Know Your Money with Bronwyn Waner and Craig Finch
Know Your Money with Bronwyn Waner and Craig Finch
114. The Hidden Urgency: Why Your Will Matters Now
What happens to your money when you die? Most people don't realize that upon death, bank accounts are frozen, property transfers take time, and assets remain locked for on average a minimum of six months while the complex estate administration process unfolds. This eye-opening conversation with Jakes Myburgh from Waks Attorneys reveals the critical importance of having a properly executed will and understanding the estate administration process.
Jakes walks us through the legal requirements for a valid will according to the Wills Act - it must be in writing, signed by the testator (who must be at least 16 years old), and witnessed by two people (at least 14 years old). We explore the vital role of executors who oversee estate administration, charging a 3.5% fee plus VAT on the total estate value, and why appointing the right executor matters more than most realize.
The discussion takes a fascinating turn when we unpack the actual mechanics of what happens after death - from the mandatory reporting to the Master of the High Court, to advertising for creditors in newspapers, completing final tax returns, and preparing a Liquidation and Distribution account. This process, which typically takes six months minimum but can stretch to years, creates a financial black hole during which beneficiaries cannot access most assets.
Perhaps most valuable is our examination of strategic estate planning solutions that can protect loved ones from financial hardship during this waiting period. We contrast assets that must go through the estate process with those that bypass it entirely through beneficiary nominations - highlighting how life policies, retirement annuities and properly structured investments can provide immediate financial relief to family members when they need it most.
Whether you're building wealth or already established, this conversation provides essential knowledge about protecting your legacy and ensuring your assets reach your loved ones efficiently. Don't wait until it's too late - proper estate planning isn't just about distributing wealth, it's about preventing unnecessary hardship for those you leave behind.
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Speaker 1:Hello viewers. Today we have Jakes from Wax Attorneys, who's going to help us understand the importance of having a will. Jakes, do you want to introduce yourself and tell us a little bit about you?
Speaker 3:Hello and thank you for having me today. I'm Jakes Myberg from Wax Attorneys. We are a firm based in Randberg, greenside and, as Bronwyn has said, we will be looking into the importance of having a will.
Speaker 4:Hi, Jax. So maybe you could just start with telling us what is a will and what's the importance of having one.
Speaker 3:A will is a document that you execute while you are still alive. I mean, after that, that it will be pointless. It's important, while you are alive, to execute a will where you will stipulate exactly how your estate will be devolved. So that is how you're going to be, how your will will be devolved, with your heirs, that's, your family members sons, daughters, wife, mothers, sisters, whoever you want your will to be executed or to be devolved to. So beneficiaries of your office your beneficiaries, yes.
Speaker 2:So, jakes, do you need it in writing? I mean, do you have to write it down and do you have to sign it? What happens if you can't write it or you want? You still want the wishes to be executed, as you said. What happens then?
Speaker 3:so in our law we look at, we look at the wills act that now that's uh, when, when you have executed the will and, in terms of the wills act, there are certain formalities that you need to follow.
Speaker 1:And what are those?
Speaker 3:Those formalities are you need to be 16 years of age. Once you are 16 years of age, anyone can execute a will, have a will drafted up, and it needs to follow the rules as per the Wills Act, and that stipulates that you need to have it in writing. You need to have two witnesses present Anyone that's 14 years and older can be a witness to your will and it needs to be signed by the test data. Now, the test data is you and me and anyone else that wants to draw up and have a will executed, and that's just and dated.
Speaker 1:Right, it needs to be dated.
Speaker 3:But it doesn't necessarily have to be dated. As long as the wishes of the test data is there and it has been signed by the test data, then that will be valid. But yes, we would say that it needs to at least be dated, but that's not really a formality.
Speaker 1:So in my opinion, if you don't date it and you have more than one will, it can be quite difficult to revoke a previous will.
Speaker 3:It could have its implications's. That's where you will then need to. If, after you've died, then that's uh, your beneficiaries or the executor will then have to go to court and say, uh, all the previous will, because normally the last will which I mean if you have dated it or not dated, it could have been signed on your deathbed or anywhere else, and it was just really, you know, an urgency, but the will needs to. You need to make sure that all the formalities have been followed, but it's not necessarily that it needs to be dated.
Speaker 4:You said executor, what is an?
