by Tobias | 23.Feb.2016 | Wills
Did you know that over 85% of South Africans have not done any estate planning, such as setting up a will for their children? Shocking as it may be, people don’t quite like thinking of death and their responsibilities to their families after they have passed away. Many believe that they will only need to set up a will when they are rich or when they are older. Unfortunately, death often comes as a surprise and even if you did set up a will five or so years ago, your financial circumstances and family and/or friend relations change. If you die without a valid will in place, you will die intestate and this means that Government Laws will decide on the process of appointing an executor and will decide on how your assets must be distributed amongst beneficiaries, such as your children, spouse or other family members. This can take a long time and while the process is ongoing your assets – even the smallest ones like a bank account will be frozen. As the result, your family will have to come up with the funds for your burial and will not have any money at hand to pay for expenses you would normally have covered. The entire process is lengthy and will add to the financial burden on your estate, which may mean that your loved ones end up getting nothing from the estate. Many South Africans also think that they can set up a will with their spouse and it will be enough. Regrettably, the country also has a high divorce rate and if the ex-spouse is...
by Tobias | 15.Feb.2016 | Estate Planning
We have answered a few of the frequently asked questions regarding wills, deceased estates, trustees and beneficiaries below. Having a better understanding of some of the key terms used by deceased estate handlers will help you understand the importance of obtaining legal advice regarding your will or right to inherit. What is the deceased estate The collective of assets, income and liabilities of the person who died is known as the deceased estate. Note that it is a legal term and not a person. Therefore the estate is vested in the Master of the Court and the executor or executors are appointed to manage or handle the estate. What is the role of the executor? The deceased estate handler has three main tasks to complete, the first being to collect all the assets and then to liquidate the liabilities of the estate, whereafter the balance (assets minus liabilities) are distributed to the appointed beneficiaries. The executor for the duration of the process also takes on legal guardianship over the assets. The executor is therefore not liable for the debts that are more than the assets in the estate and is only the legal representative of the estate. What is an executor testamentary? The Master of the High Court appoints the estate handlers called the executors dative unless the deceased stipulated in their will who should be the executor. In the latter instance, the term for such is executor testamentary. How does the liquidation process work? Once the executor has gathered all the assets, he must settle outstanding debts. For this purpose, certain assets may need to be sold in...
by Tobias | 15.Feb.2016 | Trusts
Trust funds are legal instruments to enable the protection of assets and the continuity of a person’s financial legacy. To understand the working of a trust fund, let’s look at this scenario: John has worked hard over a period of 40 years and has built a rather comfortable hedge against financial risks. He knows he is getting older and since death is one risk he cannot escape forever, he wants to make sure that his loved ones are taken care of in the event of his death. Unfortunately, not all his children are financially responsible and may spend their heritage within a couple of months. He also fears that his grandchildren may end up with nothing if their parents make financial mistakes. So he visits a trust lawyer who helps him to set up a trust fund, which helps to protect the assets and ensures that the beneficiaries receive their income without ever being able to use the assets in the trust as collateral for debt, and in this way achieves his objective of ensuring that his loved ones are taken care of. Customisation of the Trust You can set certain conditions to be met before lump sums are payable, such as that the beneficiaries may only receive the particular funds when they turn a specific age. You can also set conditions for the trust of your estate to only pay out funds for education costs or to pay out monthly amounts. The trust fund is thus an excellent tool to ensure that the appointed beneficiaries receive ongoing income or can only use the funds for specific purposes. Once...
by Tobias | 09.Feb.2016 | Offshore Estates
Estate planning precedes estate handling and only if you have taken the necessary steps to plan for the future will it be possible to ensure that your personal assets are managed according to the wishes as stated in your will. An estate can take the form of: Personal estate that comes into effect upon the death of the person and is managed according to the wishes stated in the person’s will. Assets within a trust – which is a legal instrument for the protection of assets to the benefit of beneficiaries where the estate is handled by the trustees. Estate for retirement fund benefits. Trust for purpose of property agreements. Professional estate planning takes into account that a person’s life entails many events of which some may be good and others bad. As such, the planning should be flexible enough to cater for specific needs of the person at the set time. It is essential to follow a strategic plan to ensure that the long term goals of the estate can be reached. The planning should not only be flexible, but make provision for long-term requirements. As part of this process you will need to set up a will and should review such every two years, unless there have been changes in your financial status, the beneficiaries or your wishes. Note that your will covers your personal assets. It does not extend to assets that have already been transferred to a trust for your family or appointed beneficiaries. If you are married within community of property, your will cannot express any instructions on your spouse’s portion of the estate....
by Tobias | 09.Feb.2016 | Trusts
Only once you understand the full potential of trusts do you appreciate why, despite some disadvantages, trusts make excellent estate planning and asset protection instruments. Every trust is unique, even though it falls within a specific category, and the primary function is to protect the property or assets transferred to the trust. It can be established to protect the family’s assets or to ensure that your children will have adequate income if you are no longer around to take care of them. The trust must be set up to meet your specific requirements and this is where the expertise of trust lawyers is appreciated. The Advantages Protects assets after you have passed away. Can exist for an infinite period. Protects a beneficiary from their own financial behaviour such as inability to manage their money. Protects transferred property from creditors. No estate duty payable by the trustees and thus no winding-up fees. Tax benefit since the asset’s value in the trust increases within the trust and not in a person’s estate. Beneficiaries have continuity in their income or usage of an asset even if one of the beneficiaries passes away. The Disadvantages High initial setup cost. Transfer duty is payable when assets are transferred to the trust. Trustees can be held accountable for losses if they have not applied the necessary care in managing the assets. Assets don’t belong to the trust founder, but the trust. High tax rate on earnings from assets held in trust. Higher capital gains tax rate for inter vivos trusts in comparison with the tax rate for individuals. Setup and Governance The persons that establish...
