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MONEY SEPTEMBER 2021
WILLS AND ESTATES | Unsplash.com
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CONTENTS FEATURES 5 Celebs who botched their estate planning
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Where there’s a will...
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Providing for minor children in your will Winding up a deceased estate Cypto in your will
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REGULARS Rands and Sense with Faeeza Khan
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Fact File: Quick facts and figures on deceased estates 11 Money Basics with Martin Hesse: What is your ‘estate’?
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Money Quiz 18 Planning Perspectives with Palesa Tlholoe
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Important contacts and links
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FROM THE EDITOR
A will can save one’s family from being put into a quagmired pit of legal conundrum, in case of death (which may even be untimely). – HENRIETTA NEWTON MARTIN International Author
CONTACT US PUBLISHER Vasantha Angamuthu vasantha@africannewsagency.com MONEY EDITOR Martin Hesse martin.hesse@inl.co.za DESIGN Mallory Munien mallory.munien@inl.co.za PRODUCTION Renata Ford renata.ford@inl.co.za BUSINESS DEVELOPMENT Keshni Odayan keshni.odayan@inl.co.za SALES Charl Reineke charl@africannewsagency.com ENQUIRIES info@anapublishing.com
A big difference between life in the “olden days“ and life in the modern era was the ever– present fear of death from disease, which medical breakthroughs from the late 19th century onwards had huge success in conquering. Sure, we still have cancer and other life– threatening diseases to which we have yet to find a cure, but back then they had so many more. Tuberculosis, cholera, malaria, plague, smallpox, polio, typhoid, diphtheria, syphilis … the list of deadly diseases brought under control in the last 150 years is nothing short of mind– blowing. So, although the fear of dying young from some dreaded disease will never fully go away, for us humans alive today it has receded into the background. Or at least, it had receded until we were brought down to Earth with a thud by Covid–19. I am sure you know friends or relatives who succumbed to the virus – I think by now there are very few people who don’t. Covid has brought death closer to all of us, forcing us to face our own mortality. One way we need to deal with this is to ensure that our financial affairs are in order should the worst happen and our loved ones have to pick up the pieces and carry on life without us. And that includes younger people. The risks are lower for you, but you are not immune to death, in whatever form it takes. Your estate may be small and relatively straightforward, but you may also have debts, which will need to be settled before any of your heirs can inherit anything. Do them a favour: take some time to get your affairs in order and draw up a will. The week of September 13 to 17 is Wills Week, an annual initiative by the Law Society of South Africa whereby numerous law practices across the country offer to draw up wills for free, as long as your affairs are relatively simple. Take up the offer and just do it.
Martin Hesse
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CELEBS WHO BOTCHED THEIR ESTATE PLANNING Celebrities’ estates are complex at the best of times, because their large fortunes are often tied up in different investments and because there are often multiple heirs from multiple marriages and affairs. Sadly, many who have chaotic lives also leave their financial affairs in a state of chaos when they die. By Martin Hesse
1. ROBIN WILLIAMS
2. JIMI HENDRIX
US comedian and actor Robin Williams apparently took great care in creating a trust to ensure his heirs were well cared for. But after his death from suicide in 2014, there was a well-publicised dispute between Williams’s three children and his widow, Susan Schneider-Williams. It involved Susan’s right to live on in one of the couple’s mansions and which items belonged to her and which belonged to the children - the wording in the trust document was vague on these points.
Considered by many the greatest rock guitarist of all time, Jimi Hendrix died of a drug overdose at the age of 27 in 1970. He did not leave a will. For decades there were ongoing court battles among his siblings, his father Al Hendrix (who died in 2002) and the estate lawyer, Leo Branton, who took control of the estate. Major disputes centred on ownership to the rights to Hendrix’s music and to his name and image for commercial purposes.
3. HEATH LEDGER When popular Australian actor Heath Ledger died at age 28 in 2008, his will left everything to his parents and three sisters. But there was a problem: Ledger had drawn up his will before his daughter, Matilda, was born, leaving the then two-year-old and her mother, actress Michelle Williams, nothing. Ledger’s family later gave all the money from the estate to Matilda. It was expected that Michelle Williams would lodge a claim, but she never did.
