Ruan Jooste Rants and Cents: Be careful when planning your legacy

Questions were raised about the estate services provider. Photo:

Questions were raised about the estate services provider. Photo:

Published Oct 17, 2023


It is the last week of wills month, which is an annual awareness campaign around a very important part of estate planning. Planning one’s own mortality is often the last thing on anybody’s mind, but failing to draw up a valid will or a proper plan can leave questions around your dying wishes – and leave your loved ones with unanticipated costs onto your estate – opportunity and otherwise. This can include legal, and administration costs, as well as executor’s fees and estate duties. And trust me it all adds up.

That is why when a couple of Personal Finance readers' queries and complaints over local wills and estate outfit Capital Legacy crossed my desk, it piqued my interest. They claim to cover such fees, they “offer a unique solution” in its quest to drive down “the cost of dying”.

The company has rapidly grown into the largest administrator of estates in the country, and if you just opened a newspaper you’d see its marketing has a wide reach as well. Also, in February this year, Sanlam and Capital Legacy announced that they were joining their wills, estates and trusts business together.

The transaction, which is still subject to regulatory approval, will see Sanlam Life sell its trust business, Sanlam Trust, to Capital Legacy and Sanlam Life acquiring a 26% interest in the enlarged Capital Legacy Group that includes the Sanlam Trust business following completion of the transaction. The merged entity will be managed by Capital Legacy.

So it is about to become an even more significant player in the estates’ space, but whether they have all their ducks in a row, to be able to do so, is a lot less certain.

For example, I asked Capital Legacy CEO, Alex Simeonides why zero-rated debit orders were still being run through former clients' bank accounts after they had cancelled their underlying long-term insurance with Guardrisk. He said that “there are times when a client cancels after the debit runs have been requested with the banks. When this happens, we either react, or at month's end go look for such examples, and refund.” But he never explained why the phantom debit runs continue to show.

The next question I put in front of Simeonides was why Capital Legacy representatives did not do a proper financial needs analysis prior to punting this life insurance product to prospective clients. I have received a few examples of deceased estates that were so small or non-existent for that matter, that such “risk cover” sold to them, would never have been executed in the first place, yet the premiums were collected without fail.

This was his answer: “If we engaged directly with the client, we will have advised on the need and if the client selected something else, this will have been recorded, and flagged and as it is client selection, we still issue. A few years back our quoting tool had some pitfalls that allowed for some of these cases to slip through. We quickly replaced this system and have not had an issue since, as well as went back to all clients we could see who could have been exposed and checked with them, together with a will review. This all said it means nought if a financial adviser who is not on our representative register engages the client directly. In this case, the adviser and her or his Financial Service Provider are responsible for the advice. As the product administrator, we need to honour the claim regardless.”

That being said (by him), it still sounds like ducking and diving to me if I’m going to stick to my beaked analogy. Should financial advice be dependent on a “system”? And should the company not take some responsibility for the intermediaries that push its products? In the documents in Personal Finance’s possession there are a few examples of estates that would never have been executed, due to it being lower than the required threshold. Yet, Capital Legacy insurance premiums on these “free wills” were paid without fail. As what I’ve been made to believe is that this model primarily works on lead referrals, the brokers do not sell products themselves. They only refer to Capital Legacy for them to sell. Can financial advisers now sell the product directly or are they accredited?

Now, why put this insurance product into question, if it is supposed to cover the legal cost of executing and winding up a deceased estate as I mentioned above? The problem is I have been made to believe that Capital Legacy is unable to honour at least 3/4 of the wills it has on its books. And many of them have insurance products attached to them. And just in my personal circle, that includes a family member, a former room-mate and my best friend. So that is all a tad too close for comfort.

Simeonides said, however, that we honour every valid claim from our clients and have well over 250 000 clients with a will and no premium. “During Covid-19, like many other companies winding up estates, we got caught off-guard by the spike in mortality. We have since completed most of these estates and have staffed up by 6x to the extent that we currently have more than 3-4 times months free capacity to take in new estates. We pride ourselves on this KPI as well that we have taken the number of estates per administrator down from + - 55 to 34. Many of our counterparts have numbers of more than 75 per administrator, but we do not believe you can make the loss of a loved one easier if you have this many files. Therefore, we probably spend more than most per estate to meet this self-imposed high expectation. We can gladly guide you as to the industry averages and poor experiences of beneficiaries because of such. In short, we are not worried at all, we have learnt some lessons, recovered from them and are very much on the front foot to honour our book.”

But he does sidestep the issue as it has nothing to do with capacity; it has to do with whether it is worth it for them to take on the estate - i.e. too small for them to make money. So they sell the insurance product, make their money on that and then walk away. The banks do the same, something I wrote about extensively in the past, and if it is not worth their while, they literally dump boxes of wills at the Master’s office and renege on their appointments. A poor family, who just lost their loved one or breadwinner, is left sitting with the mess and the deceased paid their lives for the product believing that all will be taken care of. This remains a huge issue in the industry.

And for the record the free will service is available only if customers take out policies with them – starting at a few hundred rands a month. Capital Legacy then becomes the executor, charging the allowable commission of up to 3.5% (plus 15% VAT) of the value of the gross assets of the estate, as well as up to 6% commission on all income collected after death to the date of wrapping up the estate. They also do transfers of property, profiting off the fee splits, and manage investments.

However, concerns have been raised about the quality and professionalism of the free wills service, whether financial planners are abrogating their fiduciary duties by passing on a core part of their work to a third party, and the actual nature of the insurance product. And that is something that everyone needs to be aware of. Always. Know what you buy. Know who you buy it from, and most importantly, know why you are buying it for in the first place.