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Author: kevin Cartmell

What happens to my company if I die?

Death is inevitable, but it can also be unpredictable. If you are a business owner, you may wonder what will happen to your company if you die unexpectedly. Who will take over the management? How will your assets be distributed? What will happen to your employees and clients? Who will inherit your shares and assets? How will your death affect your employees, customers, partners, suppliers, and other stakeholders? These are some of the questions that you need to consider and plan for in advance, to ensure that your legacy lives on and your family is protected.

Business succession planning is the process of preparing for the transfer of ownership and management of your company in the event of your death, retirement, disability, or exit. It involves identifying and developing potential successors, setting clear goals and expectations, creating a legal and financial framework, and communicating the plan to all relevant parties. Business succession planning is not only important for you as a business owner, but also for your company and its future.

Without a proper succession plan in place, your company may face various risks and challenges, such as:

  • Loss of leadership and direction: If you die without appointing a successor or a team to take over your role, your company may suffer from a lack of leadership and direction. There may be confusion, uncertainty, or conflict among your employees, managers, or board members about who is in charge and what to do next. This may affect the performance, productivity, morale, and culture of your company.
  • Loss of value and reputation: If you die without transferring your ownership or shares to someone else, your company may lose its value and reputation. Your shares may be subject to estate duty or inheritance tax, which may reduce the net worth of your company. Your heirs or beneficiaries may not have the same interest or expertise in running your company as you did. They may also have different goals or visions for your company than you did. This may affect the quality, service, innovation, and customer satisfaction of your company.
  • Loss of continuity and stability: If you die without ensuring that your company can operate smoothly and independently without you, your company may lose its continuity and stability. Your company may face operational disruptions or difficulties due to the absence of your knowledge, skills, experience, or relationships. Your company may also face legal or financial challenges due to the lack of proper documentation or agreements. This may affect the cash flow, profitability, growth, and sustainability of your company.

To avoid these risks and challenges, you need to get good legal advice from experts who understand the complexities and implications of business succession planning. AED Attorneys specialises in estate planning and administration, as well as property matters. We can help you with:

  • Drafting or reviewing your will or trust to ensure that it reflects your wishes and intentions for your company
  • Setting up a buy-sell agreement or a shareholders agreement to regulate the transfer of ownership or shares in your company
  • Valuing your company and its assets and liabilities to determine the fair market value and tax implications
  • Identifying and developing potential successors for your role and responsibilities in your company
  • Creating a transition plan and timeline for handing over your role and responsibilities to your successors
  • Communicating your succession plan to all relevant parties such as your family, employees, managers, board members, customers, partners, suppliers, and other stakeholders

Examples of what could go wrong if you do not get good legal advice

You may encounter some problems or complications that could jeopardise the future of your company. For example:

  • You may draft a will or trust that is invalid, unclear, incomplete, or outdated. This could result in disputes among your heirs or beneficiaries over the interpretation or execution of your will or trust. It could also expose your estate to claims from creditors or other parties who may challenge the validity or legality of your will or trust.
  • You may fail to set up a buy-sell agreement or a shareholders agreement that protects your interests and rights as an owner or shareholder of your company. This could result in conflicts among co-owners or shareholders over the valuation or sale of shares in the event of death. It could also affect the continuity and stability of your company if there is no clear or agreed-upon process for transferring ownership or shares in the event of death.
  • It could reduce the value and attractiveness of your company if there is no guarantee or assurance for potential buyers or investors that they can acquire your shares or ownership without any hassle or dispute
  • It could create tax or legal liabilities for you or your estate if there are any discrepancies or inconsistencies between your will or trust and your buy-sell agreement or shareholders agreement.

To avoid these risks, one of the most important steps is to draft a will and set up a trust. A will is a legal document that specifies how you want your estate to be distributed after your death. A trust is a legal arrangement that allows you to transfer your assets to a trustee, who will manage them for the benefit of your beneficiaries. By creating a will and a trust, you can avoid the lengthy and costly process of probate, which is the court-supervised administration of your estate. You can also reduce the tax burden on your heirs and ensure that your wishes are respected.

