As human beings, emotions often dictate our behaviour. One of our dominating emotions (if we are honest with ourselves) is fear. Fear of loss, fear of being hurt, fear of being poor, fear of missing out, fear of being sick, fear of clowns, fear of needles…and probably most significantly, for most of us; the fear of dying too soon.
One of the “problems” of dying too soon is that we are often unprepared for the event which means that those left behind could be left up the creek without a boat (never mind the paddle) if our affairs are not in order.
A good starting point to prevent this happening is to make sure that you have a valid will in place and that someone else knows where the original is kept. Drawing up a will is a relatively simple (and completely painless) process – no needles will be used.
But this is where our emotions get in the way – we have the mistaken belief that somehow if we draw up a will we are increasing the likelihood of our demise. The truth is that we are all going to die one day – drawing up a will is a responsible and thoughtful thing to do – it does NOT increase the chance of you dying! If you have dependents and don’t have a will then you are being incredibly stupid and very selfish too.
Stop putting it off – get it done today!
Not sure what happened this past weekend but I received 2 emailed questions (from unconnected clients) about executors fees this morning. Seems the discussion has been around the quantum of the fee and how much the traditional executors (banks, trust companies and attorneys) charge. The maximum fee in law is 3.5%+VAT plus 6% on interest and income earned by the estate during the winding up process, and they have all tended to charge the maximum fee with little room for negotiation and discounts. That’s the problem when you are dead – you cant challenge them and your loved ones are not negotiating from a position of strength either; the executor has been appointed by your will and it is too late to make changes. So what can you do to mitigate against this?
One suggestion (which was asked by both clients) is to negotiate the fee while you are still alive and commit this to writing (usually as part of the will). While this might appear to make some sense, there are a few problems with it.
For example, let’s imagine your estate is currently worth R5 million and you negotiate a fee of 2% (excl VAT). This would equate to R100k in executor’s fees and might be a reasonable fee for the work to be done. But what happens if you die years later without having amended the fee agreement and the estate has now doubled to R10m? The fee would now be R200k and it might be “way too much” for the work that needs to be done?
Or what if your estate decreases in value and falls from R5m to R2million (it happens) and now the 2% fee equates to R40k and the nominated executor declines to accept their appointment because the fee is insufficient to cover the costs?
I think there are better ways to address this issue.
The first would be to appoint your spouse/partner as executor with the power of substitution (and all the other necessary stuff). In practice they will probably not do the winding up of the estate but will be in a position to approach a few different people and then negotiate the fee with them based on the size and complexity of the estate.
Alternately (and possibly a better option) is to appoint your spouse/partner and your trusted financial planner as the joint executors. It is unlikely that the financial planner will do the work and it is also unlikely that the surviving spouse/partner will be in a position to negotiate the fees (they are grieving, after all) but it does mean that your financial planner can negotiate on your behalf and will need your spouse/partners consent to sign off on the appointment.
Where we are appointed as the executor/co-executor on most of our clients’ wills we have given them an undertaking that we will negotiate an executors fee that is consistent with the amount of work and effort required to wind up the estate in a speedy and efficient manner. That’s just one of the value-adds that you should expect from your financial planner.