Know Your Money with Bronwyn Waner and Craig Finch
Know Your Money with Bronwyn Waner and Craig Finch
115. Dying Without a Will
What happens when life's busy pace means you never get around to making that will? Attorney Jakes Myberg from Waks Attorneys explains the often complicated reality of dying "intestate" - without a valid will - and why it matters more than you might think.
When someone dies without a will in South Africa, three key pieces of legislation take control: the Interstate Succession Act, the Administration of Deceased Estates Act, and the Estate Duty Act. Together, these determine who gets what from your estate - and it's rarely as straightforward as people expect. Your marital status becomes particularly crucial - those married in community of property will see half their estate automatically go to their spouse, but the remaining assets follow a formula that divides inheritance between spouse and children according to precise calculations.
The consequences for families can be significant. Minor children's inheritance must go to the Guardian's Fund, a government-managed account that holds money until they turn 18. While this protects the funds, accessing money for legitimate needs involves bureaucracy, and the administration is often inefficient due to high volumes. After 30 years, unclaimed funds revert to the state - a sobering thought for those who assume their assets will automatically reach the right hands.
Estate duty implications apply whether you have a will or not (with the first R3.5 million exempt), but spouses can effectively transfer assets between them tax-free, potentially preserving more wealth for heirs. Without proper planning, these opportunities may be missed. Even more concerning is what happens with insolvent estates or when financial institutions act as executors, often prioritizing their fees over efficient administration.
The message is clear - creating a valid will isn't just about distributing assets; it's about protecting loved ones from unnecessary complications during an already difficult time. Don't leave your family's future to chance when a simple document can provide clarity and control over your legacy.
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Hello viewers, you enjoy our podcast. Hello viewers, today we have Jakes back in the studio and we're going to be speaking about not having a will. Jakes, will you just introduce yourself again to our viewers? Hello viewers.
Speaker 3:I'm Jakes Myberg from Wax Attorneys. We are a law firm based in Randberg, Greenside, and just thank you for having us today to discuss the problems one can have of not having a wall.
Speaker 1:Yeah, fabulous, I think if you can maybe just say, like, what exactly would happen next? What do they need to be mindful of?
Speaker 3:Great, great. So we deal with three acts in our profession, and the acts deal with when a person, in this case, does not have a will. So you will have your Interstate Succession Act, you will have your Administration of Deceased Act, which is your L&D account, which we mentioned in the previous podcast is your liabilities and distribution account, and then we have the Estate Duty Act. Well, the Estate Duty Act we can maybe touch on what is that? The Estate Duty Act is what you will then have to pay. It's like a type of tax.
Speaker 4:So duty just means tax.
Speaker 3:Yes, Might or might not. Normally if you have a small estate you might get off that you're not going to pay. Everyone gets 3.5 million, so from that it gets deducted.
Speaker 1:Three and a half million is free of estate.
Speaker 4:Free of estate yes, so if you have an estate of 10 million rand, how does the duty get worked out?
Speaker 1:So should we do the passing away without a will and we can do like a tax one?
Speaker 2:Yes, I think we will discuss that later, no problem, so last episode we said you have a will that's signed, it's witnessed and it's kept in a safe place. Yes, this episode is I don't have a will that's signed, it's witnessed and it's kept in a safe place. This episode is I don't have a will Pass away and I've got what happens then? Do you help the clients, jakes, or not?
Speaker 3:Yeah, life happened and you wanted to maybe make a will and it just passed and you've just never gotten to make a will. So when a person dies, interstate, there's a lot of complications that arises, because now the problem is that the law decides how your estate will be administered.
Speaker 1:So how it's divided basically.
Speaker 3:How it will be divided between who is still around.
Speaker 4:And is that via the master again?
Speaker 3:Yes, everything goes through the master. That's where you need to look at the Interstate Succession Act to determine who is going to basically inherit and who's not. In the previous podcast we spoke about you have legacies and you have residuary heirs. Here we only deal with heirs, so everyone is going to inherit, but it depends on if you have a spouse or if there's no spouses whether there's children involved or not.
Speaker 1:Does it depend on how you're married? So like, if you're married in a community of property, does the spouse get everything, or if there's kids, does that change?
Speaker 3:So the way that you are married is always important. So if you are married in a community of property, you need to remember that your spouse always gets half of the estate, so half of the estate is his or hers. Other half will then be whoever passed away, and the same will be we're married out of community of property, with the accrual or without the accrual, then you will need to look how you were married and how that will be devolved.
Speaker 1:So can I give a practical example? So what you're saying is if you're married in community of property and you own a house, okay, that house is worth two million rand. A million rand is the spouse that's alive. That will be hers, because it's 50-50.
