Author: Design

insolvency

What are the effects of putting an insolvency clause in your will?

Insolvency has become a sobering reality for a lot of people. The most recent statistics from Statistics South Africa showed that insolvencies increased by 123% in the three months ended August 2021 compared to the same time in 2020. Facing insolvency isn’t always because you made poor financial decisions. The global pandemic taught us many things, including the fact that we can make the best decisions and circumstances can change our reality in ways we never thought of.

When you set up your will, you might want to protect your deceased estate from the possibility of a named beneficiary being insolvent at the time that his/her inheritance becomes due and then being used to pay creditors.  Under South African law, however, there are limited ways in which you can do this, and testators need to be very careful with the specifics in their wills.

Quick recap on insolvency

In his personal capacity, an individual is insolvent when they cannot pay their debts as they become due. You could reach an agreement with your creditors to pay your debt without the intervention of third parties, or you could be sequestrated. In the case of sequestration, the insolvent’s estate is placed under sequestration and a trustee takes control of it. Assets will be sold off or arrangements made to pay the creditors at least a portion of what is owed them.

A testator could wish to keep his own deceased estate from becoming part of the insolvent estate of a beneficiary and be sold off to pay debts. In this case, an insolvency clause needs to be added to the will.

The insolvency clause

In South African case law, there are various examples of Insolvency clauses being dismissed or the Will being interpreted as if the clause did not exist. For example, in Badenhorst v Bekker N.O. & Others 1994 (2) SA 155 (N) the insolvency clause in the Will read “No rights and hopes of the beneficiaries under this Will or part thereof shall be attachable by any creditor or vest in the beneficiary’s trustee on insolvency”. The clause had no effect on the law and the inherited estate formed part of the beneficiary’s insolvent estate.

The issue arises from the fact that the inheritance, once received, will immediately form part of the beneficiary’s estate, regardless of his/her financial situation. The testator cannot place restrictions on how that inheritance is to be used, or not used as the case may be.

So, what CAN you do?

If a testator does want to add an insolvency clause that has an effect and protects the deceased estate, it is possible. These solutions, though, usually equate to the intended beneficiary no longer receiving his/her inheritance as originally intended.

Solution 1:

The Will can state that, should the intended beneficiary be insolvent when he/she is to receive the inheritance, they will forfeit it and the deceased estate’s executor will award the benefit to the beneficiary’s heirs. In the absence of heirs, the insolvent beneficiary’s inheritance can be forfeited to the other named beneficiaries in the Will.

Solution 2:

The testator can instruct that a discretionary trust be created should the beneficiary be insolvent. In this case, the inheritance will be owned by the trust and not the insolvent beneficiary. It is, therefore, not part of the beneficiary’s estate and cannot be subject to a creditor’s claim.

Section 3:

A real right can be created that would favour the beneficiary but not have him/her inherit directly. A real right could be a fideicommissum where a property is given to an heir on the condition that this heir will pass it on to a specific person at a later date. A real right could also be a usufruct over the bequeathed property in which case the right to use and derive income from a property is temporarily granted to an individual.

At AED, we know how important it is to ensure your wishes are respected once you are gone. We can help you ensure that this happens by carefully drafting a Will that will be respected under South African law.

AED Attorneys understands that every situation is unique, and although they strive to ensure that the information contained herein is accurate at the time of publishing, it cannot be guaranteed to be without errors or omissions. As a result, AED Attorneys, its employees, independent contractors, associates or third parties will under no circumstances accept liability or be held liable for any innocent or negligent actions or omissions in this article, which may result in any harm or liability flowing from the use of or the inability to use the information provided.

SARS penalties

SARS penalties for delayed Transfer Duty payments

Buying a property is a massive investment into your future and can, for some, be a form of financial security. Purchasers should be aware of all the fees and costs that go into buying a property, though, as it is not just the purchase price that needs to be paid. Transfer Duty is an additional cost that has to be paid by a certain time. If it is not paid on or before the appropriate date, you could be facing some hefty penalties.

