1. Welcome

2. PITFALLS IN ESTATE
PLANNING

3. Estate planning can be defined as:
“The
arrangement,
management
and
disposition of a person’s estate so that he,
his family and other beneficiaries may enjoy
and continue to enjoy the maximum from
his estate and his assets during his lifetime
and after his death, no matter when death
may occur”. Meyerowitz

4. Objects of Estate Planning
1. Commercial soundness: The simplest,
most cost efficient estate plan should be
implemented to achieve the desired results.
Keep it simple!
2. Liquidity: The estate plan must identify
and provide for the income requirements
of the planner and his dependants. No use
in wealth being inaccessible!

5. Objects of Estate Planning
3. Good governance: Knowledge of where
the Will is kept, proper trust
administration, accurate records of
investments etc.
4. Flexibility: The estate plan must be
capable of adapting to changing
circumstances. Both from an internal and
external perspective.

6. WILLS:
A LEGACY OR A
LIABILITY?

7. Why should a Will be drafted professionally?
A Will is the single most important tool of
any estate plan, economic, fiscal or dynastic.
Badly drafted, it can destroy families and
damage fortunes.
Once the Will comes into operation it is often
too late to make any changes!

8. Why is a Will important?
• With no valid Will you will die intestate.
• Dying intestate will lead to unintended
consequences with regards to
–
–
–
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Assets not benefiting the intended people,
Unintended death duties,
Unintended Capital Tax, and
Loss of ability to appointment an executor/s of
choice.

9. Example of dying intestate
Mr Jones passes away without leaving a valid
Will. He leaves behind his wife Mary, his
son Paul who is 18 and his two minor
children. His estate after all liabilities and
administration costs is valued at R10 million.
He was married out of community of property
excluding accrual.
The distribution of his estate including death
duties will look as follows:

10. Example of dying intestate cont..
• R10 Million is divided by 4, with a spouse
entitled to a Child’s share or R125,000, which
ever is the greater
• Estate Duty would be as follows:
Total estate value
Less: S 4q
Less: abatement S 4A
Total Estate Duty
R10,000,000
R2,500,000
R3 500 000
R4m x 20% = R800k

11. Dying intestate cont..
Mr Jones
Mary
R2,3m
Paul
R2,3m
Total estate duty cost = R800k
Minor 1
R2,3m
Minor 2
R2,3m
Guardians
Fund
Guardians
Fund
Government run

12. Requirements of a valid Will
• Must be signed in the presence of two witnesses
(older than 14).
• Must be dated.
• Each page must be signed by the testator/trix.
• Must be signed in the presence of two witnesses
who do not benefit from the Will and they, in turn,
must sign in the presence of the testator/trix and
each other.

13. When should your Will be reviewed?
•
•
•
•
•
•
•
At least every two years.
If you have children/grandchildren.
If you have offshore assets.
If you get re-married/divorced.
On the death of a spouse.
If there are amendments to the tax act.
If you have implemented any other form
of estate planning such as a trust.

14. Conclusion on Wills
1. Make sure that you have a Will!
2. Make sure that you know where the Will is
kept!
3. Make sure that the Will has been correctly
signed, witnessed and dated!
4. If you have a foreign Will make sure that
the offshore and local Wills do not override
each other!

15. Conclusion on Wills
5. Be aware that your marital contract will
determine the extent of the assets that you
may bequeath!
6. Ensure that the Will is synchronised with
the beneficiaries of any life cover!
7. Be aware that the Will does not deal with
the benefits of RA’s, Pension Funds etc!

16. TRUSTS

17. Benefits of a Trust
• Ensures the smooth handover of assets from
one generation to the next.
• Cares for assets for those who are unable to
look after the assets themselves.
• Preservation of wealth
– Example: a farm or holiday house passed
from one generation to the next – savings
in Estate Duty Tax and Capital Gains
Tax.

18. Benefits of a Trust
• Reduction of death duties which are made
up of :– Deemed Capital Gains Tax – max 13.3%.
– Executor fees – max 3.99%.
– Estate duty tax – 20% .
• Ability to split income and capital gains to
multiple beneficiaries.
• Protection of assets from creditors.

