A guide to post-pandemic estate planning

Faeeza Khan says the pandemic made many people realise the importance of having a well-drafted, valid will.

Estate planning has emerged as a priority for South African households since the onset of the Covid-19 pandemic. Be it because of the tragic loss of life or the significant economic fallout, the pandemic brought to the forefront the daunting – yet necessary – conversation of estate planning as a means to ensure the future financial welfare of the next generation.

In 2021, the Master’s Office, which oversees the administration of estates of deceased and insolvent individuals, estimated that about 70% of working South Africans did not have a will in place. However, as the pandemic progressed, subsequent studies found that there was an upsurge in people either drafting their wills for the first time, or updating the ones they already had.

Significantly, a large portion of first-time estate planners came from lower income groups, indicating that South Africans across the economic spectrum are better considering their financial legacies and the heirs of such.

This phenomenon is not inherent to South Africa alone. A survey conducted for LegalZoom. com found that 32% of young Americans aged between 18 and 34 cited Covid-19 as the main reason they had a will drafted, specifically because they, or someone they knew, contracted the virus.

Estate planning – be it through a will, legal document, or other end-of-life considerations – needs more consideration when minors are involved. In these cases, parents must navigate several complex and emotionally sensitive issues when choosing trustees and guardians to safe keep the child's inheritance until their age of majority, at 18 years old.

Any inheritance designated for children should be placed in a testamentary trust in terms of the will, which is not only the instrument that creates the trust but also allows you to nominate trustees.

The trustees will then administer and control your inheritance on behalf of the minor child. It should be noted that a life policy also allows for a certain amount of money to be designated for a child's monthly maintenance needs (including for education). It is important that these policy proceeds are paid into the testamentary trust for safeguarding.

There are a few considerations you should heed when estate planning, especially when a minor is involved:

● Many people make the mistake of trying to “rule from the grave”, which complicates the will and makes it difficult to execute. The will should be simple and understandable.

● Take time to choose trustees and guardians, and time to understand your child’s present and future needs. It is also important to decide how assets should be divided should more than one child be involved.

● A testamentary trust as part of a will is non-negotiable if there are minor children. In the absence of a testamentary trust, any inheritance that accrues to a minor child runs the risk of being liquidated or converted to cash and held in the Guardian's Fund. The guardian of the child would then have to claim maintenance from the Guardian's Fund to assist with the financial support of the child.

● Make sure there is enough liquidity in the estate to cover taxes and expenses in the event of death. Many people leave assets such as holiday homes to their children without understanding that if they can’t pay the taxes or debts, the assets will have to be sold.

● Life insurance is often used as a tool to provide a cash injection into an estate to assist with estate expenses, liabilities, taxes and to leave enough money for a trust to maintain and leave a legacy for the minor children.

If you die without a will, the Intestate Succession Act takes effect. Only blood relatives and spouses may inherit from the estate. Foster children, stepchildren, foster parents, step-parents, and possibly your partner, will therefore most likely be excluded.

Having a well-drafted, updated, and valid will can prevent undue challenges and distress after your passing and ensures assets are allocated according to your wishes. The process may initially seem daunting, but a sound financial adviser is best placed to detail the most efficient options and implement a legal plan to ensure a child's continued wellbeing, should the worst occur.

Once the key documents for an estate plan are in place, it remains important to review them each year or whenever a major change in the family occurs, such as a birth, death, marriage, or divorce.

Khan is senior specialist for legal marketing at Liberty.