4. PRINCE Rock singer Prince died in 2016 aged 58. Shortly afterwards it was discovered that he didn’t have a will. The twice-divorced Prince was neither married nor known to have fathered any surviving children. A judge was appointed to distribute Prince’s assets, estimated to be worth more than $200 million, among Prince’s six siblings and half-siblings. Within three weeks of his death, 700 people claimed to be halfsiblings or descendants. As of April 2019, no additional estate claimants were recognised by the courts besides Prince’s full sister and five half-siblings. However, his estate remained unsettled.
5. ARETHA FRANKLIN The Queen of Soul succumbed to pancreatic cancer at age 76 on August 16, 2018, without a will filed with any of her attorneys. As a result, her $17 million estate was expected to be split evenly among her four sons, and they agreed to install their cousin, Franklin’s niece and confidante Sabrina Owens, as the estate’s executor. Then, in May 2019, two handwritten documents were found in her home that outlined how Franklin wanted her estate divvied up and who she wanted to manage it. The result? Huge confusion, which has led to court battles among family members which continue to this day.
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WHERE THERE’S A WILL... Having a valid, up-to-date will is essential to ensure that your loved ones are catered for according to your wishes if you were to die suddenly. A legal expert answers some common questions about wills. WHEN a loved one passes away it can be traumatic for the remaining family, especially if the dead person’s financial affairs are not in order. With over 80 000 Covid-related deaths in South Africa reported by the end of August, this situation is more of a reality than many would like to believe. Although a will template can be downloaded for free or purchased at a local stationer, Tamasen Maasdorp from boutique law firm Reynolds Attorneys says that having a will drawn up by an attorney is worth the expense. An attorney will ensure that the will is correctly worded to ensure that your wishes are fully honoured. Maasdorp answers the following common questions about wills and estates. What happens if I don’t have a will? If you don’t have a valid will when you die, your estate will be settled according to the Intestate Succession Act. Your assets will be divided among your children, spouse and parents according to a set formula, in order of preference and on an equitable basis. Your spouse comes first, followed by your children, parents and siblings. “Dying intestate can cause all manner of issues, as
there are often questions about who should inherit what from the estate. A will cuts through this confusion and is clear on who the beneficiaries are and what percentage of the estate, after duties apply, they are eligible for,” Maasdorp says. If my spouse and I die at the same time, how will my children be looked after? Guardianship is another key area to consider in your will. This is a legal arrangement made with a trusted friend or family member to care for your children should you and your spouse die before your children reach adulthood. In certain circumstances, an attorney may go as far as advising that you have a separate will specifically to deal with guardianship. The guardian would be eligible to be paid for managing your childrens’ inheritance. This needs to be set out in your will, or they will be paid in accordance with the tariff set by the Master of the High Court. “If no guardian has been appointed, all funds left to your children will be paid over into the governmentmanaged Guardian’s Fund and managed by the state. This is something you want to avoid, so it is key to include your designated
guardian or guardians in your will (you can have more than one),” Maasdorp says. What is a trust and when should I use one? There are two main types of trusts: intervivos (or “living”) trusts and mortis causa (or “testamentary”) trusts. If you own a company or a residential or commercial property, it can be placed in a living trust – a trust that you set up in your lifetime. This is often used to protect assets from liquidation or sequestration during your life. The trust is not subject to estate duty, so it is a good vehicle to use if you have assets outside of your personal estate. Testamentary trusts (a trust created after your death to deal with assets in your estate) are commonly used in South Africa for estate planning. You establish the trust in your will, and the will becomes the trust deed. “This is often done when children are still minors and they could inherit, but instead the funds are only made available when they are older. It’s a way of protecting your legacy from their youth, as the more mature your children become, the more likely they will preserve their inheritance,” Maasdorp says.
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What is a living will and a letter of wishes? Besides a will, which deals with your estate when you die, you can also draw up a living will. This applies while you are still living: it is a request not to be resuscitated if you are brain damaged and are being kept alive by artificial means. The living will does not form part of your will (which
is often only read after your death). Copies of it should be given to your doctor and your family while you are still alive in order to affect your wishes before you die. Lastly, you could also write a letter of wishes to express your intentions regarding certain funds and how they should be administered. Although a letter of wishes is not binding, it is
likely to be followed by the executor of your estate. “In these difficult times, death has been brought much closer to home. It is therefore advisable that you plan now, no matter the size of your estate, and seek legal advice when drafting a will. This will not only give you peace of mind, but will protect your beneficiaries’ inheritance and your legacy,” Maasdorp says.
