Discussing matters of your death with your loved ones is never an easy conversation to have, nor is there ever an ideal manner in which to approach the topic. However, doing so can save your family, assets and estates in the long run. The following article discusses the critical importance of constructing, and regularly reviewing, your Last Will and Testament.
A client of mine, Walter, married his wife in 2000. As good citizens, he and his wife made each others sole beneficiaries to each others possessions, and assigned their parents as the inheritors thereof in the event of their death.
When Walter visited a few days ago, I asked him how many children he had.
“Two,” he replied.
“Do you love them?”
“Yes,” he replied, taken aback.
“Because should you and your wife pass away,” I replied, “your children are not mentioned in your current will.”
To account for a number of changes that may occur throughout the course of your life, it is important that you review your will periodically; roughly every two years.
Peter had fallen fatally ill and was in his final hours on his deathbed. During the course of his life, he had never drawn up a Last Will and Testament document. In his final hours, Peter had called upon his local Pastor to quickly draw up a will. Due to a long history of family feuds, Peter had declared in his will that his church would inherit everything. With this, the Pastor had signed as a witness. Shortly after his death, Peter’s estranged family contested the will and took the matter to court. As the Pastor was not liable to sign as a witness for Peter’s Last Will and Testament, the courts deemed the will as invalid, and the church suffered.
Not only is it imperative to have a Last Will and Testament, but it is also important to create one in the correct manner, along with the help of trained professionals, and with care. Purchasing and making use of a Last Will and Testament template from a stationer, or using a template found on the internet is not a good practice. Although these templates may appear to make the process easier, they have a number of extreme vulnerabilities that could seriously jeopardise your affairs.
A few of the common mistakes when drawing up a Last Will and Testament document include:
Have you reviewed your will?
As stated, it is highly recommended to review your Last Will and Testament periodically as changes in your life, and the lives of your beneficiaries should be documented. In the event that one of your beneficiaries passes away shortly after you, and you have not nominated substitute heirs, your belongings could devolve in terms of our intestate succession laws. For example, if you have left assets to either your son or daughter, and they pass away soon after you do, and they do not have children of their own, in the event of absent substitute heirs, your possessions will be at risk.
Is there enough liquidity available to settle claims against your estate and liabilities at death?
“Liquidity” refers to the value of cash or cash assets that are available. Following your death, if you have an amount of outstanding debt or claims in your name, your beneficiaries will have to settle these debts. In the event that you have not left an appropriate financial sum to cover these debts, your family members will be liable to settle any outstanding claims, and will either need to source additional cash funding or sell assets in order to cover these debts.
Where is your will stored?
In some cases, the latest will is not enacted because the executor or family members don’t know where their loved one has stored his or her last will. Following the death of a loved one, the family is filled with grief and during their mourning process, while funeral planning, will experience an array of overwhelming emotions. In this period, it might be difficult for them to recollect where you had mentioned you had kept your will, so make a point of informing your family members. In the event that your family members cannot locate your will, and there is no previously signed valid will, the deceased will die intestate. This can result in your assets being left to unintended beneficiaries.
What is your agreement with your business partners?
If you are a business partner, it is important to discuss the nature of the business with your partners, should you pass away. Here, it is necessary to consider whether a buy-and-sell agreement, key person insurance or other form of business assurance is required, and whether such in place. These arrangements may provide the liquidity for your business partner/s or co-shareholder to buy out your remaining shares in the business upon your death. Over time, as the value of the business increases, the business partners should agree on adjusted values and adjust the policy values accordingly.
It is highly recommended to seek the professional advice of a lawyer and/or financial planner when drawing up your Last Will and Testament. No one wants to think about, let alone plan for, their death, but doing so – in the correct fashion – could result in the safety and security of your family, dependents and loved ones.