In our past communications we have highlighted the critical importance of having your will drafted and any exiting Wills reviewed. Below is some important information regarding Intestate Succession and the impact it may have on your loved ones on your passing. Be proactive and get it sorted out.
What is Intestate?
When a person dies without leaving a valid will, the distribution of his or her Estate will be dealt with in terms of the Intestate Succession Act 81 of 1987, which means that the law dictates how your Estate will devolve and who will inherit. When someone dies intestate, he or she loses the opportunity to appoint an Executor, a Trustee, and a guardian for his/her children.
What happens with Intestate Succession?
When a person dies intestate and at the time of death they are married, their surviving spouse will inherit either an amount of R 125 000.00 or a child’s share which is the equal portion the descendant/child of the deceased would have inherited; whichever amount is greater.
The residue will be inherited by the descendants per stirpes and with representation allowed.
Per stirpes explained – when a beneficiary dies before the person whose estate is being divided, his or her descendants will inherit his or her share as a group. For example, if a father with three children is a beneficiary of an estate but he has already passed, each of the children will inherit a third of the assets that was supposed to go to their dad.
If the value of the deceased’s Estate is less than R125 000.00, the surviving spouse or spouses will inherit the whole estate and the children or lawful issue of the deceased will not inherit at all.
When there is no will, the matrimonial property regime will still have an effect on the distribution of the Estate. The surviving spouse of a marriage in community of property, will first receive his or her undivided half share of the joint estate before the estate is divided and the other half will devolve according to the rules of intestate succession.
If the deceased’s spouse has already passed away, the descendants will inherit the estate in equal share per stirpes and with representation.
What about your children?
When a person dies without leaving a valid Will and his children at the time of his death are Minors, they cannot inherit. Under South African law, a minor (a person under the age of 18) cannot inherit, because they do not have contractual capacity.
Therefore, upon the death of a parent, assets left to a minor in terms of a will, or assets the minor inherits because the parent has died intestate, are liquidated and the proceeds invested in the Guardian’s Fund, at low interest, with limited access thereto, until the minor turns 18.
What is the Guardians fund?
The Guardian’s Fund is a Fund that forms part of and is controlled and regulated by the Master of the High Court and is established to protect and manage money on behalf of certain persons, such as children (persons below the age of 18 years), those who are not able to manage their own affairs or those who could not be found. The money held at the Guardian’s Fund is generally received from inheritance. On the death of the deceased an account will be opened in the name of the beneficiary (the person that is entitled to the money).
The money at the Guardian’s Fund is mandated to be invested with the PIC. If inheritance is held by the fund on behalf of a child, the funds/inheritance will become claimable when s/he reaches the age of 18 years. Even if you have a valid Will but haven’t catered for a minor correctly it will go to the Guardians Fund. It is possible for a person to mention in his/her Will that the money kept should not pay out at the age of 18 years, but at a later age. The risk with the Guardians fund lies in the final outcome is not in your nominated guardians hands but the public authority.
It is however possible for your nominated guardian of the minor child to claim maintenance from the fund. The guardian would have to complete an application form for certain amounts to be paid in respect of maintenance towards the beneficiary. The Master of the High Court is allowed to pay all interest, as well as an amount up to R250 000.00 from the beneficiary’s money towards maintenance. Maintenance may be claimed for the beneficiary’s school fees, clothes, medical fees, and any necessary needs that can be motivated.
What could be done to avoid the Guardians Fund?
Parents should have a professionally drafted will and consider setting up a Testamentary Trust to prevent assets from being liquidated and paid into the Guardian’s Fund. An existing family Trust can be used or a Testamentary Trust can be set up on the death of the deceased. The minor children are noted as beneficiaries on the Trust, with hand selected Trustees to administer and guide the minor children to the age of majority. On the winding up of the deceased Estate the inheritance of any minor children will be bequeathed to the Trust for their benefit.
What if I am not married and no kids?
Young professionals often don’t see the need for a Will. If the deceased has no spouse or descendants but leaves behind both parents who are still alive, the parents will inherit in equal shares. If only one parent is alive, but the already deceased parent still has descendants who are alive, the surviving parent inherits one half of the estate and the descendants of the deceased parent inherits the other half per stirpes. Essentially 50% will pass in proportion to any siblings you might have. Otherwise the surviving parent is the sole heir of the estate.
Last resort is the State.
If all these rules are exhausted and the deceased left behind no-one eligible to inherit his or her estate, sections 35(13) and 92 of the Administration of Estates Act2 sets out the procedure. The executor converts the intestate estate into cash and pays the deceased’s debts. The residue is paid into the Guardian’s Fund. If no-one can prove that they have a claim to the estate as an intestate heir, the money will accrue to the state after 30 years have elapsed.
ACS 360 Wills.
When you pass, without a well-crafted Will, you leave behind grief as well as uncertainty. In a time when those closest to you need uncertainty the least. Understanding your business succession, personal succession, existing structures, dependants, key advisory team, guardians, estate liquidity etc etc are all key components to having a comprehensive Will drafted. As a truly holistic service provider our Wills ensure all boxes are ticked, and we encourage those impacted by the Will to be fully briefed on the intended outcomes thereof.