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PROVIDING FOR MINOR CHILDREN IN YOUR WILL
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In the unthinkable event that both you and your spouse die suddenly, have you given some thought to what will happen to your children and who will look after them? MARTIN HESSE explores options to consider in your will. IN SOUTH Africa, minor children (those under the age of 18) cannot inherit money or assets left to them in a will. On the death of a parent, if other arrangements have not been made, assets bequeathed to children must be sold and the money invested in the Guardian’s Fund until the child turns 18. WHAT IS THE GUARDIAN’S FUND? This is a fund specifically established for the purpose of holding and administering money for minor children and for people incapable of managing their own affairs. Each Master has its own Guardian’s Fund. According to the Department of Justice and Constitutional
Development website, when the Master receives or accepts any money bequeathed to a child, he or she must open an account in the books of the Guardian’s Fund in the name of the person to whom the money belongs or the estate of which that money forms part. Interest is payable on money in the Guardian’s Fund. It is calculated monthly at an annual rate determined from time to time by the Minister of Finance. An applicant, such as the guardian of the child, can claim maintenance or an allowance from the Guardian’s Fund to care for the child. The Master may pay from interest, as well as up to R250 000 from the invested capital, for expenses such
as school and university fees, clothes, medical bills, accommodation and any other needs that can be fully motivated. Payments can be made directly to service providers such as schools, universities and bookshops. A child can claim the invested money, as well as the accrued interest, on reaching the age of majority (18 years of age). However, in your will you can stipulate another age as to when your child is entitled to the invested capital. THE TRUST ALTERNATIVE Phia van der Spuy, a Fiduciary Practitioner of South Africa and the founder of Trusteeze, a professional trust practice, says the transfer of assets to the Guardian’s Fund
9 is something most parents would want to avoid. “So, the first thing every parent should do is to have a properly drafted will. Second, the parent should consider setting up a trust to prevent assets from being liquidated and paid into the Guardian’s Fund,” she says. A trust gives you far greater control of how minor heirs can benefit from their inheritance. Like the Guardian’s Fund, it prevents children receiving large amounts of money before they are at an age at which they can handle it responsibly. You can either set up a testamentary trust (in your will), which comes into effect on your death, or an inter vivos (“living”) trust during your life. “The main difference between a testamentary trust and an inter vivos trust is that if you create a testamentary trust, capital gains tax, estate duty and executor’s fees will be payable before the assets are
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transferred into the trust, whereas assets accumulated in an inter vivos trust will not attract any taxes on your death,” Van der Spuy says. If you decide on a testamentary trust, you should spell out in your will who the trustees and the beneficiaries will be, the responsibilities of the trustees, and any other conditions. These provisions should be detailed enough to protect your assets for your heirs. “Often, wills do not provide sufficient measures to ensure that trusts are executed properly,” Van der Spuy says. This type of trust, which is set up in terms of a person’s will specifically for the benefit of minors who are relatives of the person who died, is known as a special trust, says Van der Spuy. It ceases to be a special trust at the beginning of the year of assessment in which the youngest beneficiary turns 18. Special trusts are taxed at the same rate as individuals for both
income and capital gains, unlike normal trusts, which are taxed on income at a flat rate of 45%. POWERS OF TRUSTEES You (the testator or testatrix) serve as the founder of the trust and in your will you must appoint a trustee or trustees to run the trust. Van der Spuy says the role of a trustee usually ends after a predetermined period, or at a determined date, such as when a child turns 18. She says it is important to note that you cannot delegate your powers in a testamentary trust by giving the trustees wide powers. Only you can instruct how your assets should be dealt with after your death. She says the child’s guardian does not necessarily have to be a trustee. “In fact, it is often a good check and balance to have a separate, independent person, who is financially astute, as a trustee,” Van der Spuy says.
