Creating a will to safeguard your estate

The first priority, when drawing up a will, is making sure that you will have enough liquidity (cash) in your estate to cover all expenses. The second priority is to make sure your beneficiaries, the people inheriting from you, will get what you intended them to have.

Start by adding up your assets. These are physical things like property and your car, all at current market value. The rest are for example funds like savings, shares on the stock exchange or insurance policies that will pay to your estate after your death. Deduct liabilities and long-term debts like a bond and taxes and you have your current net worth.

A major factor is capital gains tax payable at a maximum effective rate of 18%. At your death, subject to certain exclusions, example where the asset is left to your spouse, it is worked out as the fair market value of an asset like your house, less the sum of what you paid for it plus any qualifying expenditure like improvement costs . If the house is your primary residence, a rebate of R2 million is applicable.Up to R300 000 (currently) of the sum of your total capital gains is excluded from capital gains tax upon your death.

Your marital regime plays a big part. Unless you are married with an ante-nuptial contract , your marital regime will be in community of property and the estate you share with your partner will be divided equally after divorce or death. In this case, your bank account will be frozen and your spouse cannot touch it until the executor is sure it's solvent. The executor will then give permission if the spouse can start dealing with the bank account. With a marriage out of community of property (with or without accrual), the spouse will have access to his/her own bank account after death of the spouse.

A spouse left without enough cash might suddenly be in a financial crisis and might also be unable to pay the estate costs. A life insurance policy with a nominated beneficiary can prevent this. If something happens to the life covered, the proceeds of the policy will pay to the beneficiary outside of the estate, and 3.5 % executors fees plus the VAT will be saved on the value thereof.

Once you have a clear idea of your assets and your wishes, a law firm, adviser, bank or trust company can help you create a will. It is best not to leave it to chance and to ensure that you have a properly drafted will. The costs incurred will be that for drafting the will, safekeeping of the will (depend on the institution that you are dealing with) and administration to wind up the estate (3.5 % + VAT) . Once your will is in place, update your will regularly to keep up with legislation and your own changing circumstances. Make sure that your loved ones know where your original will is kept in safe custody, and that they have the contact details of the person or institution where your will is kept.

When drawing up a will, keep the following important aspects in mind: make sure that you will have enough liquidity (cash) in your estate to cover all expenses and ensure your beneficiaries, the people inheriting from you, will get what you intended them to have.

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