19. BADLY DRAFTED TRUST DEEDS

20. Background
1. The Deed of Trust is the trustees’ constitution and if
a responsibility, duty or power is not expressly stated
then it cannot be implied by the trustees. The
trustees have no authority to ‘assume’ that they may
carry out a particular duty or power and if they do so
then they are acting ultra vires.
2. It is a dynamic document that must be reviewed
regularly. Tax and trust laws change.
3. Experience has shown that at least 9 out of 10 trusts
either have wrong clauses or are missing clauses.

21. Main reasons for bad clauses in trust
deeds in RSA :– Bad drafting,
– Ignorance of unique trust law system
in the RSA,
– Using precedents foreign to RSA
trust law.

22. • Bad drafting
– Trust templates are often plagiarised by
different companies,
– This plagiarism was recently referred to in
Potgieter v Potgieter (629/2010) [2011]
ZASCA 181 (30 September 2011) where the
attorney who prepared the deed stated in Court;

23. “It unintentionally found its way into the draft, because
I slavishly copied a precedent without realising that the
statement was inapposite to the deed that I prepared.”
• Same template is never updated to changes in
trust case law or tax law.
• Same template is not customised to meet the
individual requirements of the client.
• There are numerous examples of incorrect
clauses – too many to discuss during this
presentation.

24. Summary of problem Trust Deed clauses
1. Key terms used throughout the trust deed are not
adequately defined or are incorrectly worded.
2. Incorrect Beneficiaries.
3. Mistakes dealing with the power and authority of trustees.
4. Insufficient clarity when dealing with administrative
matters.
5. Manner in which income and capital is allocated.
6. Termination date of trust. Pre-emptorary clauses.
7. Control clauses granted to one trustee.

25. Improper management of trust
1. Requirements as laid down in the Trust Deed are
not complied with by the Trustees.
2. All the Trustees are not fulfilling their fiduciary
responsibilities.
1. Ensuring property is adequately insured.
2. Determining the correct risk profile.
3. Determining the asset allocation to match the income
requirements of the Beneficiaries.
3. Trust income is paid directly to a Trustee /
Beneficiary and not into the Trust bank account.

26. Improper management of trust
1. Trustee meetings are not held.
2. Trustee /s never attend meetings.
3. Trust transactions are not recorded through
minutes or resolutions.
4. Annual Financial Statements are not prepared.
5. Trust income / capital gains are not treated in the
most efficient manner.
6. Testator / testatrix Wills are not synchronized with
the trust.

27. ADMINISTRATION
OF
DECEASED ESTATES

28. PROBLEMS EXPERIENCED IN ESTATES
• Natural or unnatural death.
– Post mortem / police inquest / toxicology reports for unnatural
deaths.
• Last Will and testament.
– Badly drafted / original missing / legal requirements not met.
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Uncooperative family members or heirs.
Untraceable assets.
Disputed claims.
Insolvent estate.
Liquidity issues.

29. PROBLEMS EXPERIENCED IN ESTATES
• Fixed property:
– Rates clearance certificates (billing issues),
– Problems with the deeds office,
– Sale of property,
• Heirs consent,
• Masters endorsement.
• Tax:
– Outstanding personal tax,
– Uncooperative tax consultants,

30. PROBLEMS EXPERIENCED IN ESTATES
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Issuing of tax certificates by institutions,
Trustees of Pension / Provident funds.
SARS processes.
Juristic entities:
Valuations for company’s and cc’s.
Lost listed share certificates.
Financial institutions processes.
Firearms.
Motor vehicles:
- Lost registration documents.

31. PROBLEMS EXPERIENCED IN ESTATES
• Master:
– Lost files,
– Lack of intellectual capacity,
– Uncooperative staff,
– Estate duty assessments,
– Issuing amended Letter’s of Authority for existing and
new trusts.
• Accrual claims.

32. QUESTIONS?