Speaker 3:executor. An executor is the person that looks after your estate, so the executor gets appointed in terms of your will or in terms of the act. Can you appoint anybody as an executor. You can appoint anyone. Normally you would appoint a family member or someone that has a financial background. Will?
Speaker 3:the master accept it. The master will accept. If it isn't your will, it will be accepted. But if you appoint a family member, the master will need to see that you are capable of executing the will in terms of the wishes and that you have the expertise. Sorry, Jax, what's the master? The master of the High Court is a person that sits in Johannesburg or Pretoria or other offices and they oversee the whole administration process, Right? So the master is essentially the overseer of anything estate-related the administration of the estate.
Speaker 2:So, Warren, people say I don't have a will, the government's going to take all of it. It's not true. The master controls. Well, make sure that all those formalities are properly in place and that the right people inherit your estate. The master makes sure that it gets carried out. Assuming you have a will.
Speaker 1:Yes, we'll talk about not having a will because that's another scenario, right?
Speaker 2:But the master is sort of the policeman to make sure that what I write in my will goes to the right people.
Speaker 4:Okay, that makes sense. You've got to have somebody to control it. Assuming we have a will yeah, we're assuming now you have a will. What I've heard before is that executors take fees. Correct.
Speaker 3:The executor takes a fee. It's been prescribed in the administration of the Seize Act that an executor can take 3.5% on the entire.
Speaker 1:Flat spat.
Speaker 3:Yes, so on the entire estate they can take 3.5%. So that's not.
Speaker 4:It could be quite a significant amount of money if it's a wealthy individual who passes, and why so? Then why doesn't everyone just make a family member an executor?
Speaker 3:Because, like I said previously, family members don't have the necessary expertise. So normally they would just say I will appoint an agent or an attorney or someone else that knows how to deal with wills, because it becomes quite complicated.
Speaker 2:I think the master can also refuse that family member if that family member is not able to show that they can administer the estate. There's things like tax has to be sorted out, transfer of properties. There's advertising in the newspaper. There's a lot of steps that an attorney like Jake's has to go through to make sure that the you wrap up the estate. But there's a balance sheet that needs to be completed properly. There's a whole lot of steps that if you're just a family member, you don't just arrive at the master and say, hello, I'm here. You got to make sure you know how to do that administration job. It's very involved.
Speaker 3:You see, after a person has passed on, you have 14 business days to go to the master and tell the master the person has passed. So there's forms that need to be completed and those forms can be downloaded from the department of, from the judiciary's website, and that needs to be filled out, taken to the master to register the death and upon from that the master because you will have beneficiaries that will appoint someone as the executor, as a family member. The master will look at that and then will make a decision whether the executor as nominated will be appointed. But in estates we have two ways of appointing someone. The one is letters of authority. That's for any estate less than 250,000. And for estates more than 250,000, that's where they need letters of executorship, so anything under 250,000 Rand. The master will then decide who they're going to appoint. So there's no executive, no family member getting appointed only when it's over and above $250,000.
Speaker 1:And that sorry that 14-day. If you don't let them notify them within the 14 days, what happens?
Speaker 3:Nothing per se will happen. We had matters where estates get reported years after. I had a matter recently where the deceased parents, which lived in Zambia but they were South African citizens, had assets in South Africa. So my daughter came to us and she said there's a policy in one of their names, can we assist? So we then registered with Battistate so I had to go and do the death notices because that wasn't done in South Africa also. They were still showing as alive so we had to first report the death, get the death certificate, go to the master and that's been over 12 years. So nothing going to fall on that. 12 years. 12 years, yes, for the one parent and otherwise I think, 10 years and the policy is still there and still going.
Speaker 1:The policy is still kind of policy, was it?
Speaker 3:that is a life policy, but that was just really because the policy was in was to be made to from I think it was from a father to a mother, and then the mother passed away as well. So there's really no beneficiary but we.
Speaker 1:They would then fall to the estate.
Speaker 3:if there was no benefit, it falls to the estate and we first have to now get the daughter appointed as the executor. But because she lives in Zambia, it's become a bit difficult, because they wanted someone resident in South Africa.
Speaker 1:So that's maybe. Another important point is just to note if you are going to choose someone as an executor, it is definitely more feasible to choose someone in South Africa.
Speaker 2:Correct. But you'd rather make sure that the executor is an approved person. Who does this all day long? You don't just make your family member.
Speaker 4:I'm just thinking here, right. So how many masters are there in a province? I think?