Speaker 3:The other million rand then gets split according to how they say it should be, so the spouse and two kids correct you see so if you had the will, you could have decided I want the house to be left to my wife to my wife or children. That will be another topic for another day. But since you do not have a will, it just becomes more complicated, because now you have to decide whether you're going to sell the property because the children would maybe want their share. They can always say listen.
Speaker 1:I don't want it. So can you explain that house? If it was two million and now that million, how would it be divided?
Speaker 3:between a spouse and two children.
Speaker 3:The two million will then be divided between the one million between a married community of property between the two spouses, so the wife will get her million, the two million. The remainder of the two million, which is the one million, will then be split between, let's say, there's a wife and two children, so the law states that there's a child's portion that needs to be paid out, and currently the minimum is 250,000 Rand, as decided by the minister, and that will then the 250,000 Rand. So you will have to then do a bit of a calculation divide between the spouse and two children plus one. So that will be 250 000, because you will then deal with four people where there's just three people, but you always do add just one person.
Speaker 1:Why do you add one person?
Speaker 3:That's just in terms of the law. So the 250, there will be then 250 000000 rand to be. That's the child's portion calculation.
Speaker 4:Okay, so each child gets 250k, so that leaves half a million left. What happens to that?
Speaker 3:So the 250,000, 250,000 rand per child's portion, that's what the child gets, and the other 500,000 then gets given to the wife.
Speaker 2:What happens if the children are four years old or three years old?
Speaker 3:that will then the. That money will then be paid over to the guardians fund until they reach an age of majority, which is 18 years, and then they can go and get their.
Speaker 2:So, jake, the Guardians Fund receives that money because there's no will. Correct, if there was a will, you could have left that money in a trust for those children until they whatever 25.
Speaker 3:In the will you could have decided how that money needs to be distributed.
Speaker 2:So the Guardians Fund comes into play with no will, correct.
Speaker 3:So when the state comes in there. It needs to be so that's when the state comes and they need to be paid. Who's funding the guardians' wool?
Speaker 1:What is the Guardians Fund?
Speaker 3:The Guardians Fund is a fund created by the government and the government. That's where money gets paid over, where there's no one that comes forward to claim the money, and money that pays over to minor children. So that's just a fund that keeps all the money safe.
Speaker 2:Okay, so Warren, I think it's how are the?
Speaker 4:operating costs of that fund funded.
Speaker 2:Is that through the?
Speaker 4:duty or is it through a fee?
Speaker 2:No, they charge a fee. So the guidance fund is a central fund that the government controls. Okay, but they're not taking your money.
Speaker 3:No, no, no, but they're charging you. Thank you, peter.
Speaker 2:The feeling is that, oh, the guardians fund, they're taking my money. Okay, the problem with the guardians fund is there's little control over the money because the government controls it and there's an administration, probably backlog on that scenario. But they hold the money on behalf of the minor children until they become majors and they pay it out. Also, they hold money in case there's, let's say there and Jake's just telling me there's a portion where you don't have a wife, you don't have kids, you don't have an aunt and uncle, there's just you in the world on your own, you don't know of any other relative, and you pass away without a valid will. Your assets will go into the Guardian's fund, okay, and it'll stay there for 30 years, but is that fund?
Speaker 4:is that fund growing? Is your share of it growing.
Speaker 2:Yes, I think it's invested. I'm not sure the technicality of the investment, but it is growing.
Speaker 4:Because ultimately, if it's 250 grand in today's money versus 30 years money, that's nothing.
Speaker 2:No sure it will grow. So it's for the benefit of minor children or heirs that you don't know there are, to make sure that they're correct, people in their actual state, no that makes a lot of sense. So all of us want to have that stormy night. The lightning's hitting your house and there's a knock on the door and you open and there's a messenger saying oh, are you, warren Grimley? Your uncle lost uncle in the Karoo has left you a farm and you hear the title deeds what's after the 30 years?
Speaker 1:What happens?
Speaker 2:Then that falls to the state. To the state.
Speaker 3:So if you don't come forward within that 30 years and you feel like you might have been a beneficiary to the state, then the state will take that. And now, if it is in the guardians, then the state will take that.
Speaker 1:And now, if it is in the guardians fund and the child actually needs that money, what happens? Can you ask the guardians fund?
Speaker 2:Yes. And then yeah, so they will be administered by the government to make sure that the lawful child who's underage.
Speaker 1:Their school fees are paid for from that money.
Speaker 2:Yeah, the ESA administration, yeah, but the problem is it's probably inefficiently administered just because the volumes are there. That's why even more reason to have a will. Because what about minor children? You want that trust to be controlled by a proper administrator, not by a central fund. So that's very, very important.
Speaker 4:No, I mean government generally. The inefficiency is associated with government and the high volume that they'll be dealing with.
Speaker 2:But they're not taking your money.
