Estate planning is often associated with drafting a Will, but effective estate planning involves much more than simply deciding who should inherit your assets. It is about ensuring that your financial affairs are structured appropriately, your wishes are clearly recorded, and your loved ones are adequately protected.
Unfortunately, many people only consider estate planning when they reach retirement age or when a major life event occurs. By then, opportunities to structure an estate effectively may have been missed.
Below are some of the most common estate planning mistakes in South Africa and practical steps to avoid them.
1. Not Having a Valid Will
One of the most significant estate planning mistakes is not having a valid Will.
If a person dies without a valid Will, their estate is generally distributed in accordance with the Intestate Succession Act 81 of 1987. This means that the deceased’s assets may not be distributed in the manner they would have chosen.
A properly drafted Will allows you to specify who should act as executor, whether such executor should be exempted from posting security, who should inherit your assets and, where appropriate, arrangements for minor children.
It is important not only to have a Will, but also to ensure that it complies with the legal requirements for a valid Will and is kept safely where it can be located after your death.
There is an annual Wills week usually during September where the public can benefit from an initiative, led by the Legal Practice Council alongside the Department of Justice and Constitutional Development, where participating attorneys offers free basic will-drafting services to the public.
2. Treating a Will as a Once-Off Document
Your Will should not simply be drafted and then forgotten.
Marriage, divorce, the birth of children, the death of a beneficiary, the acquisition or sale of significant assets, and changes in your financial circumstances can all affect your estate plan.
A Will should therefore be reviewed periodically and whenever there is a significant change in your personal or financial circumstances.
Keeping an outdated Will can create uncertainty and may result in your estate being administered in a way that no longer reflects your intentions.
3. Failing to Consider the Full Value of Your Estate
Estate planning requires a comprehensive view of your assets and liabilities.
People sometimes consider only their property, savings and investments, without taking into account assets such as retirement interests, life policies, business interests, shares, vehicles, loans or assets held jointly with another person.
It is also important to consider outstanding debts and potential estate administration costs and taxes.
A complete inventory of your assets and liabilities can help identify potential problems before they arise.
4. Assuming That Everything Will Automatically Go to Your Spouse
Many people assume that their spouse will automatically inherit their entire estate.
This is not necessarily the case.
The distribution of an estate depends on several factors, including whether there is a valid Will, the applicable matrimonial property regime, the nature and ownership of the assets, and the existence of other beneficiaries.
Your estate plan should therefore be structured around your actual circumstances rather than assumptions about what will happen after your death.
5. Failing to Plan for Minor Children
Parents often focus on who will inherit their assets but overlook the practical consequences of leaving assets to minor children.
Minor beneficiaries cannot simply manage inherited assets in the same way as adults. A Will should therefore carefully consider how assets intended for minor children are to be administered and protected.
Parents should also consider making appropriate arrangements regarding guardianship and the financial support of their children.
Professional advice can be particularly valuable where minor children are involved, as the most appropriate structure will depend on the family’s circumstances.
6. Ignoring the Matrimonial Property Regime
Your matrimonial property regime can have a significant impact on your estate.
Whether a marriage is in community of property, out of community of property with or without the accrual system, or governed by another arrangement can affect ownership and the administration of assets.
Couples should understand how their matrimonial property regime interacts with their estate plan rather than treating their estates as entirely separate from their marital arrangements.
7. Failing to Consider Estate Duty and Other Costs
Estate planning should take potential taxes, liabilities and administration costs into account.
Depending on the circumstances of the estate, Estate Duty, capital gains tax, executor’s remuneration, debts and other costs may affect the amount ultimately available to beneficiaries.
This does not mean that every estate requires complicated tax planning. It does, however, mean that the potential financial consequences should be considered before decisions are made about the ownership and distribution of assets.
8. Making Informal Promises About Inheritance
Statements such as “the house will go to you” or “you can have my investments when I die” may create expectations among family members, but informal promises do not constitute an effective estate plan.
Your intentions should be properly documented and incorporated into an appropriate estate planning structure.
Clear documentation can help reduce uncertainty and minimise the potential for disputes between beneficiaries.
9. Forgetting About Business Interests
Business owners have additional estate planning considerations.
If you own a business, shares or an interest in a partnership or other business structure, you should consider what will happen to that interest when you die.
Without appropriate planning, the deceased’s interest may create difficulties for the business, surviving owners and beneficiaries.
Business succession planning should therefore form part of the broader estate plan where relevant.
10. Choosing an Executor Without Considering the Responsibilities Involved
The executor plays an important role in the administration of a deceased estate.
Choosing a family member simply because they are trusted may not always be the best option. The administration of an estate can involve legal, financial and administrative responsibilities, and the complexity of the estate should be considered when making this decision.
The Will should clearly nominate an appropriate executor, subject to the requirements of the Administration of Estates Act 66 of 1965 and the Master of the High Court’s requirements.
11. Failing to Keep Important Documents and Information Accessible
Even a well-prepared estate plan can become difficult to implement if important documents cannot be found.
Beneficiaries and the executor should be able to locate relevant information about the deceased’s Will, property, investments, insurance policies, bank accounts, business interests and liabilities.
This does not mean that sensitive information should be openly shared with everyone. Rather, trusted individuals should know where the necessary documents can be found when they are needed.
12. Trying to Do Everything Yourself
Online templates and general information can be useful for understanding estate planning, but every estate is different.
A Will that appears straightforward may have unintended consequences when considered alongside a person’s assets, matrimonial property regime, tax position, business interests and family circumstances.
Professional legal advice can help identify potential issues and ensure that the estate plan is properly aligned with the individual’s wishes and circumstances.
13. Estate Planning Is About More Than a Will
Good estate planning is ultimately about preparing for the future and protecting the people and assets that matter to you.
It involves considering your Will, assets, liabilities, family circumstances, matrimonial property regime, tax implications and succession arrangements as part of a coordinated plan.
The earlier these issues are considered, the more opportunity there is to make informed decisions and address potential problems before they become difficult or costly to resolve.
At WJ Mayhew Attorneys, we understand that estate planning is personal and that every family and financial situation is different. We provide professional guidance to help clients understand their options, structure their affairs appropriately and put an estate plan in place that reflects their wishes.
Planning ahead today can provide greater certainty for tomorrow.