What are transfer duties

Whenever you buy a property, it has to be transferred to your name. The Transfer Duty is a tax levied on the value of the property when it is acquired (bought) by someone. The current rate at which the tax is levied is valid until 28 February 2023 and is detailed in the table below:

Value of the property (R)Rate
1 – 1 000 0000%
1 000 001 – 1 375 0003% of the value above R1 000 000
1 375 001 – 1 925 000R11 250 + 6% of the value above R1 375 000
1 925 001 – 2 475 000R44 250 + 8% of the value above R1 925 000
2 475 001 – 11 000 000R88 250 + 11% of the value above R2 475 000
11 000 001 and aboveR1 026 000 + 13% of the value exceeding R11 000 000

This amount is payable within 6 months from the date of acquisition. The conveyancer responsible for transferring the property to the new owner is usually responsible for ensuring that this tax is paid in time and all conveyancers are required to be registered with SARS.

Transfer Duty should not be confused with the Transfer of Property costs which is the fee owed to the conveyancing attorney responsible for the transfer of ownership.

When is Transfer Duty applicable to be paid?

As per SARS and for the purpose of Transfer Duty the “property” on which Transfer Duty is levied includes”

  • Land and fixtures;
  • Real rights in land, excluding right under mortgage bonds or leases;
  • Rights to minerals or rights to mine including leases or sub-leases to mine for minerals;
  • A share or interest in a “residential property company”;
  •  A contingent right to residential property or a share or member’s interest in a “residential property company” held by a discretionary trust (not a special trust), where the acquisition of the right is consequence of an agreement for consideration in relation to property held by that trust; or accompanied by a change in the debt or security structure of the trust; or accompanied by a change in the trust’s trustee; and
  • A share in a share block company.

When a property sale has conditions that need to be met, it is important to remember that the 6 months in which the amount should be paid is calculated from the date the agreement was signed and not the date that the conditions are fulfilled.

It is also important to note that a property sale is not subject to both VAT and Transfer Duty. If the seller is a registered VAT vendor and the property forms part of the seller’s enterprise, VAT will take preference and will need to be paid rather than a Transfer Duty. If the property is not part of the seller’s enterprise, Transfer Duty will have to be paid.

So, what if the Transfer Duty is paid later than 6 months?

SARS is clear that any late payment of a Transfer Duty will be subject to interest that is calculated at 10% per annum for each completed month. A complete month is calculated as the first day from the expiry of the interest-free 6 months to the date of payment.   

Can I be exempt from having to pay Transfer Duty?

Yes, you can.  Transfer Duty is not levied against properties that are being transferred (or not transferred as the case may be) for the following reasons:

  • Marriage in community of property;
  • Divorce;
  • Inheritance;
  • Cancelled transactions.

When you need conveyancing attorneys that will see to the timely and efficient transfer of your property, let us know.

AED Attorneys understands that every situation is unique, and although they strive to ensure that the information contained herein is accurate at the time of publishing, it cannot be guaranteed to be without errors or omissions. As a result, AED Attorneys, its employees, independent contractors, associates or third parties will under no circumstances accept liability or be held liable for any innocent or negligent actions or omissions in this article, which may result in any harm or liability flowing from the use of or the inability to use the information provided.

Adoption and Inheritance

Adoption and Inheritance in terms of the Intestate Succession Act

Children are usually seen as the descendants of their parents. They are often also some of the first people to be named as the beneficiaries of a parent’s will, though they do not legally have a right to inherit. Minor children, however, are their parents’ responsibility, even in death, and even if a child is not named a beneficiary, he or she can, with the aid of their guardian, claim maintenance against a deceased parent’s estate. Such a claim receives a higher priority than those of named beneficiaries.  So, while South African law respects an individual’s freedom of testation some laws can restrain a testator’s exercise of this freedom.

But… what if an individual died without leaving a valid will or any other document containing testamentary provisions? And what if that individual has an adopted child?

Passing away without testamentary provisions

If a person passes away without a will it is said they die intestate, and his or her deceased estate is wound up according to the Intestate Succession Act 81 of 1987. This 5-page Act sets out exactly how a deceased estate is to be wound up in the absence of a will. If a will is present but a portion of the estate is not accounted for in the will, that portion is also wound up according to the Act.

