Nobody wants to talk about death and dying, especially when no-one is dead or dying. It may sound flippant when it is put this way, but it is the truth. If COVID-19 has done one thing, it has made us face our human frailty, our mortality. It is never easy to find the right time to raise these issues and some superstitious folk will say ’NO! Don’t do it! You are inviting death into our house!’
We believe that NOT talking about death and NOT making provision for those who stay behind will bring more than ‘bad luck’ to bear on your family.
Let us look first at what happens when you pass away without a Will
In death, as in life, we (or at least what and who we leave behind) are governed by law. Without a Will, the law will decide how things are divided up. It is nothing personal, there is a formula that is applied. If your loved (or not-so-loved) ones feel unhappy about the division, there is nothing they can do.
The Gauteng Master of the High Court reported that only 23% of the estates under their jurisdiction were not contested. Family dynamics are often messy and tensions rise in times of grief. Relationship history differs as do individual circumstances and needs. Do you think the application of a one-size-fits-all formula is the best way for your family? You may have a partner to whom you are not legally married. There may be other adults or children in your life who depend on you, but who are not direct descendants or family members. They will be left out unless they are provided for in your Will.
The order of preference applied to the formula, if there is no Will:
- Children (including adopted children)
- Siblings (if one or both parents are deceased)
- Closest blood relative
The story does not start at the end, though
Wills may state what happens after you die, but it is shaped by how you lived: How you lived your life prior to meeting the partner of your dreams matter. Whether you had previous relationships and if you had children together is important. Whether you made others beneficiaries of policies should be kept in mind. Whether you have children who still need to complete education matters. How you got married counts …
We cannot stress enough how important it is to set up, review and amend your Will according to changed circumstances. Your Will should not be dealt with as something separate from your financial plan.
All of these episodes in your life will impact who gets what and how much of it in the end:
Debt: Assets – Debt = Sum of what you can give away
A common mistake people make when they draw up their Wills is to forget about their debt. You cannot give away more than you have. It is important to note that whilst it is best to get a lawyer to draw up your Will, it is not their job to make sure that what you want to do is possible!
You need a financial advisor to help you do the math!
If you got married in community of property, you can only give away half of your estate. Over the years, up to 11 different ways of getting married has been written into law. The law is likely to continue to evolve. Each of these has different rules. This is why you require the assistance of a competent team to make sure that what you want to happen, can and will happen.
No-one can prepare you for the joys of parenthood. No-one can prepare you for the financial impact, either. Many parents want to see them taken care of past the age of 18 or 21. They might also need ongoing assistance due to Special Needs. If you want to provide for them properly, it is important to discuss the following aspects with your financial advisor. We will also do a follow-up blog that will go into some of these in greater detail.
- Inheritance issues for minors
- Blended families (dependent and someone who lives with you)
- Dependency rights
- Special Trusts for children with Special Needs
- Education Funds
3. Medical Issues
Alzheimer’s and dementia – when you lose your decision-making abilities
One of the reasons why it is so important to review and update your Will regularly, especially if you are older, is the fact that you may develop Alzheimer’s or Dementia related to health conditions. These conditions usually develop slowly and you may not be aware of it at the onset. It is also difficult to recognize the symptoms yourself. You may seem to have greater clarity of thought on certain days. However, once you have been diagnosed with these conditions, you are not allowed to make changes to your Will, even should you wish to. Any decisions made after it has become clear that you do suffer from one of these conditions can be grounds for your Will to be found invalid or for it to be contested.
Things to think about
Below, we will discuss some additional issues that you need to think about when you finally sit down to write the Will.
- Updates and safekeeping – the who, where, what and how
Your Will should be reviewed and updated if needed on an annual basis. A neutral party, such as your financial advisor, is a good ally to include. Remember, legal people draw up the legal bits, financial people count the money to see that what you want will work out that way. A good financial advisor who actually advises and who isn’t just a salesperson will also get to know the ins and outs of your situation. They will be able to remind you when you need to change your beneficiaries so that your current partner, rather than your ex, inherit your vast fortune and the red Ferrari.
It is a good idea to leave a copy of the signed Will with the Financial Advisor
- If you want to leave it all to Fido
If you prepare a valid Will, you can give what belongs to you to anyone you want to. However, remember that claims for maintenance from dependents, whether elderly parents, a surviving spouse or children, trumps ensuring that Fido will have access to a personal dog walker and doggy massage therapist for the rest of his life. Your dependents can challenge your Will in court.
Just remember, Fido won’t live forever, so what happens when he passes away?
Something to be aware of, though, is that should you pass away without dependents or family and you have no Will, the Government will thank you… This is particularly relevant to older people, whose family members may have passed on before them. Consider bequeathing your money to a cause, like the SPCA, a children’s charity or a club.
- It’s their party, they can cry if they want to – or not
Nobody HAS to accept what you want to leave them. Heirs may refuse their inheritance as a mark of protest against the way you treated other family members. They may refuse it on the basis that they cannot maintain it or just do not have space for your precious memorabilia. It might be a good idea to discuss your intentions with your relatives. It may reduce fights.
- Keep it simple, but not TOO simple
It is true. You can buy a draft Will at a stationery store. It is also true that it is not a good idea. It is all in the fine print. Chances are you may miss an important instruction. One mistake and your Will could be considered invalid. Whether it is because you misspelt your second child’s name, crossed it out and didn’t sign against it or you asked someone with neater handwriting to fill it out for you, or maybe your witnesses cannot be traced … the list is long.
You could get a form from the bank or your insurance company. This is marginally better but still relies on the competency of the person typing up your Will. These individuals often do not have the legal and financial experience or training to ensure no mistakes are made. They tend to use a preset Will and cuts and pastes your information into it. If this person made a single mistake, the Will could be declared invalid.
There is also another catch: Insurance companies who act as Executors want and need to make money. This means that by default, their agents will reassure beneficiaries that they will find you the right policy to invest your money, when having a cash payout may have been of greater benefit. They will earn a commission on these new policies, which is why we consider it a conflict of interest.
- Avoid overly complicated language and structures
It is very difficult to understand the law and regulations that are involved and as has been pointed out, a mistake can make the whole Will invalid. The professional person who assists you in drawing up the Will needs to have experience in drawing up Wills and understand the legal and logistical issues. Choosing the right person for the job can materially impact your beneficiaries later.
- Build your team
Make sure that you speak to a financial advisor who is a team player and who won’t just sell you or your heirs policies. You don’t need to know everything, but you should know others who know a lot. Every so often, you need to make sure that they communicate with one another. As with all aspects of your financial planning, it is best to set up a team of professionals. The team may include a tax practitioner, estate planner, accountant and even a divorce attorney, medical specialist or a therapist. IF you are unsure of where to start, or you realise it is time to review matters, feel free to contact us at Northwood Financial Services cc. We are good at finance and we know people who know a lot about many things!