Another crucial step is to appoint a successor for your business. This can be a family member, a partner, a key employee, or an outside party. You should choose someone who has the skills, experience, and vision to run your business successfully. You should also communicate your succession plan to your staff, clients, and stakeholders, so that they know what to expect and how to support the transition. You should also update your contracts, agreements, and insurance policies to reflect your succession plan.

It is important to consult with a professional legal service that specializes in estate planning and business succession. AED Attorneys offers a family-centered, open and friendly legal service to people who need understanding and sympathy in dealing with the administration of estates, as well as displaying competence and efficiency when handling property matters. We can help you draft your will and trust, administer your estate, transfer your property, and advise you on the best way to structure your business for tax purposes, and ensure that it complies with the relevant laws and regulations.

By planning ahead, you can ensure that your company survives and thrives after your death. You can also protect your family’s financial security and peace of mind. Don’t leave it to chance or fate. Contact AED Attorneys today and let them help you create a lasting legacy for your business.

What can I do if I am a new owner and there are problems with the electrical compliance certificate?

If you have recently bought a property in South Africa, you may have received an electrical compliance certificate (ECoC) from the seller. An ECoC is a legal document that verifies that an electrical installation is compliant with the legal requirements as stipulated in the Electrical Installations Occupational Health and Safety Act of South Africa. The ECoC is only valid for two years after issue or until such time as alterations or additions are made.

An ECoC is compulsory in South Africa for several reasons, such as:

  • To ensure the safety and protection of people, animals, and property from electrical hazards such as shocks, fires, or explosions.
  • To prevent or minimise the risk of damage or loss due to faulty or illegal electrical installations.
  • To comply with the regulations and standards that govern the design, installation, maintenance, and inspection of electrical installations.
  • To facilitate the transfer of ownership or responsibility of electrical installations between parties such as sellers, buyers, landlords, tenants, or contractors.
  • To enable the enforcement and monitoring of electrical installations by authorities such as the Department of Labour, SABS, Eskom, or municipalities.

According to the Electrical Installation Regulations of 2009, an ECoC is required for:

  • Any new electrical installation
  • Any addition or alteration to an existing electrical installation
  • Any change of ownership of a property with an existing electrical installation
  • Any inspection required by an inspector or supplier
  • An ECoC must be issued by a registered person who is qualified and authorised to perform electrical work and inspections. The registered person must also be in possession of a valid wireman’s licence issued by the Department of Labour.

Don’t risk your safety or liability by neglecting or ignoring your ECoC. AED Attorneys specialises in estate planning and administration, as well as property matters. We can help you to find a registered person who can issue an ECoC for your electrical installation.  

However, what if you discover that there are problems with the electrical installation or the ECoC after you have taken ownership of the property? For example, what if you find out that the ECoC is outdated, incomplete, fraudulent, or does not cover all the electrical work on the property? What if you encounter electrical faults, hazards, or defects that pose a risk to your safety or property? What are your rights and responsibilities as a new owner in such situations? According to the law, the seller is responsible for providing a valid ECoC to the buyer before transferring ownership of the property. The seller is also liable for any damages or losses caused by a defective or non-compliant electrical installation. Therefore, if you are a new owner and you encounter problems with the ECoC or the electrical installation, you have several options to pursue:

  • You can contact the seller and request them to rectify the problems or provide a new ECoC at their own cost.
  • You can contact the electrician who issued the ECoC and request them to rectify the problems or provide a new ECoC at their own cost or if he fails you can report them to the Electrical Conformance Board (ECB) or their professional body for misconduct or negligence.
  • You can hire another qualified electrician to inspect and repair the electrical installation and issue a new ECoC at your own cost.  This can only be done after you have requested the electrician that attended to the inspection initially to rectify any defects or problems.

What will happen with my Cryptocurrency when I die?

There are more than 800 cryptocurrencies that you can use to make purchases online, send money to friends and family, or get paid for your work. But what happens to your wallet when you pass away?