Speaker 4:No, no, I understand, but it's actually a lot harder to get it than if it was independently managed by somebody else.
Speaker 2:That's why the master's there to make sure that the correct people receive it, and the guardians fund is the minor children or heirs that we don't know about, or the correct heirs that receive it, but it's inefficient, and so you said up to three and a half million is your free allowance, correct, if you don't have?
Speaker 3:a will. Well, that's, if you have a will or you don't have a will.
Speaker 4:So when we go over that three3.5 million, what happens Then? You will start paying the estate, and is the estate duty a flat duty or does it escalate much like tax does, as to how much it is your income, for example? So the higher income you are, the higher tax you pay as a percentage.
Speaker 2:It's a flat 20% Up to a point I think it's it's 10 million now. Then it reduces. So it depends on the value of your estate. But if you're married, then your spouse, your wife, your husband or your spouse same sex spouse receives your estate without any so that's why often people leave everything to their spouse, because that estate duty is delayed until the next person passes away.
Speaker 3:So each one gets 3.5 million. So whatever, let's say you go over 3.5 million and it's now 4.5 million and the previous spouse died, but that was 3.5 million and was never touched. So that goes over to the next spouse. So that spouse was still not reliable, because now there's the seven million.
Speaker 2:So you roll it over. So if a husband passes away, the three and a half is in play, and when the wife passes away, she transfers that. Is this an?
Speaker 4:argument for polygamy.
Speaker 2:So I think, between husband and wife or between spouses, there's no estate duty Understood. And then the last dying there is a seven million rand free of estate duty Understood. Why is that? It's because the government, the state, wants to promote marriage, so a married society is a more stable society.
Speaker 4:Therefore, there's no tax between spouses, so you can donate anything to your spouse and there's no statute Okay, and so actually if you are married, it's only over that $7 million effectively that you start. If the last person passes away, then the children, whatever's left, then they will start paying, but that original $7 million that was accrued. The last person possibly, then the children whatever's left, then they will start paying, but that original $7 million that was accrued between the spouses is not really touchable after both spouses have died.
Speaker 2:No, that's right. Okay, so I think taxes are a completely different discussion and that's what does come into play when Bronwyn and I do financial planning on estates. That's a big part of it to how do you fund it. And then, of course, jakes would handle the estate and the practicalities of the L&D account or not having a will. So what he's saying now is that if you don't have a will, amarat, jakes and there's husband, wife and kids. The kids will inherit as well.
Speaker 3:The kids will inherit.
Speaker 1:yes, Do you have a practical example of how it's happened?
Speaker 3:So the practical example I have is more in terms of where there's not enough in the estate. So a recent client came to us and she said there are three daughters, father has died, interstate, the mother is still alive. So in terms of the law then the mother and the three children will inherit. But they decide you know, there's a small property available. They can just basically say we don't want to want to inherit. So they will then just sign affidavits and the mother will inherit all the all the money, but otherwise there will just be been problems. But persons need to understand that you, it's not a given right to to inherit, it's just a privilege. So there's nothing to inherit, then that's just where it is.
Speaker 4:So there's nothing to inherit, then that's just what it is, ken, if your liabilities outweigh your assets, how does that work if you die without an interstate, without a law?
Speaker 3:So there is not enough assets to cover your estate. Then you will turn to the creditors and you will say this is all that's that's available. So you will pay when you can and you will die with art liquidity. So you'll basically be insolvent and right, but then there's no one will inherit.
Speaker 4:There's no ability for the creditors to then go and go, go for the next of kin, for a man-to-be.
Speaker 3:No, if you die, that's not for the children, so you can't be liable for someone else's. Okay, and what?
Speaker 4:about a spouse.
Speaker 3:That depends on how you were married.
Speaker 2:So communities or properties are a problem. So the L&D account still gets. You still prepare an L&D account the same way as you would do a normal L&D for a yes, okay. So then what will happen there, warren, is that a creditor will not get anything. So that's an insolvent estate.
Speaker 3:There isn't enough in the estate and they would still close the estate.
Speaker 2:They still close the estate with a master. That just how it is.
Speaker 1:And then back to that in community of property. So if your husband owes all of this money and then he was insolvent, you then become insolvent and you have to pay all of that debt back, so that's a bad thing to happen. Yes, and so in community of property can be a bit dangerous.
Speaker 2:In community of property is the law of the land. So if you don't have a prenup or a contract, then you're going to be, you are community of property and the other side of it Jake will say that as well that you charge the 3.5% plus VAT on the full estate.
Speaker 3:Not on.
Speaker 1:well, yes, so if we married in community of property and the one spouse passes away, the whole estate the executor has to finalize. Not just your half is what Craig's asking.
