Estate Planning Insight
Understanding Special Bequests in Estate Planning
Author: Valerie Botha
10+ years’ experience winding up deceased estates and drafting Wills to ensure a smooth process in order to minimise the stress on your heirs and family. She has a passion for estate planning and ensuring your legacy is passed on accordingly.
When it comes to drafting your estate plan, understanding the intricacies of special bequests is essential. It’s also important to remember that while cash legacies might seem straightforward, they can add unnecessary complexity to your estate plan.
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What Are Special Bequests?
Special bequests allow you to leave specific items, assets, or monetary amounts to designated individuals, also known as legatees. For example, you might specify, “I leave the sum of R100,000 to my daughter, Sarah.” In addition to cash, special bequests can also include movable property, like jewellery or vehicles, as well as fixed property. However, clarity is vital—both the asset and the legatee must be explicitly identified to avoid confusion.
Distinguishing Between Legatees and Heirs
It’s crucial to understand the difference between legatees and heirs. Legatees inherit specific assets you bequeath, while heirs receive the remainder of your estate after debts and costs are settled. This distinction can significantly impact how your estate is administered.
When including special bequests in your will, consider the order of entitlement, as this can complicate the administration process. The executor must first settle any outstanding debts, taxes, and administrative costs before disbursing legacies. If the estate lacks sufficient liquid assets, the executor may need to sell other valuable assets, which could affect your heirs’ inheritances.
The Importance of Estate Liquidity
Potential Liquidity Issues
Without a solid estate plan, liquidity issues can arise. If there aren’t enough liquid assets to honour your bequests, your executor may have to sell assets, like the family home, which could be intended for the benefit of your heirs. Such problems often stem from inadequate calculations of estate liabilities or a failure to structure assets effectively.
Including conditions on bequests can further complicate matters. For instance, a testator might attach conditions that require certain actions or events for the legacy to succeed. In such cases, while the legatee may have a claim to the asset at the time of death, full ownership may depend on fulfilling these conditions.
The Implications of Bequest Conditions
Acceptance and Repudiation of Bequests
It’s important to note that legatees are not obligated to accept the benefits bequeathed to them. They can choose to accept (adiate) or reject (repudiate) the legacy. If a legatee wishes to reject a bequest, this must be done in writing, and the rejection is considered final. This process can be complex, and if you’re concerned about potential repudiation, there are strategies to mitigate these risks.
The Need for Expert Guidance
Drafting a will may seem straightforward, but the complexities only reveal themselves after the testator’s passing. Many factors need to be considered when including special bequests, making it essential to consult an experienced estate planner.