The Act states that if a person “dies intestate, either wholly or in part, and

  • Is survived by a spouse, but not by a descendant, such a spouse shall inherit the intestate estate;
  • Is survived by a descendant, but not by a spouse, such descendant shall inherit the intestate estate.”

It further continues to detail the various possible individuals that could inherit the estate depending on who survives the deceased, from just one’s parents to descendants of one’s deceased mother, for example, who are only related to the deceased through her.

Adoption and the Intestate Succession Act

Once again, the Intestate Succession Act is very clear on what is to be done about and intestate deceased estate when the child is to inherit has been adopted:

“An adopted child shall be deemed

  • to be a descendant of his adoptive parent or parents;
  • not to be a descendant of his natural parents or parents, except in the case of a natural parent who is also the adoptive parent of that child or was, at the time of the adoption, married to the adoptive parent of the child.”

An adopted child thus has the right to inherit as any biological child would from their adoptive parents. They do not have the same right to inherit from their biological parents as they are legally no longer seen as their biological parents’ descendants.

Final thoughts

While the Intestate Succession Act stipulates how to wind up an intestate deceased estate, this situation only highlights why it is important to have a recent and valid will. It is the last expression of one’s wishes and as long as all the details of your will is legally enforceable, it can ensure that your last wishes are adhered to.

While an adopted child is no longer the descendant of his/her biological parents and cannot inherit according the Intestate Succession, they might still want him/her to inherit. If this is the case, they can state so in their will.

It is always a good idea to have your will drawn up by professionals, like AED Attorneys, that can advise you on the inclusion of important clauses and ensure that the will is accepted by the Master of the court so you don’t pass away intestate.

AED Attorneys understands that every situation is unique, and although they strive to ensure that the information contained herein is accurate at the time of publishing, it cannot be guaranteed to be without errors or omissions. As a result, AED Attorneys, its employees, independent contractors, associates or third parties will under no circumstances accept liability or be held liable for any innocent or negligent actions or omissions in this article, which may result in any harm or liability flowing from the use of or the inability to use the information provided.

Effects of signing surety on a bond and what happens on divorce or death

Effects of signing surety on a bond and what happens on divorce or death

What if your life partner, business partner, family member or friends comes to you one day saying they want to take out a loan, but the bank says their monthly income and net asset value does not make them financially viable. The bank also said they can get a loan if someone signs surety on it. They tell you that they know they are good for the repayments every month, but they ask you to please sign surety. There are some important things to know before you make a yay or nay decision.

What is surety

Suretyship is a contract entered into on behalf of the principal debtor in favour of a creditor. In laymen’s terms, you sign the contract as a third party confirming that if the debtor cannot pay the creditor, you will do so in his stead. It is not a contract that should be entered into lightly. You should read every detail before even contemplating signing it as the wording of the surety can bind you in different ways.

You could be surety for a particular debt (like a home loan) or for a specific amount only. When this debt is paid off by the debtor, you are no longer surety to any form of debt owed by the principal debtor, though you should always confirm that your suretyship has been cancelled.

An alternative type of suretyship is being surety to the person. In this case, you are not released from the contract when a particular debt is paid, and you might be held liable for that person’s debt years later. If the contract does bind you to the person, you should make sure there is a clause in the contract providing you with an avenue to cancel your suretyship. When a particular debt is paid, you can then request to be relieved of this obligation.

What happens to the surety when you divorce?

If you are married in community of property, you and your spouse should both sign the suretyship agreement to make it enforceable. Both spouses are ultimately liable for the debt as they have a joint estate. If the signing of suretyship is done in the ordinary course of a spouse’s profession, trade or business, this is not necessary.

If you are married out of community of property, only the spouse that wants to act as surety needs to sign the contract as his/her estate and finances are legally seen as separate from the spouse.

Should the spouses get a divorce, it does not mean the suretyship agreement is null and void. If they were married in community of property, it is best to see if the suretyship can be renegotiated so only one person is surety. If this does not happen, both individuals could still be held liable even after divorce. If they were married out of community of property, the suretyship agreement is still relevant and enforceable. If the one spouse was surety for the other and they then get divorced, it does not change the suretyship agreement.

What happens to the surety in the case of death?