As cryptocurrency grows in popularity, you need to make sure you bring these into your estate planning, make a trusted person aware of the fact that you own such currency, and how to find they can find it. After your death the fate of your cryptocurrencies will depend on several factors, such as whether you have made provisions for their transfer or disposal in your will or other legal documents. In South Africa, cryptocurrencies are not yet explicitly regulated, and there is no specific legislation governing the inheritance of cryptocurrencies. However, cryptocurrencies can be considered assets or property, and their distribution can be governed by South Africa’s laws of succession.

The executor of your estate will also be responsible for managing and distributing cryptocurrencies according to your will. If you have not made any specific provisions, your cryptocurrencies may be treated as part of your estate and distributed according to the laws of succession. It is best to make provisions for the transfer or disposal of your cryptocurrencies in your will or other legal documents to ensure that they are handled in accordance with your wishes. You need to ensure that your bitcoin is identifiable and accessible for your executor and beneficiaries. The ‘keys’ are crucial for transferring ownership or spending your bitcoin. It is therefore important that the keys need to be protected and practically dealt with by your executor. If a key is lost or no longer accessible, then, in essence, you will have lost your bitcoin. You may want to consider storing your private keys and other relevant information in a secure location and informing your beneficiaries of their existence to facilitate the transfer of your cryptocurrencies.

If you have inherited cryptocurrency from someone, there are a few steps you should take to ensure that you have control over the assets and that they are secure:

  • Familiarise yourself with cryptocurrency: If you’re not familiar with cryptocurrency, it’s essential to educate yourself on the technology and how it works. You can start by researching the specific type of cryptocurrency you inherited, how it’s stored, and how it’s traded. Cryptocurrency is a digital currency that creates a new way to pay and receive money, using encryption techniques to regulate and verify the transfer of funds. Encryption aims to provide security and safety, by implementing cryptographic methods that involve the solving of complex mathematical problems and stored in digital wallets. You save virtual coins in your digital wallet, on your phone or computer. This also makes it easy to transfer money anywhere in the world because there are “no borders between countries” where cryptocurrencies are concerned. The first decentralised cryptocurrency was Bitcoin, and was soon followed by many other cryptocurrencies, such as Litecoin, Ethereum, Monero, and Zcash.
  • Secure your cryptocurrency: Once you understand how the cryptocurrency works, you should ensure that it’s secure. You can do this by setting up a secure wallet, which is a digital storage system for your cryptocurrency. Make sure to keep your private keys safe, and never share them with anyone.
  • Determine the value of your cryptocurrency: To understand the value of your cryptocurrency, you can check online exchanges or consult with a financial advisor. You should also be aware of any tax implications associated with your inherited cryptocurrency.
  • Decide what to do with your cryptocurrency: You can hold onto the cryptocurrency as an investment, trade it for another cryptocurrency or traditional currency, or use it to make purchases.
  • If your financial advisor was not aware of this when assisting you with your estate planning and the drafting of your will, it could increase the cost of executors’ fees and estate duty. This could also impact negatively on any liquidity calculations performed during the estate planning process. Because of the anonymous nature of cryptocurrencies, it could be difficult for your executor to trace your holdings and properly account for them unless you have ensured that your executor and/or family members are aware of your holdings and how to access them. Backing up your wallet on an external hard drive and transcribing all access details for the wallet is a practical option to ensure that your executor and loved ones have access of your cryptocurrency.

Get in touch with AED Attorneys to explain the legalities with you, and to make sure that you update your will to include your cryptocurrency. Cryptocurrency will be assets in your estate and can be dealt with to an extent in your will.

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 am named as the legal guardian of my brother’s children. What are my obligations?

When your brother asked you if he could name you as the guardian of his newborn, you felt proud and excited beyond words.  But have you considered what it actually means in terms of our law to be a guardian?

If you are named as the legal guardian of your brother’s children in his will, it means that you would have legal responsibility for the children’s care and upbringing, should both parents pass away. This would include making decisions about the child’s education, healthcare, and general welfare, as well as providing for the child’s basic needs, such as food, clothing, and shelter. In addition to these responsibilities, being named as the legal guardian would create financial obligations, which would depend on a number of factors, such as the age, needs and expenses of the children, and the financial resources that you have available.

