Old Mutual On The Money
Old Mutual On The Money
Legal Practitioner Yolanda Mnyengeza on what really happens if you die without a will
You work hard to build a future for yourself, and the people you love… but if you should pass away without a will in place, your money could end up in the wrong hands – whether it’s a long-lost cousin you’ve never met that suddenly lays claim to your legacy, or having your money tied up in the Government Guardian’s Fund. Either way, you’re no longer there to ensure that it ends up with the people you intended it for and who need it most. Worse yet, it can take years to resolve, with no guarantees that your wishes will become reality.
In this episode of On the Money, legal practitioner and tax attorney Yolanda Mnyengeza joins Old Mutual’s Group Head of Financial Education, John Manyike, to unpack what really happens when you die without a will, and why planning ahead is one of the most powerful acts of love you can leave behind.
From unexpected claims to complicated estate battles, Yolanda explains how a simple will, can help make sure everything you’ve worked for goes to the right people, at the right time – no surprises, no drama.
Thanks for listening! Interested in getting more financial education? Visit our website for free resources. You can follow us on X, Facebook, Instagram, TikTok, and YouTube.
JOHN MANYIKE [00:04] :
Welcome to Old Mutuals On The Money show. I think today it's gonna be an interesting session because we're going to be talking about a subject that a lot of people always talk about, you hear people say, ‘We must create generational wealth.’ Ok, let's get to the detail around what does this mean. So today we're joined by Yolanda. I think many of you have seen her on your socials, I mean, she's been educating us on the laws in relation to your wealth, in relation to customer marriage, trusts and related topics. So today let's learn. Yolanda, how are you?
YOLANDA MNYENGEZA [00:43] :
Good. How are you, John?
JOHN MANYIKE [00:44] :
I'm well, I'm well, uh, I want us to start with the credentials. You know, sometimes, there are a lot of people who talk legal stuff on our socials, but they're not necessarily lawyers. So maybe let's start there and establish your credentials. I mean, where you've been and, academically and, and all that, yeah.
YOLANDA MNYENGEZA [01:03] :
Ok, so I'm a graduate of the University of the Western Cape. I'm an admitted attorney. Currently practicing in Johannesburg, South Africa, I actually have my own law firm. Think we've been open since 2022. So, yeah, we've been in this industry a couple of years now. So we mainly specialize, as you know, wealth protection. Many, many other things, but that's our main aspect of the law firm. So that's me in a nutshell.
JOHN MANYIKE [01:34] :
You know when you're talking about wealth protection and laws around it, I mean, this is one of my favourite topics because I was saying to a friend earlier to say actually, I just think this thing of ownership is overrated, but if you look at what is available in our law, actually, you can live in a in your dream mansion, you can drive your dream car you don't have to own anything. For example, if something is in a trust, because then you still have a beneficiary there and you're protected, nobody can touch them. Why do you think a lot of our people are not familiar with these things? And you know, because we have this obsession that I must own this house and that house. What's your view on that?
YOLANDA MNYENGEZA [02:19] :
You know, John, I think it's a, it's a lack of education, right? What we know is that we just need to get a job, be able to afford possibly some form of loan to acquire certain property or a car, then that's it. There's no exposure about the other options that are available, i.e something such as a trust. But even though there's no exposure, people have always had this desire that whatever I own, can it not also be benefited by my children, my family, etcetera. But nobody has ever tapped into, or let's say not a lot of us tapped into trying to understand, are there opportunities for us to do this? How do we do it? And so at the end of the day, most of the time we end up just owning these properties until death. And we know what happens after death, the estates have to be administered because of these properties that we own. So it's, it's, it's a lack of education, I'd say. So nowadays the exposure is there, people are looking into it. So you can see that they're shifting a bit, so now people are no longer too obsessed about personal ownership. Now they're looking into things like your generational wealth. Let it not benefit me alone, let it also benefit other people right? So, I think that's my yeah, yeah, that's what I picked up.