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Rands & Sense
HAVE THE WILLPOWER TO PROTECT YOU AND YOUR LOVED ONES
Faeeza Khan
THE Covid–19 pandemic has made a lot of people reprioritise their lives, and this has meant a lot of difficult conversations around life, money and the people we love. Choosing beneficiaries, guardians and deciding how to divide your assets is tough, but we shouldn’t shy away from talking to the people we want to inherit from our estate. If you die without leaving a valid will, your estate will, according to the Intestate Succession Act, be distributed among your surviving spouse, children, parents or siblings according to a set formula. This means that others whom you would like to inherit from your estate may not be catered for. What's love got to do with it? Did you know that unmarried partners struggle to claim from an estate, regardless of how long they were in a relationship with their deceased partner? This was a central aspect of a recent case in the High Court in the Western Cape, where the court was asked to broaden the definition of “spouse” under the Intestate Succession Act. The court found the definition of “spouse” to be unconstitutional and referred the matter to the Constitutional Court for consideration. Interestingly, while previous case law allowed unmarried same–sex partners in a long– term cohabitation relationship to claim from the estate of the deceased partner, in this matter, the unmarried partner, Ms Bwanya, was unable to claim from her deceased partner’s estate because the definition of “spouse” in the Intestate Succession Act does not include unmarried heterosexual partners. In 2004 the definition was changed to include monogamous
and polygamous spouses and partners in Muslim marriages as well as customary marriages and unions. Then in the 2007 case of Gory v Kolver, the court further extended the definition to include a “partner in a permanent same–sex life partnership in which the partners have undertaken reciprocal duties of support”. And now in the Bwanya case, the definition, once settled by the Constitutional Court, is set to include “a partner in a permanent opposite–sex life partnership in which the partners had undertaken reciprocal duties of support”. In her application, Ms Bwanya successfully asked the court to extend the definition of “life partner” to all romantic relationships, regardless of gender. While this ruling could set a precedent for future claims, it has yet to be confirmed by the Constitutional Court, meaning that until there is clarity, it’s easier to have a valid will in place so you and your partner can avoid the court system entirely. Even considering this ruling, an unmarried “spouse” will still have to prove that the relationship included a reciprocal duty to support each other in order to be considered as an heir of the deceased. Beyond drafting a will, it is also important to ensure that on your death your debt is settled. This can be done through life insurance. Investing in a life policy means that a payout could cover your debts and allow your family to inherit the remainder. Planning for the future isn’t easy, but the peace of mind you can get from having these conversations with loved ones, with guidance from a financial adviser, is priceless. Faeeza Khan is Senior Specialist for Legal Marketing at Liberty.
FACT FILE
DECEASED ESTATES: QUICK FACTS AND FIGURES EXECUTOR’S FEE The executor is the person appointed to wind up the estate. He or she is entitled to a fee of 3.5% (excluding VAT) of the estate’s total assets plus 6% of income accruing to the estate from investments and rentals while the estate is being wound up. These are maximum amounts and lower fees may be negotiated. If the estate’s value is less than R250 000, an executor does not have to be appointed and the estate may be wound up by a family member on the authority of the Master of the Court.
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FROZEN ASSETS A person’s assets, including his/her investments and bank accounts, are frozen on death to enable the executor to properly assess how much the estate is worth to distribute it to the heirs. In a dire situation, the deceased’s family can ask the executor to get a letter of authority from the Master of the Court to unfreeze some assets to provide money for living expenses. TAXES • Estate duty: 20% on the first R30 million, 25% on any amount above that. There is no estate duty on estates of less than R3.5m. For the second-dying spouse, an estate up to R7m minus the exemption used by the first-dying spouse is not taxed. • Transfer duty: There is no transfer duty on a property that passes from the deceased to another through an inheritance. However,
there are still transfer costs to be paid to the conveyancing attorneys, which may be 10% or more of the value of the property. • Capital gains tax: CGT is payable by the estate on investments that need to be liquidated or transferred into the name of an heir. However, the exclusion in the year of death is R300 000, as against R40 000 a year during life. LIFE POLICY Any life insurance payout to the deceased’s dependants and/or beneficiaries does not go through the estate and, therefore, can occur within days of the death, helping enormously to cover the family’s living expenses while other assets are frozen. The payout does not form part of the deceased estate and does not attract executor fees. The policy must have a nominated beneficiary or beneficiaries. If no beneficiaries have been nominated, the payout will go into the deceased estate. RETIREMENT SAVINGS Any benefit in a retirement fund (pension, provident, preservation or retirement annuity fund) does not attract executor fees, but it does form part of the estate for the calculation of estate duty. Unlike a life policy, the distribution of the money is decided by the trustees of the retirement fund, so that, although taking account of nominated beneficiaries, even non-nominated dependants may receive a portion of the payout.
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WHAT IS YOUR ’ESTATE’?
