Old Mutual On The Money
Old Mutual On The Money
Kholofelo Mashitisho Talks about Estate Planning, Wills and Post-Nuptial Marriage Agreements
Already said “I do”, but now want a “redo” on the marriage contract you chose? It’s called a post-nuptial agreement, and it is possible in certain cases. Our Financial Education Programme Manager, Thabo Hollo discusses the details with Kholofelo Mashitisho, Founder & MD of Mashitisho Attorneys.
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Old Mutual 0:00
Welcome to the On The Money Podcast with John Manyike.
Thabo Hollo 0:04
Hello. Welcome to “On The Money” podcast with John Manyike. I am not John Manyike. And with us today is the lawyer. Kholo the last time you did this “On The Money”, apparently you broke the numbers.
Kholofelo Mashitisho 0:18
It blew. So in a maintenance matter, your side or your steady or your girlfriend right? can claim maintenance for the child you guys have together from your wife if you're married in community of property.
Thabo Hollo 0:35
Wow. If we married in community of property.
Kholofelo Mashitisho 0:37
Correct.
Thabo Hollo 0:38
That is big. But today we're talking about something else, right?
Kholofelo Mashitisho 0:41
Of course.
Thabo Hollo 0:44
Today we're talking about estate planning. Today we're talking about wills. The subject that I would hazard a guess and say most people are not comfortable with. You know, we deal with people and we try to say, “Hey, do you have a will?” And the first instance is do you want to kill me?
Kholofelo Mashitisho 0:56
Exactly. And they come and the first thing they ask you is like, but why are we talking about that? Imagine asking your mom, she's 50, “Mama, do you have a will?” She will say “Why? What do you want?” then worse is that they hide it. So even if they do have it, they would not bring it down and say, my children, this is what I have. Because they're scared that, you know, there's this whole, I don't know, conspiracy that older parents have that if my kids know what I've, what I’ve done, what I've given to who and to where, then they'll kill me.
Thabo Hollo 1:28
Wow. But let's start there. Let's take it to the top. What is this thing called estate planning.
Kholofelo Mashitisho 1:34
So estate planning is, I look at it as a journey. It's a route. You take it from the day you start accumulating money to the day you die. And you would hopefully want to have maintained it even after you die.
Thabo Hollo 1:49
Wow.
Kholofelo Mashitisho 1:50
Right? So, obviously, there's different tools for estate planning. So it's your will. A will is a tool for estate planning right?.There's your trust. That's a tool, right? There is a marital regime. And then obviously, there's things like your tax deductions, your tax, how you treat. But that needs a tax practitioner to deal with that. So I always look at it. It's a journey. How do you capitalize on your wealth? How do you maximize it, and how do you protect it?
Thabo Hollo 2:16
Let's start with the will. So we said there's three of them, right? What is this thing called a will?
Kholofelo Mashitisho 2:20
So, a last will and testament is a document that you draft, you sign right? That specifies what you want must happen to your assets after you die. So for a will to be valid, you need to be over the age of 16.
Thabo Hollo 2:38
There's an age thing.
Kholofelo Mashitisho 2:39
There's an age thing, yes. But if you're over the age of 16, but you're not of sound mind.
Thabo Hollo 2:44
So you need to be off sound, not just 16 and of sound mind.
Kholofelo Mashitisho 2:39
So of sound mind, I think it's very plainly put. So the person who does a will the male is a testator and female is a testatrix.
Thabo Hollo 3:02
Testatrix. So we are in the English lesson and learning. Let's go for it.
Kholofelo Mashitisho 3:06
So you as a testator, because you are a man, so you come to me, we consult. And we sit down and you tell me what your will looks like right? I draft it for you. You have to initial each and every page. Because now you can imagine if you don't initial, it means you don't agree to everything that has been on that page. But remember section two, three, even if you miss a page, the court can later say, “No, but he signed at the end. The intention was to enter the will.” So, push it through.
Thabo Hollo 3:36
So, we look at the intention.
Kholofelo Mashitisho 3:37
We look at the intention. That's what the court will look at. I mean, there's different case law where they've looked at different things, but if you miss a page by mistake, I mean, it's not a train smash. And then you need to sign in front of two witnesses.
Thabo Hollo 3:53
So, if I have two wives.
Kholofelo Mashitisho 3:55
Yeah, they can sign.
Thabo Hollo 3:57
Can they be part? If they are part of the beneficiaries of the world?
Kholofelo Mashitisho 4:03
That's what I was about to ask you. Are your wives beneficiaries of your wife?
Thabo Hollo 4:04
All four of them are the beneficiaries. Can I just pick random two and put them in there?
