Many estate planners include special bequests in their will to leave a particular item, asset, or monetary amount to a specified person which, while standard practice, can create more complexity than meets the eye – and it is, therefore, important to fully understand the broader estate planning implications of including bequests in your will.
Our law of succession provides a number of mechanisms to leave assets to your loved ones in the event of your death, with special bequests being one of them. A special bequest allows a testator or testatrix to include a paragraph in his/her will wherein a legacy is bequeathed to a legatee. An example of a standard special bequest could be worded as follows: ‘I leave the sum of R100 000 to my domestic worker, Gloria Tshepe, ID xxxxxxxxxxxxx.’ A testator could also use a special bequest to leave moveable property, such as an item of jewellery, a piece of art, or a vehicle to a specified person, as well as fixed property and, in doing so, it is important to ensure that both the asset and the legatee are clearly identified to avoid confusion. Keep in mind that legatees are different from heirs in that the former inherits the specific asset you have bequeathed to him/her, while the latter inherits the residue of your estate, being whatever assets are left after all your debts and estate costs have been settled, and all legacies distributed.
When it comes to making special bequests in a will, the order of entitlement can trip a testator up, especially when it comes to estate liquidity. The executor of a deceased estate must first settle any debt owing to SARS, pay the estate’s creditors including any accrual claims that the surviving spouse may have, cover the administration costs of winding up the estate including Master’s Fees and the executor’s own fees. Once this has been done, the executor is required to pay out any legacies included in the will assuming that there is sufficient liquidity in the estate to do so. Whatever is left in the estate after honouring all bequests is referred to as the residue of the estate which will be distributed amongst the heirs.
In the absence of an estate plan, problems could arise in the deceased’s estate if there are insufficient liquid assets to honour the deceased’s bequests. In order to pay the bequests, the executor may need to realise assets in the estate, such as the family home, which were intended for the benefit of the deceased’s heirs. This in turn could result in financial difficulty and heartache for the deceased’s surviving spouse and/or children who will ultimately receive a diminished inheritance as a result of a bequest made in the will. Such liquidity problems often arise when estate planners fail to accurately calculate the estate duty liabilities in their estate or fail to structure their assets in such a way as to reduce the estate’s liabilities. Most often, liquidity shortfalls and the subsequent unintended consequences could have easily been avoided through an estate planning exercise.
As is evident from the above, bequests are not as simplistic as they appear, and careful planning should take place before including any such legacies in a will. In terms of our law, it is presumed that a testator intends his legatees to receive their bequests unburdened. Let’s assume that a testatrix bequeaths her vehicle to her domestic worker in her will. The vehicle is financed and there is an amount of R100 000 still owing on the car when the testatrix passes. In order to give the domestic worker free ownership of the car, the executor is required to settle the amount outstanding on the car. If there are not enough liquid assets in the estate, the executor may need to sell another asset to settle the vehicle’s debt.
Attaching conditions to bequests can further complicate the matter and potentially cause delays in the estate administration process. For instance, a testator may attach a casual condition to a bequest where the fulfilment of the condition depends on a chance event happening, or a potestative condition that requires the legatee to either do something or refrain from doing something in order for the legacy to succeed. In such circumstances, while the benefit vests with the legatee at the date of the deceased’s death, the legatee will only receive full right of ownership when the condition is fulfilled. In this regard, any condition that is impossible to fulfil, illegal or immoral will be considered invalid.
Conditions can also take the form of a bequest price which is useful when the testator wants to leave an asset to one of his children but does not want the other children to be prejudiced. In such circumstances, the testator may bequeath the holiday home to the eldest child on condition that the child pays a sum of Rx amount (known as the bequest price) to each of the other two children. Upon accepting the bequest, the eldest child then has a legal obligation to pay the bequest price to her two siblings.
Important to keep in mind is that a legatee is not required to accept the benefits bequeathed to him or her, meaning that a legatee is free to adiate (accept) or repudiate (reject) the benefit. Other than in circumstances where a benefit has an obligation attached to it, a legatee is not required to accept the benefit in writing. On the other hand, a legatee who wishes to repudiate a benefit must reduce the rejection to writing, and such rejection will be deemed final. That said, repudiation can be fairly complex and if an estate planner is concerned that an heir or beneficiary may repudiate any benefits in terms of the will, there are mechanisms that can be used to mitigate these risks.
As is evident from the above, while drafting a will may appear simple at the time of drafting, it is only upon the death of the testator that the document’s mettle is tested. There are many factors that need to be taken into account when including a bequest in your will, and it is always advisable to seek guidance from an experienced estate planner before doing so.
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