Speaker 2:there's an office in most major cities, because how many deaths are?
Speaker 4:there daily. Oh sure, I'm not sure about this. Hundreds of thousands. I'm just trying to understand how they can keep up with a workload if it's this complicated.
Speaker 2:Yeah, that's why they have agents. There's not one master. He's not only one person. No, no, no, it's a big office.
Speaker 4:But okay. So how long does it take sometimes to for you to?
Speaker 3:say a better word.
Speaker 4:Yeah, I was going to say wrap up, but yeah, wind up in a state.
Speaker 3:Normally if it's an easy estate.
Speaker 1:What would?
Speaker 3:classify as easy. There's no complications. So if you have done your will, there's enough assets to be distributed between the heirs and the legatees. A legatee is someone that you have said. All right, I want to give you 10,000 rand and I want to give you 10,000 rand and I want to give you 10,000 rand, and then whatever remains is the residuary area and that is what is left in the estate and that's what someone gets. So the estate is and we work with government organizations and you have to advertise and all of that. So if you've done the advertisements in the newspapers, have advertised it again, but you need to advertise it twice. Second time is first time that you advertise is for creditors to come forward. If no one comes forward, you start your letter, lnd, liabilities and Distributions account. You then submit that for the second time to the master, which gets held at a magistrate's court in the vicinity where the person has died. And if no one comes forward, then you can wrap up that estate and it takes about six months.
Speaker 4:Six months Wait. I don't understand. I always thought that obituaries in the newspaper were a sentimental thing. They're not um.
Speaker 3:It's different from an obituary, so how do?
Speaker 4:you announce it in the newspaper. Where would you put it? You'll put it in the notices as a legal notice.
Speaker 3:So where and you?
Speaker 4:just have to put it in the local newspaper as to where that person lives, or does it go into a national newspaper?
Speaker 3:best will be national, because your creditors could be uh be all over the country but if someone doesn't do it nationally, is that a problem?
Speaker 3:yeah, no, because you'll see well, it's not going to be a problem. But you need to then advertise. If you do have it in a local newspaper, yeah, then you need to advertise it in the area where the person has died, for example, and might have lived, you know, or where creditors could be situated, so that they are all informed. So I would say having a national newspaper published that death note is more important than having local newspapers, because someone could have missed it.
Speaker 1:And the executor does that right, and the executor does that right.
Speaker 3:So it's the executor does that, and so the creditors.
Speaker 4:Let's. Let's use them for an example. If that person has, does owe money to creditors, how does that work with regards to the executor and dishing out the will?
Speaker 3:so once you have published that legal notice, creators have 30 days to come forward. If they don't, and you proceed to have the, you know the L&D account, which is the liabilities and distribution account, processed, but they can come forward at any time Within the 30 days or even after that. They can even come after that.
Speaker 2:So, warren, the idea is that the L&D account, it's basically a balance sheet. When you pass away your assets, your liabilities, so the credit will be a liability. So suddenly, I don't know, you're a furniture account that nobody knew about and then one of the furniture stores comes forward and said this person owes us this, and then the executive to take that into consideration, pay it, make sure it there was a valid claim, and then they pay the creditors out and the balance of the state will go to the whoever the heirs are.
Speaker 4:so it's very important that so so that go to whoever the heirs are.
Speaker 2:So it's very important so that's done before the heirs get any money. Yeah, yeah, they've got to pay SARS. Correct, sars has to be paid. You have to do your final tax return with SARS. It has to be completed as well.
Speaker 4:Your annual tax return.
Speaker 2:Yeah, yeah, it's got to be up to date. So if you go back tax the SARS accreditor, they'll get their money first and normally SARS gets paid first, they get paid first and what about?
Speaker 4:just? I suppose maybe we'll do this in another episode, talking about tax right? Yeah, Okay, okay, no, We'll do that in another one.
Speaker 2:Yeah, but also from a planning perspective. When we plan we also look at what the assets and liabilities are and what the costs are going to be to wind your estate up. We make provision for it. So jake says that three and a half plus vats about four percent. You make provision for that in the in in your whole financial planning and your estate planning exercise. And things like pension funds, retirement annuities fall out of that so they don't touch it. So jakes will never he won't charge that fee on a retirement annuity because that gets paid directly to the spouse.
Speaker 4:Yes, okay.