JOHN MANYIKE [03:35] :
There's a reason I started there, even though I said we're gonna talk about, you know, generational wealth, but I mean, this, this thing, this obsession about ownership. Yes, it sounds good, it sounds great, but there are other implications with owning property in your name. Because when you die, Ok, if you, if you have a will, at least you were telling us where the assets need to go or what needs to be distributed and how, provided there’s clarity. But then of course, there are other instances where you may be owning properties, these properties may be in your name. But if you don't have a will, then you must go through the master of the High Court, then there must be an executor, they must wind up the estate. It can be a lengthy process. And meanwhile the your cash in the bank is also frozen. During that period you've got children that need to go to school. Sometimes, when there's a dispute in the family, the money is still held up in those places and to the extent that your bond still needs to be paid, you know, they need to buy electricity, they need to eat and all that. It just becomes a mess wherever, whereas if it was sitting in a different instrument, uh, nothing should be interrupted if you are beneficial of a trust, for example, uh, your comments on that.
YOLANDA MNYENGEZA [04:53] :
Uh, definitely. You see personal ownership, comes with a lot of burdens. Yeah, right now is you alive, you like the, the, the amount of control that you have. But then it comes with a lot of disadvantages like you mentioned, i.e we've got the administration that has to happen after your death, moving those properties out of your estate. It comes at a cost. Whereas if you had had it in this entity and you were benefiting from it, this move would not be necessary. Sometimes you find that it has to move from one grandparent to another to the children to the children, that's a lot of money. That's why you'd find that in certain houses or family homes, the property is still owned by the great grandparent. And nowadays that's not a good idea, you’ve got bonds that need to be paid for, right? Some people don't have protection or money is available that can settle this. That's an issue because that puts that property at jeopardy. There's no money to take care of the administration, we're going to sell that property. So which means that you’re compromising the home of your family. That's right. So personal ownership is just overrated. Also any other debt, let's say you've got a house worth 1,000,000, and you're leaving a debt of 100,000, possibilities that if there's no money in that estate of yours, that personal ownership, that property, it's gone, it has to be sold. So it defeats the purpose of you creating some form of protection. So I think it's about time that people start looking into these other avenues so that they can protect their assets. Otherwise, in this day and age, we are really risking if we're just honed in, into personal ownership.
JOHN MANYIKE [06:33] :
So this is the part that people don't understand. A lot of people understand that even if you haven't estate, you have you, you have a bond, you have one or two cars and you're still owing the bank and yes, you've written a will that you want your two children to inherit your two cars. You want the property, which is bonded to belong to maybe one of the children, or wherever you decide to bequeath it to. Now the issue comes where you die while you're still owing your creditors, you're owing the bank. The bank, because it's a secure debt, the bank is entitled to repossess and sell and and things like that. But the role of, for example, a life cover which does not form part of the estate because people think if you've got a life cover then it's part of the estate. But when there's a beneficiary, those things can be settled and then it can be distributed. But as long as you're still owing the bank, how do you expect those properties to be distributed to whoever you've nominated as beneficiaries?
YOLANDA MNYENGEZA [07:37] :
So, so the life policy aspect very important if you're someone who has such debts, you know, properties you're still owing the bank for that or you have let's say a vehicle. In particular I always say to people this is not something that's cast in stone. You need to have your own plan here. For example, with this issue of a life policy, very instrumental yes, but then often we will have our own beneficiaries. But my son is written there, now is my son going to have this feeling of I need to take care of these debts? These were moms things. I'm trying to save them. So you are now also, even though you have a life policy, putting your property at jeopardy because you're trusting and hoping, that child is going to take care of that debt. So once you have an estate plan, you get to look into these things and determine whether or not you should maybe redirect this life policy. Can it just not go directly to the bank, let it settle the property then whatever is left, the shortfall, then you can give it or rather what's left in the life policy then give it to my son, that way you're guaranteed protection of those assets because then again, the whole thing of life policy is meant to take up that role of yours. You're now absent, you can't pay for the property. You need something that's guaranteed to cover for those debts. Can we trust our kids? Can we trust our families? Not so much when it comes to money. So it requires that people really hone in into their own estates, understand their dynamics, understand their families as well. Right? I've seen a situation where families have gone after maybe 1 beneficiary of a life policy trying to kill this person “You need to pay for these debts, we need to save this, this is that.” But then the person is like, what's my involvement? This is my money. I'm not obligated to do anything. Often families don't understand. But the most important thing that was missing there was that Estate plan because that person would have understood prior to their death that it's a bit risky trusting your family members. So it requires a lot of planning and, and understanding your family dynamics and issues.
JOHN MANYIKE [09:47] :
Yeah, so please explain the, the whole process of seeding a policy to a bank, with a view that if anything happens and they will settle whatever you owe like in the context of what you just said yeah.