If the principal debtor should pass away, his/her creditor can claim against the deceased estate for the money owed them. If the debtor’s deceased estate does not cover the repayment of the debt, the creditors can claim the debt from the surety (person that signed the suretyship agreement).

If the surety passes away, a number of things could happen. If the loan is much smaller by that point or the principal debtor’s financial situation has improved, it could be that the loan agreement is changed to not included a suretyship agreement. Alternatively, if this is not the case, the principal debtor could ask someone else to be surety and have the suretyship assigned to that individual for the remaining amount of the loan. Should neither of these be feasible, it could be that the creditor claims the outstanding amount of the loan from the principal debtor and upon his/her possible inability to pay it, the debt can be claimed from the deceased estate of surety.

Think before you sign

Signing a suretyship agreement should be done with caution. Ensure that you have read and understood the contract wholly and completely. If you are married in community of property, ensure that your spouse also signs for it and understands the agreement completely. Be sure that the terms are clear and that you know exactly when the agreement will come to an end and when you will no longer be liable for the principal debtor’s debt.

If you need assistance in setting up a suretyship agreement, or in fully understanding such a legally binding contract, get in touch with AED.  

AED Attorneys understands that every situation is unique, and although they strive to ensure that the information contained herein is accurate at the time of publishing, it cannot be guaranteed to be without errors or omissions. As a result, AED Attorneys, its employees, independent contractors, associates or third parties will under no circumstances accept liability or be held liable for any innocent or negligent actions or omissions in this article, which may result in any harm or liability flowing from the use of or the inability to use the information provided.

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Power Of Attorney

What does a power of attorney cover and when does it cease to exist?

If you are temporarily unable to manage some or all of your affairs, you might want to grant a trusted family member, attorney or financial advisor the authority to do so on your behalf. In other words, you wish to grant someone power of attorney (POA). A POA allows the person you nominated (the agent) to perform juristic acts for you (the principal). There are various situations in which you might want to enact a POA, but they are limited and do expire.

Requirements to create a POA

A POA is not quite a contract. It is the legal expression of the principals will that the agent has the capacity to enter into legal agreements and make legally binding decisions for the principal. If the POA is completely valid, third parties are contracted with the principal, and the agent is protected from any liability.

A major requirement for a valid POA is the contractual capacity of the principal. In other words, under South African law, the principal has the capacity to enter the agreements he is authorising an agent to enter into. If the principal the nature and consequences of granting power of attorney, he cannot validly execute such a POA. If you, for example, do not have the capacity to understand the nature and consequences of an offer to purchase a house, you cannot grant another individual power of attorney to sign such a document on your behalf.

There are no formalities for a POA, and it can be given orally or in writing. Best practice, however, is to have a POA in writing and signed by two witnesses. The POA should also state exactly what the agent is and is not authorised to do. If the principal is a company and, more specifically, the director of a company, that individual must be authorised by the board of directors to execute a POA on the company’s behalf.   

What does a power of attorney cover?

A valid POA can cover the acceptance, amendment, and signing of any legally binding document or making important decisions. These can include decisions with regard to your finances, property, tax, entering into contracts, settling claims, renewing licenses, etc. You might want to execute a POA for various reasons including:

  • Emigration and wanting someone in South Africa to finalise your affairs here. A POA can make it easier.
  • You are leaving the country for an extended period of time.
  • You want someone with legal or financial expertise to assist and handle decisions for you.

Death and Not Legally Married

My life partner passed away and we weren’t legally married, now what?

There are various ways to get married in South Africa. There are also various reasons that a couple would be life partners, but not get legally married. These reasons are often personal in nature and one can only speculate as to what they are. What we can know for certain, however, is the consequences of one member of the life partnership passing away and the possible difficulties for the remaining member.

(Not) Legally married

With all the different customs and cultures in South Africa, there are different ways in which people want to get married and different things that people think are important for a marriage. As far as the law is concerned, though, two people can get married in terms of a civil marriage, customary marriage, civil union, and a religious marriage. Note that a religious marriage is not recognised as a legal marriage under South African law, but in certain instances, the spouses are protected by the law.

A civil marriage can only be entered into by a man and a woman. Unless an antenuptial contract is signed stating otherwise, it is automatically a marriage in community of property.