Kholofelo Mashitisho 4:09
I would advise the people who are beneficiaries in the will don't put them as witnesses because obviously then it comes through as.
Thabo Hollo 4:19
Yes, yes that. So, it doesn't invalidate the will. But then they should ordinarily not be those that are witnesses to the will. Let's talk about the validity of the will because we've seen it even in most recent, in some royal houses, who also been contested. What are the grounds for which a will can be contested?
Kholofelo Mashitisho 4:39
It's forged. If you believe that your, father say, for instance, passes away and there's a will that now comes from I don't know, maybe someone just your brother decides that. Now there's a will here. And he comes the day, you know how we are as Sothos the day of the funeral, a will comes into place. Where is the will from? we don’t know it's been signed by him, it's been written by his hand. And he says, “No guys, this is our father's will.” And as you come, you know, to me and say, “Kholo, I don't think that's the real will. That will is forged. It cannot be the last and, you know, will and testament of our father.” We then have to actually go to court. And the only people who can declare a will invalid is the court.
Thabo Hollo 5:23
But what if, you know, sometimes we sit there around the fire it’s my parents and I, and we are talking about the will
Kholofelo Mashitisho 5:33
Unfortunately, he didn't put it down on paper because another formality is you have to put it down on paper.
Thabo Hollo 5:39
So it has to be on paper. It can't be something that you just spoke about.
Kholofelo Mashitisho 5:41
It can't be a conversation. No, no, no, it has to be written down. And it has to, like I said, the different witnesses, the formalities of that. But actually, another one would be an electronic will. So those actually do exist as well. But it's a little bit difficult and different in how you need to formalize it.
Thabo Hollo 5:57
In this world of the fourth industrial revolution, I imagine most of us type these things and we have electronic signatures, etc. What are the requirements in terms of the electronic or the digital world?
Kholofelo Mashitisho 6:11
Ok so if I was your attorney and you wanted to sign your will electronically, you need to have had it signed in front of a commissioner of oath. I'll take it to the top and make sure I am secure. I'm securing you and whoever's going to benefit from you in future. Because what I don't want to do is put your beneficiaries in a position where they're actually going to have to fight it out. So I'll say, get a commissioner. Same thing with if you're on your deathbed and you can't even write. You can't. You know you can hear me. I'm asking you, do you want your will to say yes this? You're nod, right? You continue and we're moving. We're moving. And I'm drafting the will as I'm going. Then what I can do is take your finger and stamp.
Thabo Hollo 6:54
So, the thumbprint will qualify as a signature.
Kholofelo Mashitisho 6:57
But then again, it must be done in front of a commissioner. So, it's the witnesses plus the commissioner to say, “Yes, indeed, this is the stamp of the specific.”
Thabo Hollo 7:05
The will’s business sounds interesting. It sounds very interesting. But here's the scenario. So I have a friend who was married under customary marriage.
Kholofelo Mashitisho 7:18
So, they married.
Thabo Hollo 7:21
They’re married in custom. But it was never signed, a home affairs registered marriage. And for some reason, the gent decided, “Nah, I think there's somebody else that I want to live with.” And gents leaves, and then go stay with somebody else for a period. And they start building these businesses with the gent. And unfortunately, the gent passed away right? The first wife has kids. What is her entitlements, if any, in the absence of a will?
Kholofelo Mashitisho 7:56
So interstate succession act has a ranking. So if you die without a will, it means you die interstate. So now, the state, the government, the act determines who gets what right? That's why it's very important to have a will, because you can then decide. You have the freedom of testation, that's what we call it, to decide what goes where. If you don't decide, the state will decide for you. There's a ranking. Section 21 is the ranking. And I'm saying go read section 21 of the Interstate Cessation act will tell you who starts. So, they say if you have a spouse, no kids, the spouse gets everything.
Thabo Hollo 8:34
Wow.
Kholofelo Mashitisho 8:35
Number two, if you've got a spouse with kids, the spouse will get what they call a child share, which is a portion determined by government by default. It's in the government gazette, I think now it's about R250 000. So, if you're sitting within a state, or if you have assets worth R500 000 by default, your wife will get R250K. It's called child share. And then the rest of the R250K will then be divided amongst your wife and all your children. So even those children from the other lady that you went and had with, they can then have a claim towards.
Thabo Hollo 9:15
To the other portion. Not the first portion? Wow.