YOLANDA MNYENGEZA [07:37] :
Ok. So what you do is that instead of having a direct beneficiary, which is your child, you make it clear to the service provider that the, the funds of the life policy are going to settle my mortgage part that's with Absa or whatever. You give them the details and then what's going to happen is that instead of them paying to your son, obviously your son gets listed as the other beneficiary, so what's going to happen is that after your death, the claims will be made, but the money will not be paid to your child who's a beneficiary as well. It's going directly to Absa or whatever bank. So the bank takes what is due to them, then whatever's left, they will request for those details of that beneficiary. Then they're gonna pay it over to that person. [JOHN MANYIKE: The balance?] Exactly. So there there's a guarantee they don't have a choice. It started at the bank before it got to the actual beneficiary.
JOHN MANYIKE [10:58] :
Alright, now that we’ve got that out of the way, let's talk about this whole concept of generational wealth. Maybe we can start with the different types of instruments that could be used to for generational wealth yeah.
YOLANDA MNYENGEZA [11:09] :
Ok. So we've got things like businesses, we've got things like your stocks and life policies as well can be utilized to achieve generational wealth. Now with all of these things, for instance, that I've mentioned too, in order for them to work, you're going to have to structure them to work for that purpose. Remember what we said about the life policy? You can't trust that it will last longer because it's going to one person. So which means that you might have to sit down now and decide what are we going to do with this life policy? Who's going to be the beneficiary? As, because now we're taking away personal ownership or personal benefit so that this money can last. So now we look into things like your trusts, look into maybe taking it to your estate, then eventually into a trust. Now, whatever it is that you're trying to do, you're trying to get it to an entity that will restrict access to this money so that it can last for a longer period of time and where possible gets to the next generation. And the next and the next. So it's very critical if you're going to use any type of wealth, try and plan for it so that it can work for that generational wealth purpose.
JOHN MANYIKE [12:26] :
Yeah. So I like what you said about you have to structure it. So I wanna hone in on each one of them. So we're gonna start with assets, for example real estate or whatever the case may be, how would you structure assets in a way that could potentially create generational wealth and what are the advantages and what are the legal restrictions or limitations of going that route in in as part of structuring something around assets?
YOLANDA MNYENGEZA [13:05] :
OK. So I think the the, the first thing would be to look into the assets that you have, immovable assets, are you utilizing them to make money? If that is the case already, we need to take away personal ownership because we're taking away all of the risks that are associated with losing this property. So first option, why not put it into let's say a company.
JOHN MANYIKE [13:32] :
So basically taking a company making make, ensuring that the property, let's say it's a house, ensuring that it is owned by a company as opposed to being in your name, is that what you're saying?
YOLANDA MNYENGEZA [13:43] :
Exactly. Taking away personal ownership so that if you die, you don't compromise these assets. So we're taking them, let's say, into a company so they operate whatever business that they're operating under that company. But then again, there's still a risk if that business is in your name. Because after your death we're still going to look into your shareholding, who's inheriting and all of those things. But then if we were to leave it at that, that would be an issue because let's say your, your son inherits your sharehold, I mean your shares in that business. What was the likelihood of that business surviving? Zero. Next to nothing. Because they are probably not part of that business and they don't even understand why you even have so many properties. They could start selling that business and it could just die. Now you look into the second aspect, which is taking ownership of that business away from you, giving it to another entity. What type of entity? Why not a trust? A trust is an entity that has the ability to live eternally right? Depending on the terms and conditions. So if the shareholding is moved to the trust what happens after your death? Nothing. It's as if nothing has happened because life continues.
JOHN MANYIKE [15:03] :
There's no account that's frozen there?
YOLANDA MNYENGEZA [15:03] :
No account is frozen. People have access to money. Right. If you said after your death, let the monthly, let's say monthly benefits go to my kids, after your death, we just obtained in the death certificate, monies are distributed to kids. If kids need to go to school, nothing is held up. We pay for transportation, we pay for school fees, whatever necessities. So life goes on. So you wanna look into such a structure if you're talking about, let's say, immovable property, so that at least it's safeguarded.
JOHN MANYIKE [15:37] :
Yeah, yeah.I wanna, I wanna take it one step higher. So here am I. I have a house. I want to move the ownership away from me, so I then get the company to buy that property. So it's now in the name of the company, the business. But even the business itself, the owner, the owner of the business is a trust. I don't feature there. Is that what you're talking about moving ownership or it should it be moved either via company or can it move directly to a trust? And if it were the case, I mean what would be the implications of moving that asset into a trust which might be sitting on a zero balance?
