An obvious starting point in our first of a new series of Trusts and Estates Alerts, is to consider the importance of having a well-constructed, valid Will.
If you, at the time of your death, have no Will, or your Will is invalid or does not deal with your entire estate, you are said to have died intestate. It is estimated that more than 50% of South Africans die intestate every year.
Despite the horror stories, if you die without a Will, your assets are not forfeited to the state, however the distribution thereof is regulated by statute as opposed to your own directions, as you would have set out in your Will.
The relevant Act that regulates the devolution of your assets should you die without a Will is known as the Intestate Succession Act, 81 of 1987.
The Act sets out a fixed formula that is applied to determine who inherits your estate and in what proportion.
The Act is based on - excluding benefits to a spouse - a system of passing benefits to the blood family of the deceased. The general principle being that those family members closest to the deceased in terms of the bloodline, stand to inherit first.
So for example, if the deceased is married, but does not have children, the spouse will inherit the entire estate.
If however the deceased does not have a spouse at the time of his death, but has children, the children will inherit the entire estate in equal share.
While this all seems logical up to this point, it becomes more complicated, and possibly less obvious, as you progress; should you die leaving both a spouse and a child(ren). In these circumstances, the surviving spouse is awarded a share equivalent to a child's share, with the proviso that she receives the first R125,000 and the rest of the estate is then divided between the spouse and children in equal shares.
In practice this often presents practical problems for the family, where as a result of the inheritance awarded directly to children, the surviving spouse is left with inadequate assets and funds to care for the children. The predicament is made worse in that the spouse will not have automatic access to the funds.
In the event that the deceased should die both without a spouse and children, the next closest relative(s) in terms of the formula of the Act, are the deceased's parents who will stand in line to inherit in equal share.
Should the parents or one of the parents be deceased that share will be distributed between the deceased's brothers and sisters in equal share-and/or half brothers and sisters-of the deceased-of the common predeceased parent, through the parent common to them.
There is no distinction between biological, so-called illegitimate and adopted children in how they are treated intestate. However, it is illuminating to note that step-brothers and sisters do not benefit in terms of the Act.
If the deceased dies without a spouse, parents, siblings or half siblings, then the estate will be distributed amongst his next closest living relatives, which in the normal sequence would be the deceased's grandparents and/or uncles and aunts.
Only in the event that no living relatives can be traced are the funds deposited into the Guardian's Fund and then only if it remains unclaimed for 30 years are the funds forfeited to the state. Yearly, the state publishes a list of beneficiaries for whom it holds amounts over R1,000 and this has given rise to an industry which attempts to trace such parties for reward.
An important point to bear in mind is that the deceased's direct descendants, as well as his parent's direct descendants, inherit by representation. This means that if a deceased's child has predeceased the latter's children (if any) - in other words the deceased's grandchildren - they will inherit the predeceased parent's share.
The same representation applies to the deceased brothers' and sisters' children if the former predecease the deceased.
Needless to say, if the deceased has any intention to benefit parties other than his spouse or relatives, or if he wishes to differentiate between what he leaves his relatives and/or vary the amount he leaves them, the Intestate Succession Act is going to fall short of the requirements of the deceased.
There are also other practical difficulties that can lead to delays and conflict as the beneficiaries have to nominate an Executor. In certain circumstances, the chosen person or the person from whom they can choose does not qualify for the exemption and the chosen individual will have to find security to the satisfaction of the Master of the High Court which is most difficult for a lay person to obtain.
A major limitation is that the Act places severe restrictions on the benefits that fall due to minor children and in the absence of the guardian being able to furnish security to the Master of the High Court, any cash has to be paid into the Guardian's Fund. The fund has a limited investment mandate and a cumbersome if not undignified procedure for access to funds.
Further, the Act also makes no provision for the appointment of a guardian and in the absence of a guardian to the children, a High Court application for the appointment of a guardian will have to be launched.
We anticipate that the limitations of the intestate system and non-alignment with individual circumstances will form a good backdrop to our second Alert, emphasising the importance and advantages of having a Will.
- The writer has generally used the male pronoun for the testator/deceased and the female form for the surviving spouse.
- He has used the term marriage and spouse - bearing in mind the extended application of the terms such as same sex partners, civil unions, customary wives, polygamous relationships etc.