Kholofelo Mashitisho 9:19
Yes. But I want to reiterate, before the issue of your interstate or the estate portion kicks in, your marital regime starts. That's the first thing that kicks in first your marital regime, and then the Interstate Taxation Act. So, but remember now we're working with R500 000. So, because you're married in community property, it halves. So now we're only dealing with a R250K. And because she's your spouse, there's only R250K left. So technically speaking, in reality, she's going to get everything.
Thabo Hollo 9:51
Wow.
Kholofelo Mashitisho 9:52
Because it's the half of the R250K from the marital regime, and it's the other half because child share, according to the government gazette. Okay, so you have wife and kids. Then you have only kids. If it's only kids, the kids get equally share among the kids. All of them. Everyone must come and yes, and if someone is saying that no, if your steady comes to the funeral and they love it, they come to a funeral and they come to the wife and say here is another one. You don't know as a wife that this is your husband's child, right? I always say, who pleads or who alleges must prove.
Thabo Hollo 10:32
I was about to ask, how do we know? How do we prove?
Kholofelo Mashitisho 10:33
Exactly. So now paternity would be going to maybe the uncle, the brother of the dad to check blood. Because paternity is the father's side, DNA testing. So, you must prove that this child that came at the funeral on the last hour is your husband's child. So, the steady is to prove that this is your husband's child. And then after that you have parents. Say you have no kids, but you have parents. So your parents get equally. Your parents then after parents, if you've got no parents, it's your siblings. After siblings, it's uncles, aunts. After uncles and aunts, it is cousins after cousins. And you have no family at all, like zero. It goes to the government. It goes back to the government.
Thabo Hollo 11:22
Talking about biological parents, because law and behold, I am married, she passes away. I'm the only one. And now I have four parents, but I'm the only child. So, it's specifically biological parents.
Kholofelo Mashitisho 11:37
Correct.
Thabo Hollo 11:38
Let's go back to the marital regime because it gets complicated. Take me through the critical aspects of the marital regime. And why is it important in the context of estate planning?
Kholofelo Mashitisho 11:52
Perfect. So, like I said before, it's a tool. And the reason why it's a tool, because it's part of the pot of how are you protecting your assets? It's the last part. Remember I said capital, maximize, protect. How do you protect? So marital regime, there's three. We currently have three marital regimes. There is in community of property, which is the one we all know, the one we default to if you do not enter into any of the other two. So, this one says, and I look at it as a fruit basket. You come with your apples, I come with my bananas. Whatever we do when we get married, it forms part of this beautiful basket, fruit basket that we have. If I have debts, it forms part of this beautiful basket that we have, it's a pain to this, you know, it's a bite to my apple. You know, the apple is not full. It's coming with a bite. You know what I mean? And this entire basket is there. And you look at it in the sense that whatever affects the basket, you need consent from the other person.
Thabo Hollo 12:52
All right.
Kholofelo Mashitisho 12:53
So, whatever, if I want to go and buy a car, I'm adding to the basket, remember right? I need to ask you for permission because you are affecting. You're touching the basket. So, remember the child maintenance.
Thabo Hollo 13:05
Yes, yes.
Kholofelo Mashitisho 13:06
The steady is touching the basket. She's a creditor. She's affecting the joint estate. That's what she's actually doing. And that's why she will be liable for maintenance, for child maintenance because she's affecting the basket that we started as a result of in community to property and because we are married and we put our foods together, and then we have the second marital regime. So, I look at. So, it's out of community property with the accrual and out of community property without the accrual. So I'm going to start with the accrual because it's a bit more complicated than the other one. The other one is simple. Your basket, my basket. Whatever I do, is not involved, whatever you do, is not involved. Whatever assets I had before, it's yours. Whatever assets I have, it’s mine. Debt, same thing. You don't touch anything. I don't touch yours. You don't touch mine. With the accrual comes in and what happens is that. You come into our marriage, and you decide that what's mine is mine, what's yours is yours right? We've decided this. So, on your anti natural contract will start as a net, or let's say your starting value would be zero, because you're coming in with nothing. You're coming with clean hands, even though you may have something at the back, you may have a property that's on you. A marriage doesn't just end on divorce, it ends on death as well. Remember I said earlier on that when you die, you automatically get divorced. Like, if you want to put it in, it's gone. So, then your marital regime kicks in. Remember, it kicks in. Once it kicks in, then whatever must happen to the assets happens.
Thabo Hollo 14:44
All right.
Kholofelo Mashitisho 14:45
So, you die, or you get divorced. So, then your post commencement value or your post value. So, the value you die, or you get divorced at is R500 000. And mine is a million. And it's a million because you take all my assets and you minus by my liabilities. And my net worth as a person is a million Rand. Yours is a R500,000. This is during the course of the marriage. This is what I've obtained, this is what you have obtained right?