YOLANDA MNYENGEZA [16:03] :
So here's the thing. If you own, let's say, real estate property, that makes money. In a company, you know that at the end of the tax year period, we're only going to deal with a percentage of tax based on the income, right? And then minus whatever, you know, expenses of this business. But now if you operate or use these properties to make money and you place them under a trust, you're going to need an accountant who's going to hone into the transactions of that of that entity. Because the trust is, is, is it's taxed way differently. And there's three people that can actually be taxed in a trust. So it gets very complicated when you get to that stage. So often I say might not necessarily be a good idea because the transaction could lead to the trust paying a lot in terms of taxes because there's a lot of income coming in, going out and which means that there's more work to be done to account as to what exactly is happening in there. So just to take away that amount of big responsibility and the possibility of you ending up paying a lot in taxes, it might make sense to have the business and then business is owned by the trust. When there's enough money in the business, you can always declare A dividend to the trust. The trust can then disperse to people like you, and other beneficiaries, some amount that you guys may need.
JOHN MANYIKE [17:52] :
Ok, let's say for argument's sake a business declares a dividend to their trust, what sort of text comes into play there? If it's owned by trust.
YOLANDA MNYENGEZA [18:05] :
So first things first, is the dividends withholding tax? So obviously the company as much as it would say we're declaring 100,000 to the trust 20,000 has to stay back and give the trust 80,000. Now how that 80,000 ends up being taxed will depend on what happens in that trust. Practical example, 80,000 came in, was still in the same tax year bracket, then you decide, Ok, 80,000 will be paid to beneficiaries directly, then it's gone. There's not any money that's left there the end of the tax year period, the people that received those monies will pay tax, not the trust.
JOHN MANYIKE [18:52] :
At their hands.
YOLANDA MNYENGEZA [18:52] :
Exactly. So which means it takes away the responsibility of the trust being liable to pay for taxes because it went to certain people. So they will be responsible to make their own declarations to SARS. So then the trust is free from that. So which makes it a bit lighter to deal with. But if you were to move now this all of these properties here, there's gonna be a lot going on here we will need a lot of expense.
JOHN MANYIKE [19:18] :
No, absolutely yeah. So I'm glad we're having this conversation because for me, I wouldn't even say this is about this is a, a creating generational worth 101 because we're now honing into detail as to the mechanics behind ownership, which we've established early on that to say ownership is overrated because it comes with other implications, but there's ways to manage it legally, right? So now that we've dealt with how you can structure assets as part of your generational wealth creation strategy, maybe let's go to intellectual property. For example, you might not be owning a movable property, but maybe you've got an IP, you have an intellectual property, you've got this trademark idea might be. Whatever the case, may maybe let's start there. What is an intellectual property so that we don't assume that our viewers know what we're talking about.
YOLANDA MNYENGEZA [20:17] :
So in in a nutshell, it's something that you have created out of your own, out of your own mind. I forgot the actual definition, but it's something that you have come up with, you've created. So it's of your own intellect. Then you put it together, so you would call that intellectual property. A song that you come up with lyrics that you write, right. An idea of how a product should look like, that's your intellectual property.
JOHN MANYIKE [20:47]:
A hashtag.
YOLANDA MNYENGEZA [20:49] : Yes, you, you sat there and you thought about it. So that's your intellectual property. Yeah.
JOHN MANYIKE [20:54] :
Yes, because. I know a guy, the name will come back. I mean, I know a guy who created a special walk and it became famous. I mean, that's how they people would refer to it, but it was so catchy. That is his IP, but more often than not, people have an intellectual property, but they don't protect. It might be maybe a TV idea, it might be a concept. I mean, let's look at somebody who, for example, who came up with a concept, “I blew it” and they, they went to sell the idea, let's say to, for example, Multichoice. And eventually we started seeing in our, in our screen, somebody had to own the idea. So other people have got great ideas, I don't know what what's sort of. Ideas. I'm just using the, the, the entertainment industries, an example. So say you have an IP of an idea, how do you protect it? Because you can have it and then if you don't protect it, then you can also be careless yourself and somebody else can steal it. You have this IP and you, you want to protect it for generational wealth. What do you do in that instance?
YOLANDA MNYENGEZA [22:07] :
So let's make a typical example about, let's say, an idea of a show.