MONEY BASICS
with MARTIN HESSE
THE word “estate” abounds in literature about personal finance and law, and yet I am sure many people don’t fully understand what the word means. Not only is it a clinical legal term; it is too easily confused with the other meaning of the word, which refers to residential or commercial property, as in “wine estate” or “estate agent”. I love the Afrikaans word for estate: “boedel”. To me that is far more down-to-earth and somehow descriptive. Everyone has an estate, even
the homeless man in a makeshift tent underneath the bridge. It’s just the size and complexity that differs. Essentially, your estate is what you own, all bundled together in a “boedel”. It’s your car, house, Pierneef painting, Persian rug, stamp collection, Krugerrands, computer, cellphone … the list can go on and on, depending on how much stuff you have accumulated. These are, to use another financial term, your “assets”. Assets also include non-physical
things such as shares in a company, cryptocurrency, savings and investments. An assessment of your estate cannot be complete without also taking into account what you owe – what the financial and legal folk refer to as your “liabilities”. In other words, your debts, including what you owe on your mortgage bond, vehicle finance and credit agreements. To determine your “net worth” you need to calculate the value of all your belongings (their market value, or what you could
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reasonably sell them for), add the money you have in investments and bank accounts, and then subtract all your debts. Importantly, your retirement savings in a recognised pension, provident, preservation or retirement annuity fund, while theoretically part of your estate, are considered separate from your estate for legal and financial purposes. This is because this money goes directly to nominated beneficiaries and/or your dependants, as determined by the retirement fund trustees. Also, you cannot include in your estate what would be paid out on a life insurance policy – this “asset” is not yours. It is an entry on the books of the insurance company that only materialises when your beneficiaries claim against the policy on your death. When does your estate become important? There are several instances when your estate would need to be assessed for legal purposes. The main ones are: ● getting married; ● getting divorced; ● declaring insolvency; and ● when you die. If you get married, you may combine your estate with that of your partner (marriage in community of property), keep your two estates entirely separate (marriage out of community of property), or opt for only sharing what you accrue during the marriage (marriage out of community of property with accrual). Getting divorced means splitting the two estates again, according to which of these regimes apply. If you declare
yourself insolvent, it is when your debts exceed your assets, and your assets may need to be sold off to pay your creditors. Unlike the other three instances, the last is unavoidable: your death. When you die, your estate must be assessed, all debts paid, and the assets that are left over must then be distributed among your heirs. DECEASED ESTATES Winding up a deceased estate can, again, be simple or complicated, according to the extent and complexity of the things you own and owe. It is done by an executor, who has the legal authority to take charge of your financial affairs after your death. When you draw up your will (which everyone is advised to do, because you get to control what goes to whom), you must nominate an executor.
If you die intestate (without a valid will), the state will choose one for you. Your estate is immediately frozen on your death, and this includes your investments and bank accounts, which may cause problems for those you leave behind. If the value of your estate (excluding your retirement savings and life policies) is less than R250 000, then an executor may not be required. All processing of deceased estates, whether above or below R250 000, is done through the Master of the High Court, which must approve all actions taken and finally sign off on the distribution of your assets. See “Fact File” on page 11 and “What to know about winding up a deceased estate” on page 14” for details on the costs and taxes involved
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WHAT TO KNOW ABOUT WINDING UP A DECEASED ESTATE There is a set process to be followed when a person dies regarding how his or her assets (and debts) are dealt with and distributed. WHEN someone dies, that person’s deceased estate comes into existence and must be wound up in terms of the Administration of Estates Act. Depending on the nature of the estate, the winding-up process can be lengthy. “The time required to wind up a deceased estate will be determined by, among other things, the size and complexity of the estate,” says Madelein Steenkamp, legal specialist at PSG Wealth. Winding up the estate, step by step, Steenkamp says a deceased estate must be reported to the Master within 14 days of the date of death. ● As a first step, the executor