Thabo Hollo 15:16
All right.
Kholofelo Mashitisho 15:17
So now this is now where the math’s comes in.
Thabo Hollo 15:20
Let's do the math.
Kholofelo Mashitisho 15:21
Let's do the math. So now we take the one with the most. So my one million, minus your R500 000 right? it’s R500 000. Then we half that amount, which is R250K. That R250K is called the “Accrual.” And that accrual means that right, when you say with accrual, the one with the most must give to the one with the least. And that's called an “Accrual claim”.
Thabo Hollo 15:52
Wow.
Kholofelo Mashitisho 15:53
So, for instance, in a death scenario, you die, and we were married with the accrual. Then what will happen is that I, as the person who's alive, will have a claim and an accrual claim on your estate, even if you have a will or not, before the will it takes place or even before interstate kicks in, I'll be able to claim my R250K from your estate, and then whatever is left can be decided based on the will or interstate.
Thabo Hollo 16:22
So, I have a will. We've proven that this will is a valid will. In my will, I'm saying, yes, we married.
Kholofelo Mashitisho 16:30
But you want me to inherit nothing.
Thabo Hollo 16:32
Yes, I give it to the cat.
Kholofelo Mashitisho 16:36
Your marriage regime kicks in first.
Thabo Hollo 16:36
Ah, yes. So, it doesn't matter. Does it mean it overrides?
Kholofelo Mashitisho 16:42
It doesn't override, but it goes first.
Thabo Hollo 16:44
It goes first.
Kholofelo Mashitisho 16:45
Yes.
Thabo Hollo 16:46
Wow.
Kholofelo Mashitisho 16:47
I don't want to say overrides, because now it's going to be like, eish overriding is a very tough word to put as one starts, but by default, your executor. And that's something also we must discuss. An executor will know, or should know, or your administrator of your estate will know that he was married. How was he married? On the top of your what they call a liquidation and distribution account, which is the account at the end. After everything, you find out how much money he's got. There's a mathematical way. They decide at the end, but what goes to who? Who goes to where? At the top, the heading says Mr. XYZ, married in community of property, or Mr. so and so married out of community of property with the accrual. It's stated at the top. Reason why? Because the accrual starts in. It kicks in first. That's why the accrual claim is the first claim that is able to be taken by me on your estate.
Thabo Hollo 17:46
So apart from just having a valid will, the estate planning is also impacted by the type of marriage regime that you are in.
Kholofelo Mashitisho 17:55
No, no, it is definitely because now if you have a plan and your plan in life is to retire at 40 and my plan is to work until I die right? My plan and your plans are not the same, you'll know that you need to start saving, you need to start putting things away. But now, if you're married in community of property and I'm living my best life, and I know my man is going to take care of me, what does it do? It affects the estate plan. It affects your plan. Do you see? So now when I create a debt, I know the apple, the baskets will take care of it.
Thabo Hollo 18:28
Wow. Wow.
Kholofelo Mashitisho 18:30
So that's why the marital regime is an estate planning tool.
Thabo Hollo 18:33
What determines the validity of somebody to qualify as an executor of a will?
Kholofelo Mashitisho 18:41
Well, over the age of 18, they just must be nominated.
Thabo Hollo 18:42
So, I can choose my cousin's cousin, as long as I fulfill. What is their role, though?
Kholofelo Mashitisho 18:49
They're supposed to administer and wind up the estate, right? So normally, because especially bigger estates or more extraneous estates, you get the executor who will then get the assistance of an attorney, and that attorney is called the administrator. They're not the executor. You're still the executor. So, you still get to make, you're making the decisions. So maybe your attorney will come to you and say, “Hey, this is what's going on. We've got this going on. I think we need to sell this property because the liability is too high.” And then you'll decide if you don't want to sell it, I can't force you to do that. And I then am working on your special power of attorney on your instructions, you're telling me as executor, what to do. But now the issue is when you pick the wrong executor or the executor is picked for you, a lot of the financial institutions will offer you a will.
Thabo Hollo 19:44
Yep, we do that.
Kholofelo Mashitisho 19:45
And they offer you for free. But now you don't know that they have, by default, put themselves as executor, right? So, you just sign. They ask you how many assets you have, what do you want to do? But you haven't checked that paragraph, their executor. And then what happens? You die and your estate is being winded up for ten years. It means that your kids will not have food when you die.
Thabo Hollo 20:07
For next 10 years.
