National Wills Week: Why experience matters

Where free wills are standard, you may think that you have won a prize by receiving something for nothing, but this approach could cost you a lot of money.

A will and estate plan are extremely important to your family. A will is personal and should be tailored that way. The correct estate plan and will can have a huge impact on the income and capital you enjoy during your retirement and how you can, on your passing, legally ensure that the SA Revenue Service only gets what is due to it and your family benefits as much as possible.

As members of the Legal Practice Council, attorneys can elect to offer free wills for one week a year. This is an ideal opportunity to see whether your present will is structured correctly or you need to draw up a new one. 

The person you trust with your will and estate planning should have a thorough understanding of the law, especially with respect to wills, trusts and estate duty. They should also have practical experience of winding up estates, a working knowledge of, among other things, income tax, capital gains tax and VAT, policies, usufructs and dealing with assets abroad.

Collectively, Pagdens has more than 50 years’ practical experience in winding up estates and two directors who have completed advanced courses in estate planning, and trust and estate administration.

Padgens has drawn up wills for people who initially thought they could draw their own wills but accepted that they didn’t have enough knowledge. They consulted Padgens because it works in estate planning and will drafting on a daily basis. Padgens has drawn wills for judges, advocates, attorneys, accountants, financial planners and even tax consultants.

Statements such as: “If I am dead, taxes cannot hurt me as they will be my children’s problem” and “My children can restructure their own lives” are often heard and not entirely correct. Estate duty and capital gains tax alone can reduce your estate by 34.4% once your joint estate exceeds R7m. This makes an big difference to the lives of those you leave behind.

Here are two examples of ways Padgens has saved clients and their families money by properly structuring their estate plans:

• Mrs X’s son inherited a farm worth R10m but it was subject to his 90-year-old grandmother’s usufruct. Usufructs create penal capital gains tax and estate duty consequences. The grandmother was advised to sell her usufruct to her grandson a few weeks before she died, which she was happy to do. This saved the family about R1.3m in estate duty. It also increased the grandson’s base value of the farm for capital gains tax purposes should he ever sell the farm.

R1.3m saved!

• Mrs Y, who inherited R5m from her husband and had R2m of her own, would be facing a substantial estate duty problem on her death in about 10 years’ time. This would occur even though, prudently, a testamentary trust of R3.5m had been created by her late husband.  She was advised of options such as a trust, donations and interest-free loans, which would result in her not being liable for estate duty and almost no capital gains tax compared with the possible R1.8m in capital gains tax and R1.74m estate duty if her assets doubled in value and she had not done the correct estate planning. 

R3.74m saved!

A specialist in wills and estate planning can point out these pitfalls and introduce numerous ways to capitalise on substantial income tax, capital gains tax and estate duty benefits of which a non-specialist estate planner would not be aware.

Even those who feel their estates aren’t big enough for this type of structuring can benefit from making small changes and putting less complex structures in place now. 

So why not use this opportunity to consult people in the know? Call Pagdens today on +27 (0) 41-502-7200 or e-mail ilse@pagdens.co.za. 

Disclaimer: This article is for general information should not be used or relied on as legal or other professional advice. The amounts quoted were correct at the time of publishing. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact an attorney for specific and detailed advice. Errors and omissions excepted (E&OE)

This article was paid for by Pagdens.