Usually children are entitled to receive financial support from their parents’ estate, such as from life insurance proceeds or other assets. However, if these resources are not sufficient to cover the children’s needs, you as the guardian may be required to provide additional financial support, depending on the applicable laws and court decisions.

In South Africa, guardianship is governed by the Children’s Act of 2005 and the Mental Health Care Act of 2002. These laws impose certain parental rights and responsibilities upon parents and guardians. A guardian would be appointed by the court to make decisions on behalf of a minor or incapacitated adult, who is known as the ward. Guardianship refers specifically to the legal relationship between a guardian and a minor, or an incapacitated adult. Guardianship of minors refers to the legal relationship between a guardian and someone younger than 18.

On a day-to-day basis, the care of a child means the safekeeping and protection of that child, provision of daily needs (food, shelter), emotional and financial support. As their guardian you will be responsible for the maintenance, care and upbringing of the children, and will have the authority to make decisions on their behalf. Your role will be to assist the child in all ways, including medical treatment and legal, administrative, and contractual matters.  It can also include refusing consent when it comes to a child’s marriage, adoption, removal or departure from South Africa and even an application for a passport or consenting to the sale of a child’s immovable property.

Legally, the High Court is the upper guardian of all children in South Africa, so if someone believes that a guardian is not fulfilling their required duties, under certain circumstances the High Court can intervene and terminate guardianship. The best interests of the child are always of the highest importance so the child’s well-being and ability to thrive as it applies in your particular situation, would be taken into consideration. Since families and situations are different, decisions are made on a case-by-case basis, and factors such as the relationship between you and the child would also be considered.

Remember that being named as a legal guardian in a will does not necessarily mean that you are obligated to take on this responsibility. If you do feel that you will not be able to care for the child, you may decline the appointment as guardian, and the court would then look for an alternative guardian for the child. It is advisable to obtain the services of a legal professional to guide you through the process especially if you have children of your own, or are not sure what the legal implications would be. AED Attorneys can assist you to ensure that every child’s interests are taken into consideration and that your documents are updated to make provision for a potential new addition to your family.

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.

Child Maintenance Will 

When you become a parent, you automatically have the obligation to look after the child, as set out in article 27(2) of the Convention on the Rights of the Child (1989). This is known as “a common law duty” and is set out in more detail in Section 15(3)(a) of the Maintenance Act (99 of 1998). The primary duty of parents would be to provide financially for their children from birth until the child becomes self-supporting, regardless of whether the child was born lawfully or out of wedlock. If one of the parents dies, the surviving parent is primarily responsible for raising the child. In principle, the obligation of a parent to support a child only ends in the instance of the child’s death (and not by the parent’s death), since a child has a right to claim maintenance from the deceased parent’s estate. Such a claim has priority above any other bequests.

If the deceased parent’s estate is not enough to cover the child’s support, or if there is no estate and the remaining parent is unable to support the child, the duty of support could be extended to the child’s grandparents. South African law places an obligation on siblings to support each other. This means that if the remaining parent or the grandparents are unable to support the child and there is not enough in the estate either, the siblings will have to support the dependent child. A sibling must be destitute when claiming support from siblings, and the extent of the duty will depend on the respective means of the siblings.

A guardian could be appointed by the court to make decisions on behalf of the child. In South Africa, guardianship refers to the legal relationship between a guardian and a minor (or incapacitated adult). Guardianship of minors refers to the legal relationship between a guardian and someone under the age of 18. The guardian would be responsible for the maintenance, care and upbringing of the child and has the authority to make decisions on their behalf.

South African law recognises the right of every child to an adequate standard of living. This means that appropriate measures (such as grants) must be made available to assist parents and other people responsible for the maintenance of the child according to this said right to an adequate standard of living, which also applies where either one or both parents have passed away and there is no other responsible and financially able person to support the child.