A civil union can be entered into by two people and by persons of the same sex. As with the civil marriage, it is automatically in community of property unless your antenuptial contract is different.

A customary marriage is celebrated and concluded as per the indigenous African customary law. It is recognised as a legal marriage according to the Customary Marriages Act. The exact traditions that need to be followed may differ from community to community, but generally, lobola must be paid after which the necessary rituals and celebrations must take place. A customary marriage also allows for polygamy, though the groom must apply for permission to the High Court and the customary marriage must be registered at the Department of Home Affairs within three months.

A religious marriage is entered into in terms of a religion like the Islamic faith. Although it is not legally recognised, spouses are protected against domestic violence and when a spouse dies, the surviving spouse may

  • Approach the Magistrate’s Court to request maintenance against the deceased estate
  • Inherit in terms of the Intestate Succession Act if no will was left behind  

If your partnership does not fit into any of the categories above, you are not married in the eyes of the law.

No such thing as a common-law marriage

Many South African live together with the understanding that their years of partnership and cohabitation constitutes a common-law marriage with all the legality that is involved in a marriage. This is false and they are just cohabiting a space with no legal commitment in terms of marriage. A cohabitation agreement can be entered into that can regulate financial and property matters, like who pays the mortgage and who pays for living expenses. It provides financial stability, but they are still not legally married.

So, what if my partner passes away?

It is clear that if you and your partner were not married in any of the manners as set out above and you had no type of contractual agreement, the surviving spouse is left with no legal recourse to make any claims against the deceased estate.

A partner is only entitled to inherit from the deceased estate if they were legally married, and a cohabitation agreement does not give you the same right.

The only way to ensure your life partner inherits from your deceased estate and is legally protected after your death is to draw up a will and include him/her in it.

At AED Attorneys, we understand that every relationship is unique. We also understand that the law will place you into certain legal boxes. Having an airtight will is one of the best ways to protect your loved ones, married or not, after your passing and that is where we can help.

AED Attorneys understands that every situation is unique, and although they strive to ensure that the information contained herein is accurate at the time of publishing, it cannot be guaranteed to be without errors or omissions. As a result, AED Attorneys, its employees, independent contractors, associates or third parties will under no circumstances accept liability or be held liable for any innocent or negligent actions or omissions in this article, which may result in any harm or liability flowing from the use of or the inability to use the information provided.

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Uif

When a family has to deal with the death of a loved one, it places a lot of emotional stress on them. If that loved one is also the breadwinner or important monetary contributor to a family, the added financial strain makes it even more difficult to grieve and deal with your emotions in a healthy manner. One financial recourse that is possibly available to the family members left behind is the UIF Dependant’s Benefits which allows dependants of UIF (Unemployment Insurance Fund) contributors to claim.

UIF contributions

The Department of Labour states that the “Unemployment Insurance Act and Unemployment Insurance Contribution Act apply to all employees and workers, but not to:

  • workers working less than 24 hours a month for an employer
  • learners
  • public servants
  • foreigners working on contract
  • workers who get a monthly State (old age) pension or
  • workers who only earn commission.”

The UIF that is payable amounts to 2% of the value of each worker’s pay per month – 1% is contributed by the employer and 1% by the employee.

When a worker becomes unemployed or is unable to work due to maternity, adoption, parental leave, or illness, UIF provides short-term relief to these workers if they contributed while working and are not exempt as stated above.

How can dependants of a deceased worker receive UIF?

UIF is available to the dependants of a deceased worker if you are a:

  • spouse
  • life partner
  • guardian
  • child of the deceased under the age of 21.

There are some exclusions, though. The dependants cannot only claim if the worker received benefits from the Compensation Fund or an unemployment fund as defined in the Labour Relations Act or if the worker was suspended from claiming because of fraud. Children can only claim if there is no spouse of life partner or if the spouse or life partner does not claim within 18 months of the worker’s death. The benefit is payable to a dependant for a maximum of 238 days and is based on the income the breadwinner was earning before he/she died.

