Your Last Will and Testament- A Psychology of Trust and Fiduciary duty

Trust

17th Century theologian, Isaac Watts, once said that “Learning to trust is one of life’s most difficult tasks.” As we examine this quote, we can relate that what stood true to the concept of trust in the 17th century, still holds true today. In fact, we can add further that this will always be a reason for concern. The commonality through the ages and beyond is that this is what being human is all about. According to the Merriam-Webster dictionary, Trust is defined as the,“assured reliance on the character, ability, strength, or truth of someone or something.” Now that we understand what trust is we can accept, that to trust is to know. By know we refer to the idea that we will have total assurance and confidence in whom we have placed trust, more especially when we are not around. This person or institution will carry out our wishes as if we had said or done so ourselves. They step into our shoes and ensure that our needs or interests are taken care of.

Needs

Trust becomes essential when needs are required to be met. The iconic “Theory of Human Motivation” more commonly known as Abraham Maslow’s hierarchy of needs, describes five levels of needs that drive human motivation.

The basis of Maslow's theory is that we are motivated by our needs as human beings. Additionally, if some of our most important needs are unmet, we may be unable to progress and meet our other needs. This can help explain why we might feel "stuck" or unmotivated. It's possible that our most critical needs aren't being met, preventing us from being the best possible version of ourselves. Changing this requires looking at what we need, then finding a way to get it. Trust is a crucial need, as a human being.

The psychology of money management and leaving a legacy

As humans when it comes to money, no one is entirely rational. We don’t know how to budget and even if we do have a budget, we never follow it. Often, we find it difficult to save from monthly income although we believe it would be in our best interest to do so. We know that we need a financial plan but often put off the work involved. Somehow it never happens. We also know that when we are not around, we need to provide financial security for the needs of our family. We know the importance of this, right?

Yet, did you know that according to data provided by the Master of the High Court in South Africa, more than 70% of deaths reported relate to South Africans who pass away without a valid Last Will and Testament? This is an alarming statistic because what this means is that inheritance in such matters devolves according to the Law of Intestacy. Simply put, next-of-kin are identified according to the blood line and automatically qualify as heirs to the estate. A Will provides a Testator/ix the freedom of testation which means that a person has the legal right to distribute their estate to whomever they wish. Although, a simple document, a Will is the cornerstone of a financial plan. In the financial services industry we commonly refer to it as a “true balance sheet “. We know that we will not be around at the time of death and therefore the Will tells your story and carries out your wishes when you cannot.

It’s worth thinking about money as something with which you have a complex relationship. Your money (and more broadly your personal finances) is not a rigid phenomenon, but rather a complexity of data points, challenges and opportunities you revolve around, interact with and have feelings about. You make decisions about money that impact your financial situation and these impacts in turn, reciprocally affect your feelings and future behaviours. It’s actually a relationship that evolves over a lifetime. Your relationship with money is complex, but it need not be complicated.

Emotion and money

Some emotions in relation to money are fear, guilt, shame and envy. It’s worth spending some effort to become aware of the emotions that are especially tied to money for you because, without awareness, they will tend to override rational thinking and drive your actions.

What’s there to be afraid of? The possibilities are as varied as there are individual stories. Common fears include the fear of not having enough, the fear of looking incompetent, the fear of provoking envy and the fear of being exposed or humiliated. Guilt and shame are not the same emotion. Guilt has to do with feeling bad about a negative impact you’ve had on others, while shame is a feeling evoked when you let yourself down or don't live up to your own sense of what’s right. You might feel guilty because you have more than your friends, or you haven’t been particularly charitable, or you’ve had money come too easily. Shame is one of the most common and powerful emotions associated with money and personal finance. It is a prime reason people avoid doing what they know they should. It's natural to want to avoid exposure in relation to something you're ashamed about.