(nominated in the will or appointed by the Master of the High Court) will consult with the family to obtain all necessary information to report the estate to the Master in the jurisdiction where the deceased lived during the year before his or her death. ● The executor will be issued a letter of executorship – authorisation to act in respect of all matters pertaining to winding up the estate. This includes taking control of all assets of the deceased, opening an estate bank account, notifying third parties of the death of the deceased, settling liabilities and transferring or selling assets. ● The executor will need to advertise the estate in the
Government Gazette and a local newspaper. “This advertisement is for the attention of debtors and creditors of the deceased. It informs them that they have a period of 30 days from publication to submit their claims against the estate,” she says. ● The executor must also notify the South African Revenue Service of the death – this must be done even in cases where the deceased was not registered for tax purposes and no estate duty is payable. An income tax return must be submitted each year until the estate becomes distributable. ● Once the 30-day period of the advertisement has expired, and all claims have been lodged, Steenkamp says the solvency
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of the estate is determined. “The executor will then draft the liquidation and distribution account, which reflects all the assets and liabilities of the deceased and sets out how the assets will be distributed to the heirs.” ● The will of the deceased determines how assets are distributed. “If the deceased died without a valid will, the Intestate Succession Act will apply. This contains formulas that determine how assets are to be distributed,” Steenkamp says. ● The liquidation and distribution account is then lodged at the Master’s Office for approval. Once approved, permission is granted to advertise the account, which will lay open for inspection for 21 days. Interested parties may lodge objections with the Master within the 21-day period. ● If no objections are received, the executor may proceed to pay creditors and distribute the estate to the heirs, in accordance with the liquidation and distribution account. ● Once the estate has been liquidated and distributed, and all creditors paid, the executor must notify the Master, who will, if satisfied, confirm that the estate
has formally been closed. THE COSTS INVOLVED Steenkamp says that one of the costs to consider is the executor’s fee. The maximum fee (excluding VAT) is currently 3.5% of the gross value of the estate assets, and 6% of all income (such as rentals, interest and dividends) collected while the estate is being wound up. There are other expenses to take into consideration, such as advertising costs, property transfer costs, valuation costs, mortgage bond cancellation costs, bank charges and funeral costs. Unless the executor qualifies for an exemption, there will also be the cost of providing security to the Master for the value of the estate. This must be in the form of a bond of security, issued by a short-term insurance company. WHAT THE FAMILY NEEDS TO DO The family must notify the executor of the death and obtain the death certificate. “They should also get all relevant documents of the deceased together for the first interview with the executor,”
says Steenkamp. “Managing day-to-day living expenses is important. Once the deceased’s bank account is frozen, it can take several months before the executor is able to pay creditors. It is therefore recommended that heirs plan beforehand to maintain these payments,” she says. Heirs may find themselves in a position where they require access to funds from the estate to meet their day-to-day living expenses. The Administration of Estates Act makes allowance for the Master of the High Court, upon request, to issue a letter permitting the bank to release funds from the deceased’s frozen accounts to cover living expenses while the estate is being wound up. Pension fund and life insurance benefits are typically not dealt with by the executor. This is separate to winding up the estate, and the family can begin the claim process straight away. “A qualified fiduciary expert will help you with your will and estate plan to ensure that your loved ones are taken care of and that your estate is distributed as intended,” Steenkamp says.
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ESTATE PLANNING FOR ’CRYPTONIANS’ If you’ve accumulated crypto assets, it goes without saying that you must explain how you want them to be distributed in your Will. Kyle Abrahams sheds some much-needed light on a little-discussed issue. By KYLE ABRAHAMS IN RECENT years, the global market has opened itself up to a whole new idea of trade … a cashless society! Cryptocurrencies (crypto for short) are intangible digital assets that are not issued by a central authority. As an unregulated currency, crypto is controlled by the developers themselves. These days, crypto can quite easily be converted into cash. Since 2009, crypto has soared in popularity, with the likes of Ethereum and the most popular of them all, Bitcoin, becoming household names. Statistics show that there are 200 million crypto users globally and 18 000 businesses (and counting) that accept cryptocurrency payments.
