ESTATE PLANNING FOR THE SERIOUSLY ILL
FOR CHILDREN with ageing parents, or for those whose spouse or siblings become ill, dealing with a will or estate planning can be the last thing on their minds. However, in many instances, it can be better to encourage the relative in question to act sooner rather than later and put his or her affairs in order while there is still time. Here are some points to be aware of:
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The Intestate Succession Act applies here. This means that the Act will determine where any accumulated wealth will go. Perhaps the person without a will is too ill to speak or unable to draft one. A person’s ability to draft a will is not something that can be delegated to another person, particularly if that inability is due to a mental illness that precludes that person from understanding the nature of his or her actions. Where the testator (the person who needs a will) is physically unable to sign a document intended to be a will, it can be signed by someone on behalf of the testator. This, however, has to be done in the presence of a commissioner of oaths who includes a certificate at the end of the will to certify the identity of the testator, and the fact that the contents of the document are intended to be that person’s will.
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What if there is no will? What about power of attorney?
Because section 2(3) of the Wills Act requires that a document must exist that was intended to be the will, or an amendment to an existing will, of a person, it is not lawful to try to obtain power of attorney to draft a will from scratch if the testator is mentally unable to understand and convey his or her instructions to the wills drafter. You may feel that the person without a will is trying to communicate, but it is inconceivable to think that if someone were to wink their eyes, for example, that it could be construed as giving instructions on a will.
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What happens in the case of dementia?
While an elderly parent is mentally able to understand the nature of their actions, they can grant a power of attorney to a child, or other person, to deal with their financial affairs. A problem arises when the elderly parent loses the mental capacity to understand the nature of their actions. At this point, the power of attorney becomes null and void, and the only remedy is to approach the High Court to appoint a curator to the estate of the mentally handicapped person. South African law does not permit an enduring power of attorney, which would allow children to continue to manage their mentally disabled parent’s financial affairs.
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How are testamentary trusts structured to help?
A testamentary trust can be set up in the estate of a spouse for the benefit of the surviving spouse and can also be structured to make provision for children. This structure ensures that the trustees of the testamentary trust have full control over the assets of a parent, without the associated problems with outdated or illegal powers of attorney. The rights of beneficiaries can be contingent on the trustees exercising their discretion in favour of a beneficiary, depending on the circumstances at the time. The discretionary nature of the trust means that the ownership and benefit of the assets can effectively be withheld subject to the trustees’ discretion to determine when and in what proportions a beneficiary will benefit.
Willie Fourie is the head of estate and trust services at PSG Wealth.