How to claim…

A dependant must claim within 18 months of the worker’s death, and you will need to hand in various documents along with the application form. These are:

  • Your Identity Document
  • Copies of the deceased’s last six payslips
  • The employer’s details on form UI19
  • A certified copy of the death certificate
  • For the spouse: a certified copy of your marriage certificate
  • For the partner: lobola letter or an affidavit in case of life partners
  • For the children: proof of guardianship (if applicable), a letter confirming the minor is still in school, birth certificate
  • Proof of your banking details

When will the money be paid out?

According to the South African Labour Guide, the payments should start within 8 weeks of registering. Money is then paid out every 4 weeks until the benefit is used up. If you do not receive a payment in that time, you should contact the Labour Centre and ask them to investigate the delay. There is, however, anecdotal evidence that payments have taken much longer than the 9 months. The money paid out is not taxable, but if the UIF overpays an individual, you will be expected to refund that money.

In conclusion

Dealing with legalities and Governmental Departments is not what we want to do while we grieve the loss of a loved one. Sometimes, though, the financial difficulty we are placed in when the breadwinner passes away leaves us with no other option. Luckily, we do have options available to use, one of them being the UIF.

AED Attorneys understands that every situation is unique, and although they strive to ensure that the information contained herein is accurate at the time of publishing, it cannot be guaranteed to be without errors or omissions. As a result, AED Attorneys, its employees, independent contractors, associates or third parties will under no circumstances accept liability or be held liable for any innocent or negligent actions or omissions in this article, which may result in any harm or liability flowing from the use of or the inability to use the information provided.

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Documents executed inside or outside of South Africa

Documents that are signed in South Africa but need to be used internationally, and vice versa, need to be signed and executed correctly, and you have to make sure they are legalised.  These documents could include certified copies, academic certificates, birth certificates, marriage certificates, police clearance certificates, power of attorney, etc.

Signing/executing documents in South Africa for use outside of South Africa

In situations where countries are a part of The Hague Convention[i]

  1. These documents first need to be notarized, i.e., signed and/or executed in the presence of a Notary Public. The Notary Public will attach a Certificate of Authentication with his signature, stamp and seal.
  2. The Notary Public will then send these documents to the High Court in the area where he/she practices. There, the Registrar will add an Apostille Certificate which authenticates the Notary Public’s signature

Your documents are now legal in all the countries that are part of The Hague Convention

In situations where countries are not a part of The Hague Convention

When a country is not part of The Hague Convention, two more steps are required.

  • The documents are submitted to DIRCO’s Legalisation Section to be legalised. The Department of International Relations and Co-operation is based in Pretoria.
  • The documents are sent to the Embassy/Consulate where they are to be used and authenticated.

Your documents can now be used in countries that are not part of The Hague Convention

Signing/executing documents outside of South Africa for use in South Africa

In South Africa, Rule 63 of the Uniform Rules of the High Court stipulates how documents signed outside of South Africa can be authenticated. These documents need a Certificate of Authentication from:

  1. The head of the South African diplomatic/consular mission.
  2. Consul-general, Consul, Vice-consul, or consular agent for the United Kingdom in that country.
  3. Any government authority of a foreign place permitted to authenticate documents under the law of that country.
  4. Any Notary Public in the United Kingdom of Great Britain and Northern Ireland, Zimbabwe, Lesotho, Botswana, or Swaziland.
  5. In the case of a document being executed by a person on active service, a commissioned officer of the South African Defence Force.

If the prescribed certificate is attached, you can use the document in South Africa.

AED Attorneys understands that every situation is unique, and although they strive to ensure that the information contained herein is accurate at the time of publishing, it cannot be guaranteed to be without errors or omissions. As a result, AED Attorneys, its employees, independent contractors, associates or third parties will under no circumstances accept liability or be held liable for any innocent or negligent actions or omissions in this article, which may result in any harm or liability flowing from the use of or the inability to use the information provided.


[i] The Hague Convention of 5 October 1961 Abolishing the Requirement of Legalisation for Foreign Public Documents is a multilateral treaty developed by the Hague Conference on Private International Law (HCCH). It replaced the cumbersome legislation that was required for cross-border mobility with a single formality – the issuance of an Apostille. Currently 120 are a part. 