JOHN MANYIKE [22:13] :
Oh, sorry, I remember that guy. He's called Beke Le Beke. Yeah, Beke Le Beke. So he has this walk and you know, some people can create a T-shirt and call it Beke Le Beke. But whose original, whose IP is that? It’s that guy who can we invented that walk. I know that it’s, is I think it's an easy example for people to understand when you talk about an IP and owning an idea. So let's talk about yes, how do you protect it?
YOLANDA MNYENGEZA [22:38] :
So very critical. You need to take the steps of registering that IP so that it is known that it belongs to you and it's going to be a patent or a trademark of some sort so that the other people when they get into the game, they are not able to utilize that which you have now, protect or you've come up with, so now you’ve protected it. So I always say that first things first, before you talk to people about this idea, maybe find ways to protect it before then. Because once you start talking to people, there's no guarantee that somebody else will not come up with it because all of a sudden you'll see another one saying no, no, no, but I actually had this idea even before you came to me. But if you, for example, you had patent an idea, it's very difficult then for someone to say no, this was mine. You’re already registered. Yours is noticeable. You've got record of when it was registered. So it's difficult for someone to steal that idea. So when people don't take up such things, i.e this Beke Le Beke guy, another person can hone into it, run and then get it registered on their own name. What can be done about it?
JOHN MANYIKE [23:51] :
In fact somebody can go and create a drink and call it Beke Le Beke. I know there's one artist that had this concept ‘Fill Up’, and there were debates about because other artists wanted to have their own gigs and they wanted to use the word ‘Fill Up’, but, you know, if he has a trademark on it, then there's a problem if you use it. But I also know that other people who found other ways, instead of saying ‘Fill Up’, they say Gcwalisa, what, what stadium. Ok, but, but essentially it's about protecting that idea and trade mark it in such a way that if anybody has to use it, they need to get your permission. And if they ask for your permission, you have a right to demand some kind of royalties for them for using that, that name and so on. So I think, uh, I think it's, it's, it's clear on, on that. Maybe let's look at another example of an asset. So there's stocks for example, and cash maybe, can you talk about those as well?
YOLANDA MNYENGEZA [24:50] :
Terms of structuring them for generational wealth?
JOHN MANYIKE [24:52] :
Thats right.
YOLANDA MNYENGEZA [24:52] :
For example, I know with stocks, a lot of the people who, let's say who haven't, who have this understanding that in the long run, these stocks are going to pay up. What they normally do is in their estate planning, right now, the stocks might be in their possession, they could be benefiting from that, but they're going to make sure that when something happens to them, it is not benefited by anybody. In their will they're gonna have clauses that make it clear that as soon as I die, they are moved into a trust. Dividends are paid. They're paid into a trust. People will benefit directly from that trust. Because here's the thing, let's say this person has the these stocks that they bought and the company blows up. What's going to happen if they've died? Most likely if they've left it to their children, their children are going to be like, let's realize it. It's, it's sitting at its highest peak. But those stocks could have continued to work for that family for the longest. So always think about placing it in a trust so that they can't get access to it. They are restricted as to how much they can get. In your lifetime. it's fine if you don't want to move it, you can deal with it, but after your death, make it a point they don't get access to it personally.
JOHN MANYIKE [26:04] :
Yeah. So, you know, for a lot of people who talk about creating generational wealth, but they don't have a will, what would you say to them? And what are the dangers of attempting to create generational worth? And yet you have not structured a way. What are the risks?
YOLANDA MNYENGEZA [26:22] :
There, is no generational wealth there, I mean generational wealth that you're going to create. Because that's where you literally start with the planning, with the drafting of documents and a will is very instrumental. For example, you could say you want to build generational wealth, but the things are still in your position right now. So how are you planning on building this generational wealth without a will? Let's say in your lifetime you are able to move only one property. What about the rest of them? So if you don't have a will, that idea of yours is not going to pan out. So as soon as you say generational wealth, the first thing is go do your estate plan. Go draft your will, and then see if there's any other entity you're going to set up now or it's going to be set up at your death. Otherwise, if you're just saying it, it doesn't matter how much money you have. You will never attain generational wealth because we can't guarantee what the people will do with the money that they get. Yes, IE that things like your pension fund. Yes. People often think that because I have millions, this is generational wealth. How? You leave a 25 year old with two million. It's gone within six months. Yeah, that's not generational wealth.