Speaker 3:You only look at the deceased, so not on the entire regime. The 2.5% will be paid on what's in a certain estate. So there's 2 million and half is the wives and half is the deceased, but the liabilities are way over. Let's say 4 million. Then there's 2 million rand that needs to be recovered and that's not going to be possible. So they will sell the properties, recover the 2 million, but only 3.5 percent of that certain estate that you have been dealt with. That's what the executor will will take, but not on the on both estates, because the other person is still alive. So that will only come later okay, is there anything there anything?
Speaker 1:else on dying without a will that you want to just maybe say towards the end.
Speaker 3:So it's just important to always remember if you die without a will, you are going to open up a whole can of worms and you don't want to do that to your, to your beneficiaries or whoever is left behind, your loved ones. Your loved ones, or it could be just a nearest relative. So if you don't have any um descendants that's, children or spouse and you've got descendants, which is your grandparents or mother and father you want to still be able, to want to take care of them, maybe because they I mean, circumstances could have been different for each and every person, but you want to ensure that your will gets executed the way that you want it. So if you don't have that no thing, you've got no control. The person who's left behind has no control over how it's going to be distributed. So the importance is really to have a will, as opposed to letting it slide and think well, tomorrow could be another day and I'll sort that out I could ask one last question about worlds.
Speaker 4:So you obviously have people like you use Capital Legacy, I believe.
Speaker 1:And Vardeles Fox.
Speaker 4:Yes, so you have institutions that specialize in this, but then you also have banks and other institutions that offer this as a service. What would you say to people who get that offer?
Speaker 3:I have a personal experience with banks. I can't speak on all of them because I don't know what their processes are, but your experience yeah, my experience is that after my dad passed on, so he's had the will from 1990. He's never amended it, no one's told him to make changes. So that is the will. And after we located the will, they said listen, you have to pay 10,000 Rand before we will even touch anything. And so we had to go and report the estate to the master and try and sort out the 10,000 Rand that they wanted us to pay. And that's just a deposit to start with. Then they come, and they were appointed as the executives, so you would think, as a beneficiary, that all will be sorted. No, they come and they say okay, well, we want the 10,000 rand to be paid over, then all sorts of other administration that they want you to pay over.
Speaker 4:So you are captive, effectively, financially captive, until you pay the money.
Speaker 3:Yeah. So you can't do anything until they say, listen, pay us the money, or you have to bind yourself to say, right, I'll pay the 80,000 rand. So you paid the 10,000 rand, then you still owe 70,000 rand. You have to go to your brothers, your sisters, mother, whoever you feel like, where you can go and say, listen, we need this money. Then you have to bind one person not everyone, only one person binds themselves to saying I'm going to ensure that the remaining 70,000 rand is paid over. So you bind yourself to 10,000 rand that needs to be paid and if you don't pay that, then they will just walk away from the estate.
Speaker 1:And you can't go to the master and change the executor.
Speaker 3:No, until they decide, in my case, that this happened from the estate and you can't go to the master and change the executor. No, until they decide, in my case, that this happened. They decide you know what, we will resign because they saw there was just a lot of issues and the beneficiaries weren't happy with them. Because you must remember banks and other institutions, they deal with a lot of these types of matters. So they've got like a thousand matters that they're dealing with. So your matter is probably not the top on their list. So if you pass on and they get your file, they will see okay, well, let's see who's more important. So in that time the liabilities could accrue. They take time to close the bank account. They will decide we will sell your property for probably less than what it's worth because they will sell it at an auction.
Speaker 3:So, basically, you'll file worse than where you were let's say, you appointed a family member to oversee that but, more important, someone that deals with these matters on a daily basis and they understand your predicament and they can walk the mile with you, instead of someone that just sees you as another number and because this is a thousand this month, next month more people will die, so it will just accrue and they will just want to get this wrapped up as quickly as possible, and I would say so, inefficient.
Speaker 4:I've gone further than that, but yeah.
Speaker 2:Yeah. So, as Jack said, there's too many, they might have too many to administer. There's no personal touch on it and that's where we are involved as financial planners. If something happens, we go with the clients to the, for example, Capital Legacy and we make sure that things run smoothly. I think what you also made the point is of not having a will. It's not a desperate situation because the master still gets involved. Administration firms like you still get involved to help the client go through the process. Yes, but you don't have control over the process. Well, you're not here, but I mean, your wishes aren't your wishes. It goes with what the law says, yes, and it may not be your wishes, and that's the problem. I think we should wrap it up on that.
Speaker 1:Yes, on that note, Thank you so much for your time. Really appreciate having you here.
Speaker 4:Thank you, guys.
Speaker 3:Good to have you here, Jack. Very interesting, Jack. Thank you very much. It's been a pleasure. Thank you for having us.
Speaker 2:Yes, thank you.
Speaker 1:Bye.
Speaker 2:Thank you for listening. If you have enjoyed this podcast and 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.