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Executors or Brokers – Who deals with your policies after you die

Planning for the future is an activity that we all should engage in from time to time. We should not just plan for the immediate future, but we should keep in mind that some of the planning we do now can greatly affect the people we leave behind when we pass away. That is why proper estate planning is essential and having a life insurance policy is also very important to adequately provide for our loved ones.

The people involved with planning your estate is not necessarily the same people that are involved with providing you with a life insurance policy. So now the question is, when you pass away, who is responsible for your insurance policy – the executor of your estate, or the broker of your policy?

What are their roles?

Fully understanding who deals with your policy will be easier once we have clearly defined the roles of your executor and broker.

The executor of your deceased estate

The executor is responsible for administering your deceased estate once you have passed away. He/she is responsible for obtaining all the legal documents, like the death certificate and a list of all the assets and liabilities that are part of the estate. They are also responsible for reporting to the Master of the High Court through which they have been appointed. The executor has to make the death known to the deceased’s creditors and provide the opportunity to institute claims against the deceased estate. The executor is also responsible for closing the deceased’s bank accounts and opening new ones where the money of the estate will be kept. He/she has to determine how the liabilities are to be paid – is there enough money or must some of the assets be sold. The executor has to draft accounts for public inspection and lodge them with the Master of the High Court. If they are approved, the executor must pay the creditors and distribute the deceased estate accordingly.

Your broker

Your broker will organise and execute financial transactions on your behalf. Your insurance broker specifically works for you in purchasing the best policy that will meet your needs. They use their technical, legal and industry knowledge and experience to advise you on what your options are whenever you have to renew a policy or whenever a claim is filed against a policy.

How does your insurance policy factor into your deceased estate?

Certain policies and funds do not form part of your deceased estate – these include your retirement fund, living annuity, and business interest protected by a business assurance. Your life insurance policy can also rank among the policies not included in your estate in certain circumstances. As these do not form part of your deceased estate, they are not administered by the executor.

Your life insurance policy is usually deemed an asset in your deceased estate and thus forms part of payable estate duty. However, if the policy is recoverable “by the surviving spouse or child of the deceased under a duly registered ante-nuptial or postnuptial contract” it is not included in estate duty and not part of the deceased estate. In such a situation, the named beneficiary (spouse or child) is responsible for filing a claim with their broker who will then set the process in motion to have the insurance policy be paid out to them. This payment has nothing to do with the deceased estate, and the executor, responsible for administering the estate, is not involved with it at all.

If your estate is the named beneficiary, however, and there are several reasons why one would want to name your estate as the beneficiary, the policy forms part of the deceased estate, it is part of the calculation for estate duty as well as the calculation determining the executor’s remuneration. In this situation, the executor has to file a claim for the insurance policy to pay out. It is still, however, the broker that will actually deal with the claim and see to its payment.

Key takeaways

Ultimately, your broker will handle your life insurance policy and the payment thereof after your death once they have received a claim for it. The executor does not deal with the policy, though they might need to file the claim, depending on who the beneficiary is, and they might also need to deem the policy an asset in your estate when the estate duty or executor’s remuneration is calculated.

The relationship between your life insurance policy, estate planning, estate duties and executor’s remuneration can become a very complicated one, and it is best to have professionals assist you with your estate and life insurance planning. For the most part, though, the executor of your deceased estate will have little reason to deal with your life insurance policy as it is the named beneficiary of that policy that will deal directly with your broker (or insurance company).  

AED Attorneys understands that every situation is unique, and although they strive to ensure that the information contained herein is accurate at the time of publishing, it cannot be guaranteed to be without errors or omissions. As a result, AED Attorneys, its employees, independent contractors, associates or third parties will under no circumstances accept liability or be held liable for any innocent or negligent actions or omissions in this article, which may result in any harm or liability flowing from the use of or the inability to use the information provided.

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Valid Will

The importance of a valid will which is drafted correctly

There are some documents and contracts in your life that will simply be much more important than others. Your will is such a document. It is a document that becomes very important once you’ve passed away and also gives you the best chance to ensure your wishes regarding your estate are respected once you are no longer here. The importance of a will should never be underestimated, nor the requirements that need to be met to ensure that the will is valid and drafted correctly.