JOHN MANYIKE [27:37] :
No, that's true. And I think maybe a caveat to that is pension fund. That isn't does not necessarily form part of your estate directly in a sense that it is a law on its own in a sense that the our beneficiaries there in a pension fund and the trustees are responsible for identifying them, confirming the beneficiaries and distributing their assets directly to the beneficiaries. Unless if a person was a worker and was contributing towards a retirement fund and they have no beneficiaries at all. Then in that case, then, it may bring that, on this side of things. Maybe let's talk about there, if a person dies without a will, explain to us the law of Interstate succession act. How does it work in an instance where a person died, umm, without a will? I often hear people say, ‘Yeah, if you don't have a will, the government will spend that money, it will be eaten up by the government.’ So maybe let's just demystify the needs and at what point they would anything like that happen?
YOLANDA MNYENGEZA [28:47] :
It's listen, it's it's most likely to happen not necessarily for the government to spend your money, but it's most likely to end up at a place we call the government guardians fund because probably you're not aware of it. But what happens is that when you die Interstate, right? We look at one, your status and also do you have kids?
JOHN MANYIKE [29:10] :
And just for the benefit you know this is a lawyer we're talking about when the lawyer says die interstate, you’ve died without a will so just to clarify.
YOLANDA MNYENGEZA [29:19] :
Yeah, Yeah. That's really helpful. Yeah. So you died interstate, we're going to look at your status where you married? Were you not married? And did you have children? So in most instances, if you've got enough money or enough assets or you're worth a lot, both these parties should get right? And also we're going to look at the type of marriage you're in, because remember your party needs to get their 50% and then we're going to deal with your fifty. So if you don't have a will automatically, they are guaranteed 250,000 Rand, then whatever is left can go to the kids, but then there's also something we call a childs share, if you've got, if you've got no will. If let's say you only have one child and one spouse and the money that you've left, which is your 50, let's say it's a million, if you divide that by two, how much is it 500,000? So the law says instead of giving them or the spouse the 250, we're gonna give them the child's share, which is that 1,000,000 divided by two, which is 500,000. Because it's bigger. So which means your child and your spouse will get equal shares. But it's not as simple in most instances because we have to hone in into the value that you've left behind. So there's no percentages that are often inherited. We can only determine a percentage after we've determined how much they’re meant to get. So you'll hear sometimes people saying that, ‘When you die Interstate and you're married, your spouse gets 75% and your kid,’ there's no such thing. We have to look at how much and we have to do these calculations. Once we've done the calculations, we can then determine, Ok, this is the percentage, then we start splitting things. So, but if you died single, only have children, the children are going to share everything that you have. Very simple.
JOHN MANYIKE [31:16] :
Yeah, so, so I, I, I like how you're breaking it down there, but I think maybe for a more further breakdown. So you die, you don't have a will. So the state dictates the, the, the process to be followed in terms of identifying potentially who should inherit. Because you didn't tell, you didn't tell us. So the government will decide for you where the money must go and there's a formula that they use, and that's where you talk about the Childs share. Why should a spouse get a child's share if she's not a child?
YOLANDA MNYENGEZA [31:49] :
It's the law, right? It's the law has given, listen the law has given, John, a lot of people the opportunity to draft wills, but they're not taking up this opportunity. So now because there's nothing you've left or said, the law made a determination that you know what maybe they wanted the spouse to benefit even more Yeah, let's just give the spouse a guaranteed 250. And if the child share is bigger, let’s give them a child share, because what's the reason of you not drafting your will? That's right. So unfortunately the law whenever I think it's in 1960s or something when they determined that. We were not here, so we don't even know what informed their decision making. So we just now following what the law states.
JOHN MANYIKE [32:30] :
Yeah, let's have a person who died, had lots of assets worth millions, and because they're often there's no one to bequeath these assets to and they didn't have a will. What would happen in that instance?
YOLANDA MNYENGEZA [32:44] :
So if a person is an orphan we now start to look at further relationships. So remember with you, because you had a spouse and a child, we could look into these two. If you, let's say you did not have a spouse, you did not have a child, we’d go up to your parents, they're the next in line.
JOHN MANYIKE [33:09] :
So in this case, it's an orphan, there's no parents, yes.
YOLANDA MNYENGEZA [33:11] :
So now we go to the siblings like this on dad’s side, on mom's side. Then we're gonna give those siblings whatever is due. But if there are no siblings, we then start looking at the closest relationship uncles, aunts. Then those people in that line of relationship will have to share that amount of money. If we don't have these people, again, we're going to have to find someone who has who's closely related to this person. And if there's not more than I mean more than one person in this line of whoever it is that we find, they're going to share what that orphan left behind. So that's why it can get a bit complicated because we need to start looking at relationships. How far are they to this person? And then we give them what is left behind.