Speaker 2:I understand Beneficiary nomination or even an endowment policy Right and some of the tax-free products we do. We do a tax-free through Alan Gray. There's a nomination of beneficiary. Jakes won't get involved in that as well, so that 4% falls out of that.
Speaker 1:So, basically, anything where you nominate a beneficiary, the executor doesn't have to be involved in or wind up or take a fee from that. So life policies, endowments. And that's why, when it comes to planning, we would plan how much of your money is in a unit trust or should we be shifting it into an endowment because your beneficiaries need that money straight away with winding up of an estate. All that money stays in there till SARS is done, till those six months.
Speaker 4:So, for example, a property that is then going to be divvied up between children, that will form part of the executive estate.
Speaker 1:Yes, and will only happen once everyone else has been paid. And if there isn't money in the state but there is a property, the property has to be sold to pay SARS and then you get the rest wow so that's why having a life policy on endowments is so important, because it doesn't form part there yes and it can get paid out and help your beneficiaries in those six months when every the bank accounts are frozen and everything's so money in the bank will go through the process that jake's mentioned, the six month process.
Speaker 2:So it's probably minimum six months because depending on.
Speaker 4:The master can take can take up to two years, seven years, maybe 12 years for someone.
Speaker 2:There's disputes on that but so you can have all your money in the bank and you can have a property and you pass away and you might be very wealthy in cash and very wealthy property, but your, your heirs, your beneficiaries, will have to wait until the estate is wound up and if they rely on your salary and your money, it's all locked up what happens if you are um.
Speaker 4:Your properties are in a trust.
Speaker 2:Then the trust continues, so it doesn't get affected by the will A trust doesn't form part of your estate, so that is maybe why people do that. Yeah, there's a number of reasons, but that could be so. The trust is a living situation, so it'll continue.
Speaker 4:Jakes won't get involved in that either Right Makes a lot of sense.
Speaker 2:Now Okay, now okay well, maybe not to have a trust, but that's another discussion.
Speaker 4:I mean I mean when you said the balance sheets of assets and liabilities. So if you are cash rich in the bank and if you own multiple properties but you actually have no living, annuities or life or anything, no, life policies no beneficiaries named from family members. You're actually. It's a. It's a nightmare.
Speaker 2:When you're dead, then for the people who are left behind, no, exactly because there's an immediate need for cash if you pass away, your family still needs your income, as Bronwyn says, but it's locked up, then they can't access it, but that's where we plan it, to make sure there's life policies.
Speaker 1:Yes, we do a liquidity analysis. So how liquid are you if you pass away that they are okay and they have that money for those few months or years?
Speaker 4:before all of that wealth that you have until jacks came on today, I didn't realize that it was such a long process and it could be such a long process and also that it is, you know, until your creditors are paid back, until you've paid your tax return, no one can access the money.
Speaker 2:No, no no, stuck there, yeah, yeah and.
Speaker 4:And that's even the cash in the bank. Yeah, especially the cash in the bank. What happens if you have a joint account with your wife? Is she no longer allowed access to?
Speaker 2:it. I don't think there are joint accounts in South Africa.
Speaker 3:You'll just have another bank card.
Speaker 4:But she can't use it.
Speaker 2:No.
Speaker 4:It's in his name. Let's say he died. It's in his name.
Speaker 3:Not necessarily because it's your will and your death follows from how you were married. So, in terms of your marital regime, if you're married in a community of property, then the half share is hers, half share falls in his estate. But just you know, I think she will be able to continue, after just speaking to a master explaining the situation, that we need access to the money because she's still, because half of that belongs to her. Yeah, that, that, that's hers.
Speaker 1:But it does. It does get more complicated and debit orders if they're going off, that you know the spouse's bank account and that's why we're saying don't get an executor that is a family member, Because all of this stuff needs assistance. You need help, you need to be told okay, this needs to happen, that needs to change. Have you thought about this? Have you thought about that?
Speaker 4:Well, you know, my dad's a chartered accountant, so he's been the executor on my grandparents, for example from my mother's side. And yeah, he did say it's not much fun to do it no, yeah.
Speaker 2:And then he understands how balance sheet works and he knows how to do it up and he knows how to do tax property. So even that you've got other rigmaroles and other processes. Like jake said, the advertising, the newspaper, when do you advertise it? The two adverts have to happen, there's a lot of process and also properties have to be transferred from one spouse to another and you convince attorneys to do that.