For the millennials and festivalgoers out there, Howler is an example of a business that has gone completely cashless. With 4.2 million crypto owners, South Africa ranks in the Top 10 “crypto nations” in the world. CRYPTO AND YOUR WILL Being an intangible asset, crypto is seen as property in terms of the Estate Duty Act and estate duty is therefore applicable on the value of the asset at the date of death. That said, the value of your digital wallet must be taken into account when planning your estate. If you have accumulated crypto assets, it follows that you should include them in your will. Here, I strongly recommend a
two-pronged approach: 1. Include a clause in your will detailing how you want your crypto assets to be distributed. 2. Create a separate letter of directions to a nominated beneficiary and/or the executor of your estate which explains where and how to access your crypto assets. Step 1: The clause in your will As always when drafting a will, it is highly recommended that you seek the services of a professional. The clause can follow the same format as the rest of your will: you simply have to detail who should inherit your crypto assets and in what ratio. As crypto is a recent phenomenon, I would strongly
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recommend following this up with an explanation along the following lines: My cryptocurrency might be stored on digital wallets, paper wallets, online exchanges, or a combination of wallets and exchanges or any other crypto digital platform. The following items or devices might contain a cryptocurrency wallet: (item/device and type of cryptocurrency). These items shall not be distributed to any person until such time as the cryptocurrency or any information related to the access of my cryptocurrency is transferred to (nominated beneficiary). It is also important that you specifically state in your will that you have created a separate
letter of directions which explains how to access your crypto wallets and accounts. You also need to mention where this letter is held (typically with the executor of your estate). Step 2: The letter of directions This letter should detail where all of your crypto assets can be found and must include the keys, usernames and passwords required to unlock them. Depending on who will be inheriting your crypto, it is probably a good idea to include detailed instructions on how to convert the crypto into cash should your beneficiary opt for such. It is of utmost importance that this letter of instructions is NOT
filed with your will. If included in your will this information will be lodged with the Master of the High Court and thus enter into the public domain. Including this information in your will is akin to giving your ATM pin to strangers. THE BOTTOM LINE While it may not be as widely understood as cash, shares or bonds, crypto is an asset like any other. If you have accumulated crypto assets, then they must be dealt with in your will. Should you not include it, your crypto will be lost. Kyle Abrahams is an admitted attorney and legal adviser at BDO South Africa.
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Money Quiz Test yourself on your financial knowledge
1. Which of these typically has the lowest interest rate? a) Personal loan b) Car finance c) Mortgage loan d) Credit agreement on a fridge 2. Which of these is not a type of retirement fund? a) Unit trust fund b) Preservation fund c) Retirement annuity fund d) Provident fund 3. To what percentage of assets in a deceased estate is the executor entitled as a maximum fee (excluding VAT) for winding up the estate? a) 2.5% b) 3.5% c) 4.5% d) 5.5% 4. What is the capital gains tax exemption in the year of death? a) R40 000 b) R100 000 c) R300 000 d) R500 000 5. What legal authority has jurisdiction over deceased estates? a) Master of the Supreme Court of Appeal b) Master of the Magistrate’s Court c) Master of the Constitutional Court d) Master of the High Court
ANSWERS:1c, 2a, 3b, 4c, 5d, 6b, 7d, 8c, 9b, 10a.
6. Which of these companies recently performed a shareswap with a sister company to reduce its weighting on the JSE? a) Pick n Pay b) Naspers c) Standard Bank d) Pioneer Foods 7. Who is the current chair of the Federal Reserve Bank in the US? a) Ben Bernanke b) Janet Yellen c) Alan Greenspan d) Jerome Powell 8. What is the tax rate for trusts that aren’t special trusts? a) 35% b) 40% c) 45% d) 50% 9. What is the acronym of the state-sponsored insurance company that covers individuals and businesses against damage from riots? a) ASISA b) SASRIA c) SARS d) SAICA 10. Approximately how many companies are listed on the main board of the JSE? a) 330 b) 380 c) 430 d) 480
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Planning Perspectives
Three powerful tools to create generational wealth
Palesa Tlholoe