JOHN MANYIKE [33:58] :
And this is why people inherit relatives when they die. You know, relatives that they never even spoke to when they died. So let's talk about the tax regime that applies when it comes to diseased estate because people don't know that when you die, you are regarded to be someone who's on their way to SARS. But something happened along the way. Why? How much will this day take from your decision state when you die?
YOLANDA MNYENGEZA [34:29] :
So it will, it will depend on one, your affairs at SARS. There are some people who don't declare, and death will reveal everything to us. Also because you've died we're looking at let's say if you had immovable properties, we're looking at now capital gains tax, because as soon as the property has to move from you to another it's, it's regarded as a sale for purposes of tax. So looking at that one.
JOHN MANYIKE [35:00] :
What percentage is that, that we’re looking at?
YOLANDA MNYENGEZA [35:01] :
We also have to calculate that there's a formula for that, then it gets determined. And then we also have, things like your business tax, it's called it's, it's like 20% of your net worth is taken away if you're valued more than 3.5 million Rand. It's called estate duty tax. That's the most expensive one. So that also has to be calculated based on how much you've left behind. Guaranteed if your assets or your estate was more than 3.5 million Rand, it will be charged by SARS. What other taxes? But the most important thing is that you need to know this, you need to sit down with someone because during estate plan we can already determine possible taxes that may be applicable here. That will also inform you going forward, should I be keeping these things in my personal capacity? Or is it time for me to remove them away from me because they're going to be very expensive tax
JOHN MANYIKE [36:04] :
Even when you die.
YOLANDA MNYENGEZA [36:04] :
Exactly. So every time before we finalize a deceased estate, it goes to SARS. They have an opportunity to look at everything. They are going to determine, Ok, so and so owed us this much probably before they passed away or they had not declared during their lifetime. And now there's also these death taxes. They're going to say you owe us this amount. We've got to settle that amount in cash. SARS has got nothing to do with your properties. They want their money in cash. Which is why an estate plan is important because you make provision for this money. Because if there's no money, we start selling things so that SARS can get their money.
JOHN MANYIKE [36:42] :
Yeah. I think this is, it's so important to talk about this because people think it's easy to just say, yeah, I'm going to generate generational wealth. And this is why it's important to demystify that there has to be a considered action. There has to be a plan. You must be intentional about structure, structuring something for generational wealth. It won't happen in its own and just because you've got that access doesn't mean you're creating generational wealth, there are specific things you need to do. That's why it's important to speak to a financial advisor, your lawyer to structure these assets or instruments that you have for generational wealth. Now the other thing I want us to talk about is the difference between, you know, when it comes to an estate, a deceased estate, a letter of authority, a letter of executor. What's the difference between the two?
YOLANDA MNYENGEZA [37:32] :
Ok, so less of authority, you are valued at less than 250,000 Rand at your death. So it means we're not going further, we're not gonna do anything beyond reporting to the master's office. That's the only letter that you need. But now if at the time of your death you were valued at more than 250,000, you're going to, your estate will be issued these letters of executorship. So these letters will allow the, the, the, the, the executor to be able to communicate with different institutions, the banks, et cetera, right. But then there's a lot that needs to be done after the letter has been issued, we do advertisements for creditors. We do them again. We draft liquidation and distribution accounts because people need to see, am I there? Did they consider the fact that that one was owing me money because I need to be on that list. So all of these things have to be advertised and they take, let's say the first advert takes about a month. The next one has to take about 21 days, an approval has to be given at the master. So once you are at that wavelength of more than 250,000 Rand, you can expect that your estate to go through that administration process for something like a year or so, before anything can move to beneficiaries.
JOHN MANYIKE [38:59] :
Now, now that we've explained that process and we've elaborated on it, I think this is the best time to now show the difference between winding up a disease estate and the admin and the tax implication that comes with it versus having your assets owned by a trust, are all these processes applicable when all these assets are owned by trust?