Speaker 4:There's transfer costs, transfer costs for that as well. So the more stuff that's left in assets rather than in policies, there's more costs that are going to come out of that as well. Then yeah, exactly, because if you have conveyancing through the lawyers, they're going to take a piece. Is there a sales tax as well on selling the property?
Speaker 2:No, there's a capital gains tax, it could be capital gains, depending on the property and you do get $2 million on a primary res as an exclusion.
Speaker 1:So there's a lot more to it than just that. But I think the basis of this episode is having a will and just understanding those points that there needs to be two witnesses, it needs to be signed.
Speaker 3:It needs to be 16 years of age.
Speaker 1:It needs to be 16 years of age.
Speaker 3:The witness can be 14, though, yes, witnesses can be 14.
Speaker 1:And then we would recommend don't just say I'm leaving all of this to this. You need to understand the implications if you leave everything to your child. And how you leave it yeah.
Speaker 2:Yeah, because children underage. How are they going to run those assets? They won't be able to. So you need to have a trust drawn up in your will as well. So the importance, I think, of what Bronwyn's saying is draft the will correctly and make sure the executors are like Jake's, who know what they're doing. Don't make it a friend or a family member, because there's a lot more involved and when your assets are distributed, we're going to help you with that. We're going to say this is actually what's practically going to happen, but it's important to have the wool and make sure the world is kept in a safe place as well. Right, jacks?
Speaker 4:it needs to be easy get this kind of this filed yeah but it must be so you don't have to have the physical copy anymore.
Speaker 3:You have to have the physical copy you need because the master will need an original when that gets submitted.
Speaker 1:So if you have a will, make sure that it's kept safe and you can have more than one original, so you can keep an original and the other original can be at someone else's house correct, it was certified as a true copy of an original.
Speaker 3:But you're not going to sign two different ones, you'll just sign one.
Speaker 2:But can you have a photocopy or the master accept that?
Speaker 3:No, the master will want to be original.
Speaker 4:A certified copy.
Speaker 3:A certified copy will do, but the master will give you directions on how they want it. The master will give you directions on how they want it.
Speaker 2:If the only copy is a copy, a photocopy, for example, a scan copy or an email copy, and there's no physical paper or signature copy, what happens then?
Speaker 3:Then you will have to go to the High Court, the High Court will then decide whether the master can then accept the copy.
Speaker 1:Is that you or is that the executor that does that?
Speaker 3:The executor will appoint an attorney, and the attorney will then start the process of just going to the High Court. So some more costs. The state matters need to go through the High Court.
Speaker 2:So that's an expensive process if you haven't got the original.
Speaker 3:That would be an expensive process.
Speaker 2:So important to keep your will.
Speaker 4:Very important Because otherwise the wealth that you've managed to accrue of your life is slowly being eaten away. Yeah, yeah.
Speaker 2:But I think it's done Well. It's definitely the master's there to make sure that your heirs are the right people. Yeah.
Speaker 3:Because what's important is is, before you die and I know people don't have time for that, because life happens is just update a file every every month so that your heirs and family members are able to access that fairly quickly after you've passed, because you don't want someone scramble around looking for documents, having to ask don't know what, what credit is there and get surprises afterwards. Just keep a document a file, I mean, with all your documents updated every month with what's needed and just make life easier for whoever will be left behind because, yeah, you have someone that's mourning and they still have to figure figure out how am I going to deal with?
Speaker 4:this, sorry. Just last last thing from me, but this actually happened to a good friend of my wife's, um, her, her brother, um, so her friend's brother, sorry, passed away in his mid-30s from a heart attack and he was in charge of the finances and looked after everything, from debit orders to school fees, everything. And suddenly she was mourning and had to come up with answers as to where money goes, where.
Speaker 1:And that's why, in our planning practice, we have that all for you. We put it together for you. You have somewhere where you can go. So I think, to wrap it all up, heather will get some financial advice from it and understand who your executive is.
Speaker 3:Thank you, jase, only a pleasure.
Speaker 1:Very interesting.
Speaker 3:Thank you, thank you, only a pleasure.
Speaker 2:Thank you for listening. If you have enjoyed this podcast and would like to subscribe, please visit our website wwwgrowthfpcoza. The information we have provided in this podcast is our personal opinion. For more detailed information, please discuss your financial situation with a financial planner.