Two events are inevitable in life – paying tax and dying. Both events need careful planning to make sure that the best possible outcomes are achieved when, not if, they happen. In this article, we will only focus on the difficulties that are created if you die without a valid Will and Testament. This is known as “dying intestate”.
Certainly, dying intestate places an additional and unnecessary burden on your loved ones left behind. The way your estate is distributed is then regulated by law, rather than in terms of your own wishes which would have been set out in your Will had the necessary planning been done.
The law that dictates how your assets will be distributed, should you die without a Will, is set out in the Intestate Succession Act no. 81 of 1987. The Act sets out a specific formula to determine who will inherit from your estate and in what proportion. In our experience, sadly, the way the law dictates that the deceased estate is to be distributed among the deceased’s heirs is hardly ever the way the deceased would have planned the distribution of the estate, had proper planning taken place.
The general principle of the Act is that those family members closest to the deceased, in terms of the family bloodline, stand to inherit first. For example, if the deceased is married, but does not have any children, the spouse will inherit the entire estate. It becomes more complicated should you die leaving a spouse and children in terms of the splitting of the assets, because the children will inherit part of the estate, which may have unintended estate duty consequences.
The Act provides for most eventualities, which should or could be avoided if possible, by simple and timeous planning.
In the event that no living relatives of the deceased can be traced, the funds or value of the estate will be deposited to the Guardian’s Fund which is managed by the state. If the funds remain unclaimed for 30 years, the funds will be forfeited to the state.
When a person dies intestate, there are difficulties that can lead to delays and conflict in winding up of the estate. The Act places severe restrictions on the benefits that fall due to minor children. In the absence of the guardian being able to furnish security to the Master of the High Court, any cash has to be paid into the Guardian’s Fund. The fund has a mandate to invest funds in an interest- bearing account and there is a cumbersome procedure to access funds. This is absolutely not an ideal scenario and should be avoided at all costs. And it can be avoided by simple planning!
Another factor to consider is the most appropriate nomination of a guardian for your children in the event of your death. This won’t happen if you die intestate.
When you consider all of the above, it would be wise to have a Will drafted to suit your particular circumstances and avoid the unnecessary drama that goes with dying intestate.
This article is a general information sheet and 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 financial adviser for specific and detailed advice. Errors and omissions excepted. (E&OE)
FPM Risk & Wealth Management
011 778 9300