan clearly what you want to happen and how you want it to happen. For example, you could make provision for a testamentary trust to be set up for your sons should you pass away. A testamentary trust only comes into effect when you pass away, so unlike an inter vivos trust, you don’t have to incur all the costs and fees during your lifetime if it’s not needed.

The testamentary trust could receive the assets you wish to leave to your sons and can vest at an appropriate age when they are ready to manage their own financial affairs. I have three boys myself and I’ve made vesting age 25 for them. Imagine an 18-year-old with access to hundreds of thousands of rand?

Another important thing to consider is the unexpected legal fees and costs at death, such as executor fees and conveyancing attorney fees to transfer the properties, which can all add up to hundreds of thousands of rand. This can cause liquidity issues for the estate. Suppose there isn’t enough cash available to cover these fees. In that case the executor may need to auction off assets (which can include properties) to cover these costs.

— Grant Fietze, executive manager: marketing at Capital Legacy

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