What a valid will can and can’t do once you have passed away

In its most basic form, a will indicates how you wish your estate to be administered once you have passed away – who inherits what. If you have a valid will, it cannot be ignored. However, there are laws in South Africa that also have to be followed and a will can only be administered in conjunction with these laws. These are The Administration of Estates Act 1965, The Wills Act South Africa 1953, and The Intestate Succession Act 1987 (only applicable if you do not leave a will behind or your will is invalid).

What it can do:

In your will, you can nominate the individual that you wish to administer your estate. This individual, the executor, will be responsible for ensuring that the will is honoured, and the estate distributed legally and according to the will to the extent that it is legal and possible. If you nominate an individual in your will, it is best to also discuss this with them as they have the right to not accept executorship.

Your will can further clear up any doubts about who is to inherit which assets and/or monies. The flip side of this is that you can, of course, do your best to ensure that your assets do not end up with people you don’t want to have them. If you have a prized collection of rare books, for example, you can stipulate that these should be inherited by your bibliophile grandchild and not another relative that you fear will only sell them. In South Africa, no individual has the right to inherit from a deceased estate and if, for example, you name one family member as a beneficiary and not another, there is very little they can do about it. There are exceptions to this, however, that we will get to when we discuss what your will cannot do.

If you still have minor children, your will can also serve as the final indication of who you name as their guardian. If this is not stipulated, the court will decide. When a valid will is in place, it will be easier and faster for your heirs to access their inheritance. In your will, you can also give gifts and charitable donations that will help to offset the estate tax that will have to be paid.

What your will cannot do

Your will cannot enforce conditional gifts that are illegal, immoral or against public policy or unreasonable to enforce, solve your estate’s insolvency, or exempt you from certain financial responsibilities.

If you name a beneficiary and you want a condition to be placed on that inheritance, it has to be reasonable. Let’s say you sponsor your grandchild’s tertiary education but only if they leave their current partner whom you disapprove of – this is not an enforceable condition. An enforceable condition could be that he/she maintains a certain average throughout their studies.

If your estate is insolvent, your death will not change this situation. Your will might be written without considering the estate’s insolvency, but the insolvent estate’s debts with its creditors have to be settled first. Only once this is done can whatever is left of the estate be distributed among the beneficiaries.

In addition to debt responsibilities that need to be seen to, other financial responsibilities also take precedence. A minor child, for example, can claim maintenance from a deceased estate as a parent’s support of their children is only terminated by the child’s death, not the parents’. If an individual did not make provision for their child’s maintenance in their will, the child’s claim against the estate will legally rank higher than any named beneficiary. Similarly, a spouse can also claim maintenance if he/she is unable to meet their maintenance needs by themselves, but only if the marriage was dissolved by the death of the spouse.

What makes a will valid?

The contents of a will mean next to nothing if the will itself is not valid and a will is only valid if:

  • The testator is 16 or older and mentally capable of appreciating the nature and effect of his/her act.
  • The will must be in writing – typed or handwritten. The person that wrote the will cannot be a named beneficiary.
  • Every page of the will is signed by the testator and competent witnesses.
  • The testator and witnesses must sign in each other’s presence.
  • A witness cannot be a named beneficiary or nominated executor
  • If the testator cannot sign due to a disability, they can nominate someone to sign on his/her behalf or make a mark (a cross or thumbprint). This manner of signing needs to be certified by a magistrate, justice of the peace, commissioner of oaths, or notary public that will also sign each page of the will.

If these requirements are not met, a will can successfully be contested because there was a failure to comply with the formalities or the testator did not have a testamentary (mental) capacity. A will can also be contested on the ground of forgery or undue influence.

When you want to draft a will or review your current will, it is best to have it done by professionals that have extensive knowledge of all the laws and requirements that have been touched on here. At AED Attorneys, we can assist you with drafting a will that will make it as easy as possible for your executor to administer it and your loved ones to inherit.

AED Attorneys understands that every situation is unique, and although they strive to ensure that the information contained herein is accurate at the time of publishing, it cannot be guaranteed to be without errors or omissions. As a result, AED Attorneys, its employees, independent contractors, associates or third parties will under no circumstances accept liability or be held liable for any innocent or negligent actions or omissions in this article, which may result in any harm or liability flowing from the use of or the inability to use the information provided.

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