THANKS mostly to social media, generational wealth is a topic that has gained popularity recently. Perhaps it’s the recognition that it is possible to create something that you were not fortunate enough to have received yourself. There are three main estate planning tools you can use to create generational wealth, depending on your needs and personal circumstances: a will, life cover and the creation of a trust. 1. A will provides a way A will is used to stipulate how you want your assets to be inherited upon your death. If you have minor children, you can also nominate a guardian who will be legally responsible for them. If you die without a valid will, you are considered to have died “intestate” and the Intestate Succession Act will dictate how your assets are distributed. The problem with this, besides the bluntness of the whole process, is that your estate might be subjected to high taxes and fees that will need to be paid before any beneficiary distributions are made. Money might not be readily available, depending on the structure of your estate. Rather don’t leave things to chance. A well-planned estate uses a will to distribute assets in a way that will lower inheritance tax and improve the efficiency of winding up the estate. It’s always best to consult with a Certified Financial Planner (CFP) or an estates expert when drafting your will. There are many things to consider, including inheritance tax, transfer fees and executor fees. A professional will make sure all of these are accounted for. 2. Life cover pays One suggestion your financial planner might make is to take out a life insurance policy, which will
cover all the fees and taxes in the event of your death, and probably also leave a sizeable lump sum for your heirs. Life cover is powerful in that it delivers wealth to your heirs at a reasonable and attainable cost, by simply paying your monthly premiums while you’re alive. An endowment policy is sometimes used for the same purpose – it allows for the transfer of assets to your heirs directly – but it’s a slightly more complicated financial instrument and requires expert input. 3. Secure it in a trust A trust is a legal relationship where the founder gives up control of his or her assets to a board of trustees, for the benefit of the trust’s beneficiaries. There are several types of trusts, but in estate planning there are two main types: an inter vivos trust (or living trust); and a testamentary trust, which is created upon the death of the founder through an instruction left in his or her will. Depending on how it’s set up, an inter vivos trust can eliminate inheritance tax, as the assets in the trust are not affected by the death of the founder. The disadvantage of any trust, however, is that they cost more. Annual taxes are high and there are administration fees to consider, both of which make trusts unattractive for many people. In conclusion Building generational wealth is not an easy journey, but with an expert by your side you can create a customised estate plan that will result in a meaningful legacy. If you’re not sure where to find a CFP, visit fpi.co.za for a list of qualified professionals near you. Palesa Tlholoe CFP, co-founder and wealth manager at Imvelo Wealth
INFORMATION
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click on the links to visit the website
Here are sources that can help you with financial education, give you more information on savings and investments, and afford you recourse if you have a consumer complaint or a complaint against a financial services provider
FINANCIAL EDUCATION Financial Sector Conduct Authority MyMoney Learning Series https://www.fscamymoney.co.za South African Savings Institute #WaysToSave https://waystosave.co.za/ BANKING Ombudsman for Banking Services ShareCall: 0860 800 900 or phone: 011 712 1800 Email: info@obssa.co.za www.obssa.co.za CONSUMER ISSUES National Consumer Commission Toll-free: 0860 003 600 or phone: 012 428 7000 Email: complaints@thencc.org.za www.thencc.gov.za Consumer Goods and Services Ombud ShareCall: 0860 000 272 Email: info@cgso.org.za www.cgso.org.za
FINANCIAL ADVICE Ombud for Financial Services Providers phone: 012 470 9080 or 012 762 5000 Email: info@faisombud.co.za www.faisombud.co.za INVESTMENTS Financial Sector Conduct Authority ShareCall 0800 110 443 or 0800 202 087 info@fsca.co.za www.fsca.co.za LIFE INSURANCE Ombudsman for Long-term Insurance ShareCall 0860 103 236 or phone: 021 657 5000 Email: info@ombud.co.za www.ombud.co.za MEDICAL SCHEMES Council for Medical Schemes MaxiCall: 0861 123 267 Email: complaints@medicalschemes.com or information@medicalschemes.com www.medicalschemes.com
Credit Ombud MaxiCall: 0861 662 837 or phone: 011 781 6431 Email: ombud@creditombud.org.za www.creditombud.org.za
RETIREMENT FUNDS Pension Funds Adjudicator ShareCall: 0860 662 837 or phone: 012 346 1738 Email: enquiries@pfa.org.za www.pfa.org.za
National Credit Regulator ShareCall: 0860 627 627 or phone: 011 554 2600 Email: complaints@ncr.org.za or (debt counselling) dccomplaints@ncr.org.za www.ncr.org.za
SHORT-TERM INSURANCE Ombudsman for Short-term Insurance ShareCall 0860 726 890 or phone: 011 726 8900 Email: info@osti.co.za www.osti.co.za
TAX Tax Ombud ShareCall: 0800 662 837 or phone: 012 431 9105 Email: complaints@taxombud.gov.za www.taxombud.gov.za PROFESSIONAL ORGANISATIONS Fiduciary Institute of Southern Africa (FISA) phone: 082 449 2569 Email: secretariat@fisa.net.za www.fisa.net.za Financial Planning Institute of South Africa (FPI) Phone: 011 470 6000 Email: info@fpi.co.za www.fpi.co.za South African Institute of Tax Professionals (SAIT) Phone: 012 941 0400 Email: info@thesait.org.za www.thesait.org.za FINANCIAL DATA ◆For ◆ the latest financial market indicators, go to https://www.iol.co.za/businessreport/market-indicators ◆For ◆ the latest quarterly unit trust performance, go to https://www.iol.co.za/ personal-finance/collective-investments ◆To ◆ look up performance of a particular unit trust fund go to https://www.iol.co.za/ personal-finance/fund-look-up