There is no single or specific law that authorises courts to grant an order that would oblige the state to provide support to children in need of maintenance. The implication is that government institutions have discretion over the decision to provide children’s grants. However, art 27(4) of the Convention on the Rights of the Child does oblige state parties to “take all appropriate measures to secure the recovery of maintenance for the child from the parents or others responsible for maintenance”. This means that Government could use both national and international measures to secure the recovery of maintenance for needy children. For this purpose, the maintenance laws and maintenance courts can assist in the implementation and enforcement of maintenance orders. Legislation include Case Law and:

  • The Constitution
  • Convention on the Rights of the Child
  • The Children’s Act 38 of 2005
  • The Maintenance Act 99 of 1998

Section 15(1) of the Maintenance Act states that child maintenance is the common law obligation of both parents (section 15(3)(a)). Maintenance will be distributed between the parents in accordance with their respective financial means.  The following four requirements should be met:

  1. The court should have the authority to hear the matter;
  2. There must be a legal duty for child maintenance;
  3. The child to be maintained must be in need of support; and
  4. The person responsible for the maintenance must have the means to do so.

If one of the above requirements is not met, the court will not grant an order of maintenance.

The Constitution provides that every child has the right to parental or family care, or to alternative care if the child had to be removed from the family environment. It also states that a child has the right to basic nutrition, shelter, basic health care services and social services, with the best interests of the child are of paramount importance in every matter concerning the child. The criteria for determining the best interests of the child will apply in each instance, including a child’s right to maintenance.

The Convention on the Rights of the Child was ratified by South Africa in 1995. Article 3 provides that the best interests of the child shall be a primary consideration in all actions where children are concerned, whether undertaken by public/private social welfare institutions, courts of law, legislative bodies or administrative authorities. This means that special maintenance grants from the state children who are in need of support may be eligible for.

In instances where a child has a maintenance claim against the estate, the Maintenance Act does not provide for such a right/claim and cannot be relied on. Under such circumstances, children whose parents have passed away will not have protection under the Maintenance Act. These children will, however, be automatically protected according to general South African law, in which case a maintenance claim can be lodged against the executor of the deceased parent’s estate.

The Children’s Act covers almost every aspect relating to children. It sets the principle of “best interests of the child” and describes the parental responsibilities and rights a person may have in respect of the child, including the right to care for the child and to contribute to the maintenance of the child.  The Children’s Act empowers the children’s court to issue a contribution order against the parents of the child, which functions in effect the same as a maintenance order. This Act read with the Maintenance Act stipulates that both parents have an obligation to support their children in accordance with their respective financial means. The Children’s Act further brings South Africa’s child care and protection law in line with the Constitution.

In the instance where a child is claiming maintenance from a deceased parent’s estate, or should a dispute arise between the surviving parent and the executor representing the deceased parent’s estate about the amount of maintenance to be paid, the matter will have to be resolved by an independent professional before it goes to trial. Ultimately, after considering all relevant circumstances, the court will base its decision on what it believes is in the child’s best interests. We recommend that you obtain the services of a legal professional to guide you through the process. AED Attorneys can assist you in getting the paperwork right, handling the estate and ensure that the child’s interests are taken into consideration.

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.

What is a Probate Process? 

The English noun “probate” derives directly from the Latin verb probare, which means to try, test, prove, or examine.  In legal terms, probate is the process completed when someone leaves assets to distribute after their death, such as possessions, real estate, bank accounts and financial investments. Probate is the general administration of a deceased person’s will or the estate of a deceased person without a will. England and South Africa have very similar probate processes, and South Africa is recognised under the UK’s Colonial Probate Act. In South Africa the terminology is slightly different in regard to certain probate documents. For example, the equivalent of the British “Grant of Probate” is called a “Letter of Executorship”.

A Letter of Executorship is issued by the Master of the High Court, when an estate has a value above R250 000 and serves to confirm the appointment of the executor. Under normal circumstances, the Master can take up to 6 weeks to issue an appointment letter provided that all the correct and relevant documents have been submitted.

A Letter of Authority confirms the appointment of the Master’s Representative and can be issued for an estate with a value less than R250 000, according to Section 18(3) of the Administration of Estates Act. A Letter of Authority empowers a person to administer the deceased estate without following the full procedure set out in the Act, leading to an informal and more cost-effective estate administration process will be followed.

