Estate planning is a critical aspect of your financial journey, but its complexity means that even seemingly minor errors can have significant, long-lasting implications for your loved ones. Whether you’re in the process of drafting your first Will or revisiting your existing plan, it is essential to approach the process with care and foresight. To help you avoid unnecessary complications, here are some of the most common estate planning mistakes—and how to steer clear of them.
Know your marriage contract before you plan
When developing your estate plan, one of the first and most important considerations is the nature of your matrimonial property regime, as this forms the legal and financial foundation of your marriage. Your marriage contract governs how assets and liabilities are treated during your lifetime and upon your death, and it directly impacts how your estate should be structured.
If you are married in community of property, you and your spouse are regarded as equal partners in a single, joint estate. This means that all assets and liabilities acquired before and during the marriage form part of the shared estate, with each spouse owning an undivided 50% share. In the event of your death, your Will can only deal with your half of the joint estate, making it essential to ensure that your Will is limited to distributing only your share of the assets. Alternatively, if you are married out of community of property with the accrual system, you are generally free to bequeath your assets as you wish. However, it’s important to factor in the accrual calculation when planning your estate. If your estate has grown more than your spouse’s during the course of the marriage, your surviving spouse will have a claim against your estate for her share of the accrual.
To ensure the smooth administration of your estate and to prevent delays or disputes, it is vital to anticipate and provide for this potential claim, particularly in terms of liquidity, so that your estate can meet its obligations efficiently.
Plan property for minor children
If you intend to leave a financial legacy to your minor children, it’s important to understand that children under the age of 18 lack legal capacity and cannot inherit directly. Any cash bequeathed to them will likely be placed in the state-run Guardian’s Fund until they reach legal majority, while immoveable property will be managed by their legal guardian. To avoid these administrative complications, the most practical and effective solution is to establish a testamentary trust in your Will, naming your children as beneficiaries and appointing trustees to manage the inheritance on their behalf until they are old enough to inherit.
Understand what belongs in your will – and what doesn’t
Keep in mind that the proceeds of your life insurance policies, where beneficiaries have been nominated, and your retirement fund benefits do not form part of your deceased estate. These assets are distributed separately and should therefore not be mentioned in your Will. Life policy proceeds are paid directly to your nominated beneficiaries, while retirement benefits are allocated to your financial dependants in terms of Section 37C of the Pension Funds Act. Including these assets in your Will can create confusion, delays, and unnecessary frustration for your loved ones during an already difficult and emotionally charged time.
Don’t let a beneficiary witness your Will
A common mistake made by those drafting their Will is to get their beneficiaries – often a spouse or adult child – to witness their Will, which amounts to a fundamental estate planning error. Remember, anyone who stands to benefit from your Will and who also signs as a witness may be disqualified from inheriting in terms of your Will. This includes beneficiaries, legatees, your executor, administrator, guardian, and trustees.
Update your Will after divorce
Divorce is an emotionally taxing experience, and it’s understandable that updating your Will may not be top of mind once the divorce order is granted. However, it is essential to revise your Will without delay. Section 2B of the Wills Act allows a three-month grace period after divorce to amend your Will. If you fail to do so within this timeframe, your previous Will remains valid, and your ex-spouse may unintentionally inherit from your estate. To avoid this outcome, update your Will as soon as your divorce is finalised to ensure it reflects your true intentions going forward.
Don’t forget to date your Will
Although dating your Will is not a requirement for validity, the consequences of not dating your Will can be detrimental to your overall estate plan. Dating your Will means that your executor and heirs will have no doubt as to which version of your Will is your latest, especially if you have not destroyed all copies of a previous Will or where a previous, undated Will is found.
Nominate the right beneficiary for your life cover
Nominating the correct beneficiary on your life policies is crucial to ensuring your estate plan functions as intended, particularly where you rely on policy proceeds to create liquidity in your estate. In such cases, it is often advisable to nominate your estate as the beneficiary, ensuring the funds are paid directly into the estate. This allows your executor access to the necessary cash to settle debts, taxes, and administration costs. If, however, you nominate an individual as beneficiary, the proceeds will be paid directly to that person, which may result in a liquidity shortfall in your estate and delay the finalisation process.
Be cautious when naming minor children as beneficiaries
After a divorce, you may wish to remove your ex-spouse as the beneficiary of your life policies and nominate your minor child instead. However, it’s important to consider the implications. As minors cannot directly inherit, any proceeds will be managed by their legal guardian—most likely your ex-spouse—until the child reaches majority. If this outcome is undesirable, consider alternative structures such as a testamentary trust to protect and manage the funds on your child’s behalf.
Don’t promise what your estate can’t deliver
Before making financial bequests in your Will, it is essential to understand how succession law works. Once your executor has settled all debts, taxes, and administration costs, the next step is to pay any specific bequests to your legatees. Only after these payments have been made will your heirs receive what remains. When drafting your Will, ensure your bequests are realistically funded so they can be honoured without unintentionally eroding the inheritance you intend to leave to your residuary heirs. Careful calculation is key to preserving the balance of your legacy.
Think twice before bequeathing property to multiple heirs
Leaving fixed property to multiple heirs in equal, undivided shares may appear to be a fair and practical solution, but it can give rise to a number of challenges. For example, you may bequeath the family holiday home to your three children with the hope that they will continue enjoying it together. However, life circumstances differ—one may wish to retain the property, another may prefer to sell their share, and a third may have emigrated and no longer has use for the home. These differing needs and objectives can lead to tension and disagreement, making joint ownership impractical. If your intention is for the property to be enjoyed by future generations, it may be more appropriate to transfer the asset into a living trust during your lifetime. This allows you to structure its use and preservation more effectively, while also providing clarity, continuity, and proper governance through the appointment of trustees.
Avoid contradictions in your codicil
If you decide to add a codicil to your existing Will, take great care to ensure that its wording is fully consistent with the provisions of your original Will. Any inconsistencies or contradictions can cause confusion, delays, and unnecessary distress for your loved ones. Keep in mind that a codicil must meet the same legal requirements as your Will in terms of witnesses, although it does not need to be signed by the same individuals who witnessed your original Will.
Don’t forget the ‘left-overs’ clause
Omitting a ‘left-overs clause’ in your Will can have unintended consequences for your estate. The residue—everything remaining after debts and legacies have been settled—must be specifically addressed. If not, you are deemed to have died partially intestate, and the remaining assets will be distributed according to intestate succession, potentially undermining your intentions and disrupting the financial legacy you hoped to leave behind.
Keep your tax affairs in order
One of your executor’s first responsibilities is to report your deceased estate to SARS, bearing in mind that the tax authority has the first claim against your estate. If your tax affairs are not up to date, your executor will be required to rectify all outstanding tax returns before preparing the pre-date of death assessment, potentially causing delays in the administration and finalisation of your estate.
Have a lovely day.
Sue