YOLANDA MNYENGEZA [39:23] :
No. They are not applicable. Remember what we said at the beginning that let's say we move our assets into this company, this company ends up being owned by the trust. Once you die and you had a trust, the structure was in existence, it's like nothing happened to you. Unless of course, there were certain conditions now that apply to the trust or sometimes after your death as the person who founded this trust there would be terms that have to now be different, but that's it. The trust will continue to be administered. It's not really affected. You're just gone. The kids or whoever you're living behind, they're just heartbroken but we move on. Now when it comes to the administration aspect or if you did not move your things into a trust, that's a different story. 1, whatever amounts of money that you left behind, they cannot be accessed because we're still dealing with the administration.
JOHN MANYIKE [40:22] :
That's right.
YOLANDA MNYENGEZA [40:22] :
Because it's very risky for us to be giving money out whereas we're still not certain if the creditors will get what is due to them that's right because the law says First things first, who’s important? Creditors.
JOHN MANYIKE [40:32] :
That's right.
YOLANDA MNYENGEZA [40:32] :
So monies are held tight, properties cannot be transferred, there's only one person who rules over these properties and it's the executor and often sometimes these executives can do their own malicious things so it's it it's totally different. Administration and having a trust and trust is much more beneficial and plus with the administration, you still have a lot of uncertainties. More debtors or creditors rather, can come through. More taxes could be imposed because you decided to go through the administration process. So where possible, it's always nice for people to consider. The looking into a trust because it could save them a lot and their families a lot, in fact, yeah.
JOHN MANYIKE [41:15] :
Wow, sure. Uh, I think this is a lot for, for one person to consume at a go. It requires one to listen up and reflect on this because, creating generational work comes with a lot of work and then necessary work that needs to be done upfront. But maybe you're parting shots. I mean, talking about the generational wealth, what are the top maybe three things that you think anybody who is who intends to create generational wealth should be doing from a foundational point of view, what should we be doing?
YOLANDA MNYENGEZA [41:56] :
First things first, I say build the wealth. Where is it? It's a business? You must be building it. Because when you're saying you're leaving wealth, meaning you're leaving money that can help your children get a head start, your children's children. So build that. Find something that you can hone into and make money from number two, you have to structure it. What's gonna happen to it if you're very sick? You have to put certain things in, in, in in in practice here, i.e we've got things like your key man insurances for people who are building this wealth, You might get sick, you need something that's gonna keep that business running prior to your death. Then you also need to have death care plans. What's going to happen then at your death? If you were the director, who takes over? Right, If you did not move, let's say the shares during your lifetime, now if you're moving them, who's going to be running this entity, which is the trust, because the idea is that you move it to an entity so that it can be generational for the trustees. Do they have an idea of how a trust is run? Can they even run a business? Can they be able to find someone who has the expertise? So these are the things that you just need to think about, if you're saying you want to leave generational wealth.
JOHN MANYIKE [43:18] :
You know, this is where I think people also might be missing it that, some of the wealthy people around the world, they take these life covers and they know that, should anything happen to them, if they've created a trust, and the trust is a beneficiary, when a life cover pays, it pays into that trust. And because there's no tax when it comes to a life cover, the trust is funded. And then that creates more wealth for the next generation and the next generation and the next generation. But again, it just highlights what we've been talking about, that you have to plan it, you have to structure it, but you need to speak to the right expert to get there. Well, Yolanda, thanks who thank you very much for, for joining us. I think this was such a mind-blowing conversation, particularly on this subject, which I think there isn't really a lot of talks around this time kind of topics and people just throw in words without understanding what they mean. I'm hoping that our viewers would have learned something and they will see a need to speak to the experts and to get help that they need to generate generational wealth.
YOLANDA MNYENGEZA [44:26] :
We can only hope, John. We can only hope.
JOHN MANYIKE [44:27] :
Where do people find you if they saying, well, I've heard this, but you know what, I need to speak to someone. I need to know how do I create this trust? I need to know, you know, of course, then I'm sure you would refer them to the relevant institution, distributor, financial advisor if they need to take a life insurance in relation to some of the stuff we spoke about, where do people find you?
YOLANDA MNYENGEZA [44:52] :
So they can find us, they search us online, they'll find our website. We're also on Facebook Mnyengeza_Attorneys, also on YouTube and also on Tiktok. So if they go there, they will be able to find our details there and then they can be able to get in touch with us yes.
JOHN MANYIKE [45:11] :
Thank you for joining us.
YOLANDA MNYENGEZA [44:12] :
Thank you for having me.
JOHN MANYIKE [45:13] :
Alright. Yeah, ok, go ahead and create generational wealth that's all I can say.