An executor is commonly named in the will or an administrator, if there is no will, to complete the probate process. This involves collecting the deceased’s assets to pay any remaining liabilities on their estate and distributing the assets to beneficiaries.  The probate process, which formally allows the distribution of a decedent’s assets, can be time consuming, but when you have a valid will in place, the probate process can usually move more quickly than without a will. The process can be time consuming and may leave your heirs with higher court costs and legal fees than would be the case if you had a will.

You have a few options, like establishing a trust, having a Living Will, granting Power of Attorney, and setting up a Health Care Proxy to consider.

  • A Trust is an entity with legal authority to manage your assets and distribute them according to your wishes. You will appoint a trustee to oversee the trust.
  • A Living Will acts as a type of healthcare directive to instruct your doctors and loved ones on how to handle medical decisions, should you ever become incapacitated.
  •  A Power Of Attorney is a document authorises someone to act on your behalf and is used in cases where you are unavailable or unable to make decisions.  A ‘durable’ power of attorney means it survives your incapacity.
  • A Health Care Proxy is also known as as “a health care power of attorney”, and allows you (as a patient) to appoint an agent to make health care decisions on your behalf, should that become necessary.

Distribution of your possessions and assets could be relatively uncomplicated if your spouse is the sole beneficiary, but if you wish to give some money to a few charity organisations and then have the balance divided among relatives and friends, you will need to involve a competent legal professional to ensure that your wishes are carried out without ambiguity.

Apart from potentially speeding up the probate process, a will has the following benefits:

  • Assign guardianship. A will allows you to decide who takes responsibility for your children and pets.
  • Tax implications. The value of what you give away can help minimize estate taxes.
  • Peace of mind. With a will in place, family conflict can be minimised.

Remember that a will should be revisited from time to time, especially in cases where life events change your circumstances. These would include at least the following:

  • Acquiring or selling a large asset (a vacation home, valuable artwork, etc.)
  • When you get married or divorced
  • Having a child, or when your children leave home or pass away

Everyone can benefit from a will, regardless of their assets. Not everyone needs a complex will or formal estate plan, but if you have fairly extensive assets or complex plans for distributing your property, you may want to seek out professional help to draft the documents. Individual financial circumstances and preferences vary widely and often don’t match up to pre-determined templates or forms that are freely available on the internet so it is best to work with attorneys that are experienced in their field. The team of experts at AED Attorneys can advise your family on the process, assist you in getting the paperwork right and give you peace of mind that your last wishes will be carried out as you have intended.

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.

Letter of Instruction in Estate Planning: What It Is & Why You Need It 

For those unfamiliar with the process, estate planning seems like “just another difficult and arduous legal procedure”. The thought of distributing your property when you are no longer there, is difficult to imagine. There is an easy way to ensure that even the most complex inheritance documents translate accurately and are represented as intended: A Letter of Instruction.  

A Letter of Instruction, also called a Letter of Intent, has the purpose of clearly communicating the intentions of the deceased to the executor (or anyone else who may need to interpret the contents). Such a document supplements the will as a step-by-step guide on how to proceed with estate planning or clarify some detail that was left out of the will.

For example, anyone who receives a Letter of Instruction upon death should know how to proceed with handling of the estate. The final Letter of Instruction should outline the executing the will and also specify who will receive specific or sentimental items. The Letter of Instruction serves as a key to translate the will.

In addition to supplementing a will, the letter also serves as a way for you to express your last wishes in a more personal format. The Letter of Instruction does not have to follow the same rigid structuring as many of its legally binding counterparts, as it has no legal authority in itself, and is not a public document. Because a Letter of Instruction is more personal, such a document usually provides some comfort for the family and simplify the inheritance process for any heirs who may not be familiar with the legal terminology associated with estate planning. Although the executor does not require a Letter of Instruction in order to proceed, such a document will serve as a guide to follow in instances of ambiguity.

Since this is a document without any legal ramifications, there is no prescribed format for a Letter of Instruction. Some contain detailed instructions on how to proceed with the Will, while others simply provide general guidelines to follow, for instance what to do with sentimental items, pets or donations.

