Updated: Feb 19, 2020
We've had many comments on our Facebook page by people saying why should they pay for a Quickwill if the banks do it for free? So I decided to write a blog post about it, to explain the consequences of a free will.
Firstly, we all know, there is no such thing as free, but we need to understand where the hidden costs lie. When a person or institution offers to do a free will for you, they usually do so provided that they be appointed as the executor of your estate - something Quickwill does not insist on.
Legally, the executor of your estate is entitled to a fee equal to 3.5% of the gross asset value in your estate, plus VAT. This means the value of your assets before liabilities have been deducted. So if you have an estate with a gross asset value of R 1 000 000, your estate administration fee will amount to R35 000 + R4900 (VAT). Now say your estate comprises assets that are financed. Your estate will have to pay the outstanding financing costs and you will still need to pay the administration fee on the asset. Do you see that you are paying estate duty on the part of the asset that's financed, as well as the part that you have paid off?
The reality of the matter is, if your estate is valued at R 1 000 000, your "free" will is actually costing you R39 900 in the long run. But you will have to pay estate fees anyway, right?
Yes, but... say you appoint your own executor - your sister, Frankie. Once you pass on, Frankie has negotiating power to approach several estate practitioners for their best fee on the administration of your estate. Because she has this negotiation power, she may be able to negotiate a fee of 2% of the gross asset value plus VAT, or even in some instances a flat fee. This will save you R12 800 by appointing your chosen executor and paying for the drafting of your will upfront.
There really ain't no such thing as a free lunch!