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Free or cheap wills can cost your estate dearly in the long run, according to Alfred Bester of Legacy Fiduciary Services.
"A will drafted for free, or at a reduced cost, may not take into consideration the actual needs of the person making the will, or those of his or her family, unless the offering is linked with the provision of a product such as an insurance policy," he says.
In his experience most people require a simple will in which they would typically leave their estate to their spouse, or if their spouse is deceased, to children or, in turn, to their grandchildren or great grandchildren. However, family circumstances and needs differ from one family to the next, and the circumstances that apply to one family may not necessarily apply to another.
This is where a generic or a simple will may do more harm than good.
"The most common problems that arise from the death of a particular person are the costs and taxes associated with their estate," says Bester.
"There are many cases in which an estate is asset rich, but cash poor; and the last thing the beneficiaries may want is the forced sale of any of the estate assets to meet the liquidity requirement of the executor."
These will typically include the following executor's fees; estate duty; general administration expenses; and creditors' claims.
"Even if the deceased dies without any debt, there will always be executor's or administration expenses and possibly estate duty," says Bester.
One must also remember that death is deemed a capital gains tax event.
"Unless the estate devolves upon a surviving spouse, the death of a person is as if the deceased had sold his estate to the executor and (subject to certain deductions) the taxman has his last bite at the capital gains tax cherry," says Bester.
As for executor's fees, he says that, apart from relying on the provisions of the Administration of Estates Act to check on excessive executor's fees, it is also advisable to appoint a trusted friend or family member as co-executor.
As an alternative, the surviving spouse and a child may be appointed as executors who, in turn, could source a professional company to administer the estate at an agreed fee.
This would have the effect of reducing executor’s fees and, by implication, the potential cash shortfall in the estate.
He says there are also further estate planning steps one can implement, in order to ultimately reduce an estate’s exposure to estate duty, especially if these relate to the estate of the second spouse to die or where there has been no spouse at all.