The benefits of a well-crafted Letter of Instruction greatly outweigh the drawbacks of not writing one. The natural flexibility and non-legal nature of these letters imply that there is no right or wrong way to write them, but there are a few unwritten rules that you should take note of. Apart from a comprehensive list of all the assets in your possession and instructions for how the executor should disperse these assets, your Letter of Instruction should include the following:

  • A list of each account beneficiary and their contact information
  • Any papers pertaining to your marriage status and/or citizenship
  • Where to find important documents (tax returns, birth certificates, Title Deeds, etc.)
  • The contact information of creditors or policy holders (mortgage, car loan, insurance policies, etc.)
  • The contact information of previous attorneys, accountants, brokers, financial advisors, etc.
  • The date and your ID number
  • The location of any assets that are not easily accessible (including safe deposit boxes and their keys)
  • The login credentials pertaining to any financial accounts you may have (passwords, PIN numbers, account numbers, etc. So make sure the letter of instruction is in good hands.)

A Letter of Instruction looks somewhat like a Will in the sense that they both delegate instructions on what to do with assets and who gets them. However, a Letter of Instruction is not a legal document while a Will is enforced by law. For this reason you should not include the distribution of any assets in a Letter of Instruction that are not already included in the Will. Your Letter of Instruction may be incorporated to enable understanding of the process better and can include burial arrangements or guidance on the memorial service. The addition of a letter of instruction to your Will could expedite the estate planning process and, in addition, you can rest assured that your wishes will be carried out exactly as you have intended.

Most people do not know how to write a letter of instruction (or may feel uncomfortable doing so) and feel more confident if you enlist the services of a qualified professional, such as AED Attorneys for guidance. We know exactly where discrepancies are most likely to arise and are more than equipped to help you address them. AED Attorneys can assist you in getting the paperwork right, and handling the estate.

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.

Can you inherit debt? What happens to the debt in a deceased estate?  

Many people are concerned that they may be liable for their spouse’s debts if the spouse dies and the liabilities of their estate exceed the assets. The short answer is no: heirs do not inherit the debt. If the estate is insolvent all the assets of the estate become liquidated and divided among the creditors. It sounds relatively straight forward but there are certain exemptions and practicalities that one should be aware of. An estate includes all the assets and liabilities, including the debts, property, vehicles, furniture, and the money in your bank account. The assets are used to pay off your outstanding debt before heirs receive their share of the inheritance. In brief, debt is handled as follows:

  • The executor of the estate’s main task is to trace the assets and pay off all debts and liabilities before distributing the remainder to the beneficiaries as stated in the will.
  • If an individual has debt on their assets when they die (e.g. a student loan, vehicle, or house), the loan or financing agreement must still be honoured. Their heirs are not directly liable for the debt, but creditors can prosecute the estate for the full payment (unless the loans were assured). Assets can be used to pay the outstanding amount, but persons who have signed surety for the deceased can become responsible for the debt.
  • When a taxpayer dies, the executor of the estate is required to submit the outstanding tax returns up to the date of death of the deceased person. The executor needs to ensure that the necessary documents are furnished to SARS to be updated.
  • Secured debts are debts that are secured against certain assets, for example when money is borrowed and the property is used as security.  If a debt was not insured (eg credit cards and personal loans), there is no specific asset that can be taken back and sold and the bank has to get a court order that valuables from the estate may be repossessed and sold to pay off the debt.
  • If spouses or business partners have co-signed for debt, it is the responsibility of all parties whose names are listed on the account to settle the debt. If one of the partners dies, their estate can be used to pay off part or all of the debt. If the deceased’s estate has insufficient assets, it will be liquidated and the other account holder(s) will be liable for all outstanding debt.
  • If you are a guarantor on a loan, it will become your responsibility to make the repayments.
  • If you were married within community of property and your deceased partner’s estate is insolvent (i.e. your joint estate), all assets of the estate will be liquidated so that the proceeds can be divided between the creditors. You shall therefore also lose everything from the joint estate, but at least you won’t inherit the debt or have to pay anything toward the deficit.
  • Once the executor has finalised all the administration in the deceased estate, the remaining assets, after paying all the debts, will be distributed to the beneficiaries.