Kholofelo Mashitisho 20:08
Because someone there is struggling to finish the estate, to finish the work that must be done. So, it's important to pick your executor. Even if you go to these financial institutions and they tell you, and you say, listen, I want a will. Thank you so much. I want a free will. You pick your executor, because that is the most important, that's the person who's going to start and move your estate to be distributed according to your will and make sure it's done in an adequate time, because, I mean, it's supposed to be done in a year. But you get estates still sitting from 1999, there's still nothing's been done.
Thabo Hollo 20:46
Nothing has been done. But you're getting me to another point. Dying interstate, and I heard that at the Master's office at the moment, the queue is up to Timbuktu. What is the hold up? What could cause this hold up and what does it result into in terms of the people that are impacted?
Kholofelo Mashitisho 21:06
The admin of it all, I think the administration that's happening in the different Master’s offices, there's a huge backlog. Remember, when you die, they block all your accounts, they freeze your money, they freeze everything. Nothing is moving. So, if your wife was a housewife and she was dependent on you, and they freeze your accounts, what's going to happen then?
Thabo Hollo 21:29
What happens up until the whole?
Kholofelo Mashitisho 21:30
Up until it's finished, up until it's complete, because when you die, you have to open what they call a deceased estate bank account. Everything that you've had goes into that bank account, into that pool, and then basically how the process of the administration runs right? Only at the end will it be determined who gets what going forward.
Thabo Hollo 21:49
But then who opens that account?
Kholofelo Mashitisho 21:51
The executor. Remember I told you the executor is like the most important person here. That's it. He or she is the runner of your deceased estate.
Thabo Hollo 22:01
How often, in terms of the will and estate planning broadly, should we be reviewing the data and the information that we're giving?
Kholofelo Mashitisho 22:08
Yes. So, when your circumstances change, when you have kids, new kids, extra kids, whether they're in and out of marriage, whether they are, you know, maybe you've got a beneficiary that has passed away, you'd revive it. So, I always encourage clients that there's a wills week in September. Every year there's wills week. Every attorney during that week does wills for free. So, I always encourage my clients come back every September. If I've done, or we in the office have done your will last year, we'll remind you will's work. Has anything changed? Have your financial circumstances changed? Have you gotten an extra property that you haven't included last year? And then you change it, you update it. And always in the first paragraph of a will, it always says, “I revoke every will I've made before.”
Thabo Hollo 22:55
So, whatever we're doing now supersedes whatever we've done prior. I get it. I got the tools. Now talk to me about something called the Section 21.
Kholofelo Mashitisho 23:06
So, when you are married in community of property and you're not happy, or you've just discovered on this podcast that eish, I should have done out of community of property. You know, after reading, after, you know, watching today, you're like, eish, I really, really wish I was married out of community of property. You can change your marital regime. It's called the Section 21 applications. It's an application that you do to the court. Unfortunately, you do need assistance from an attorney because it's quite a hectic application that you do, right? And then you tell the courts, listen, I want to change my marital regime from in to out. So, when that's done or during that process, then they'll ask you. Or then you'll tell the court that, listen, I want to change it, but this is my, what they call a post nuptial agreement. So that postnup is then made a court order. You then go and you take it to the deeds office and register your postnup. You are attached a court order. And your postnup is saying, I've been given permission to be able to change my marital dream from in to out. But now, here's the complicated thing. You have to let all your creditors know. So do you remember the basket of apples that I had? Every single bite of the apples, every single bite of the banana, every single bite is a creditor. You need to tell them that, “Hi, me and my husband are about to change our marital regime. Does it bother you?”
Thabo Hollo 24:28
And can they say“No”?
Kholofelo Mashitisho 24:29
They can, yeah. They can defend and say.
Thabo Hollo 24:31
Under what circumstances?
Kholofelo Mashitisho 24:32
Because it makes more sense for you guys to be married, to be together as in community, than it does apart. So now you have to prove that the change of the marital regime will not prejudice my creditors.
Thabo Hollo 24:44
Wow. Estate planning and wills are complex yet necessary?
Kholofelo Mashitisho 24:50
It is. It's very, very necessary and I think people don't take it seriously and they don't know. Normally when people come with wills or they'll come with a will that's handwritten, this is my will. It has not met any of the formalities, but they say, this is my will. I can go fight it out in court and say, yeah, this is your intention. This and this and this. But I would strongly advise to get the proper advice. Read guys read.
Thabo Hollo 25:17
Get proper advice.
Kholofelo Mashitisho 25:18
Get the proper advice. Consult with the attorneys. There's a leeway to assisting with the drafting of a will. It's available.
Thabo Hollo 25:25
Wow. Kholo, thank you very much. Where there is a will, there is a peace of minds. Let’s go for wills.
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