AED Attorneys shall ensure that there are no ambiguities in your will and that your estate is distributed exactly as you have planned.

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.

To Do or Not to Do: Shall I purchase property in a trust? 

The word “trust” in a legal sense, originated from the Latin word fiducia, meaning “confidence, courage, security”, and also translates to “pledge” or “guarantee” which indicates a concrete sign of commitment. The Latin word fides, means “faith, conviction, belief” which is more of a reliance without guarantees. This makes us wonder if it could be safer for you to hold property in a trust than in your own name, in which case it forms part of your estate.

Interestingly, the verb that most commonly indicates the beginning of a relationship is “I give you my trust” and the verb that marks the end is “I have lost my trust in you”. So what do you have to give and what is there to lose? Personal circumstances would have an influence e.g. whether you are prone to risks of insolvency, whether your personal income tax rate is already high and if there is a history of mental illness in your family. Let us look at the options that you have when investing in property, and how buying it in a trust could benefit you.

WHAT IT MEANS

  • “Perpetual succession” means that a trust does not “die” and is therefore not liable for estate duty, transfer duty, executor’s or conveyancer’s fees, or capital gains tax (CGT) that might otherwise happen on the death of an owner.
  • A trust is a legal entity that holds assets for the benefit of beneficiaries, on behalf of its founder(s).
  • A trust is not liable for estate duty, transfer duty, executor’s, or conveyancer’s fees.
  • There are administration costs involved in setting up a trust, and it is taxed at the top marginal rate.
  • The founder tasks a trustee or trustees with the management of the trust’s assets for the benefit of one or more beneficiaries.

TO DO (THE PROS)

Property registered in a trust does not form part of your personal estate and is thus protected from creditors. Upon your death, the property would not be wound up in your estate subject to various costs such as estate duty, capital gains tax, executor’s fees, transfer duty (subject to the relevant exemptions), and transfer fees.

Your trust and the property registered therein will not be affected by your death.  If your heirs are beneficiaries of the trust, it should not be necessary to transfer the property into the name of the heirs.   If old age or an illness prevents you from managing your affairs, the trustees would be able to sell the property if need be without your family having to undergo a High Court application to apply for a curator to manage your affairs to sell the property.

Income from the trust’s property is for the trust, and expenses such as repairs, maintenance, water, and rates bills are also for the trust’s account. In the situation where you struggle with an age-related illness to the extent that you are no longer capable of managing your affairs, the property owned by the trust would ensure that your illness does not affect the management of the property.

Having property registered in a trust rather than your own name means the value of your personal estate is reduced, which lessens your estate duty exposure.

If a property is tenanted, the trust will produce an income that would be taxed at a 45% rate. The trustees have the authority to distribute the profits to the beneficiaries to minimise the tax implication. The beneficiaries would then pay tax on such distributed profit according to their own personal tax rate (which would be lower than 45%, depending on your annual income).

NOT TO DO (THE CONS)

There are setup and administration costs involved.

Problems may occur if the trust is not properly established or managed. The trust will be a separate taxpayer, meaning the cost of another tax return. 

If you lend money to the trust, you will have to charge interest at the SARS rate.

If the property is tenanted, the rental would be considered an income earned by the trust which would be taxed at a rate of 45% (whether the rent income is substantial or not). If the property is sold, the capital gains tax percentage is far higher than if the property was owned in your personal capacity. If you utilise the property as your primary residence but it is owned by the trust, there are provisions available but the relevant costs involved could prove the exercise impractical.

If the trust requires finance to purchase property, financial institutions are reluctant to give 100% mortgages. Procedures are far more complex if there is a default in payment, so banks require one or more of the trustees to stand surety for the loan. If the person who signed surety dies, the banks could submit a claim and subsequently sell the house to settle the outstanding bond if the estate does not have sufficient equity. The balance would be paid to the estate.  There is no quick yes or no answer to the question “to do or not to do” when  it comes to trusts, so it is best to make use of expert tax consultants or property practitioners to help you make the right decision taking into account your circumstances and goals. Whether purchasing a property for a trust or in your name, AED Attorneys can advise you about choosing the right option, and assist you in getting the paperwork right.

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.