Here are just some of the possible versions of shameful feelings related to money:

• I don’t have enough money.
• I’ve avoided thinking about finances.
• I’ve avoided doing what I’m supposed to do about finances (creating a safety net,planning for retirement, sensible budgeting and proper estate planning).
• I’m really ignorant about all of this. I spend too much.
• I buy stuff when I’m unhappy. Shame interacts with avoidance to create a vicious cycle. When you’re filled with shame the natural tendency is to avoid facing whatever is making you uncomfortable. That avoidance itself leads to additional shame and more avoidance. Next thing you know your taxes are overdue and it’s six years since you decided to finally make that appointment to see a financial planner and it still hasn't happened.People who avoid tackling financial necessities often label themselves a procrastinator and assume they are just lazy or undisciplined. That’s judgmental and not helpful. The psychological dynamics of avoidance underlie what we tend to call procrastination. We’re hard-wired to deploy various kinds of avoidance manoeuvres when encountering something that is anxiety provoking or uncomfortable. The tricky thing is that in the very short run, avoidance works to reduce anxiety and because it works, you’re inclined to do it again in the same circumstance.Here’s how it unfolds. You’re thinking about sitting down and taking a hard look at your financial situation and creating a realistic financial plan. But just thinking about it makes your anxiety level rise, because you’re afraid you will not be able to face the reality that, for example, you have nowhere near enough saved for your kids’ education. That anxiety leads to avoidance. You postpone the task and distract yourself. At that moment, your anxiety level immediately drops, giving you positive reinforcement for the avoidance. You repeat this cycle over and over but each immediate drop in anxiety doesn’t quite bring you back to the previous baseline level of distress and over time, your overall level of anxiety increases and increases. Contrast this pattern with confronting the dreaded task. As you face the facts, your anxiety temporarily increases. If you stay with it, however, the overall level of anxiety will steadily decline. You have to tolerate that short-term increase in distress to benefit from the long term decrease in anxiety. In the end, the lesson is that reality is always your teacher.The Psychology of money- effects of Family and childhood influences

• Every family has its own unique psychology of money. What can be spoken about, who should be in control, what money responsibilities are assigned to what gender and the importance of money. Additionally, there are always stories about money that are part of a family’s identity. Maybe a serial entrepreneur grandfather lost the family fortune, sparking an excessive conservatism in subsequent generations. Or a brilliant parent was seen to have been cheated out of his/her proper destiny. You may have experienced subtle pressures to right the wrongs perpetrated by or suffered by previous generations. Or you may feel internal pressure to oppose the family money mentality. If you’re the first in your family to succeed you might want to give back to the rest of the family and neglect your own financial needs. These factors have significant influence over how we use, protect and part with our finances.How to harness money emotionsEmotion isn’t all bad. It tells you what you’re passionate about, what really matters to you. It makes you feel alive. Anxiety isn’t all bad either. Mild to moderate levels of anxiety are motivating. Harness them to tackle what you need to face and know that you will feel better when you’ve done so. The key is self-awareness. Much of our emotional world is sub-conscious. It’s not that hard to access if you know what to look for and have a blueprint for the kinds of emotions and family stories that can influence your personal relationship with money.

The Last Will and Testament- a cornerstone of Fiduciary Trust

The culmination of an individual’s decision to plan, draft, and more importantly sign a Will, stems from the fact that they have addressed:

• Their understanding of a bespoke need,
• The Trust that is associated with that need,
• Psychological associations to money and
• Familial influences over moneyIt is envisaged that as soon as an individual overcomes these psycho-social barriers, they can plan for and leave a legacy to ensure generational wealth protection. Having a Fiduciary duty is defined as a legal obligation of one party to act in the best interest of another. A fiduciary is therefore an individual in whom another has placed the utmost trust and confidence to manage and protect his/her property, money or affairs. One type of a fiduciary relationship is that of an executor/ix of an estate, namely an individual appointed to administer the last will and testament of a deceased person. The executor's main duty is to carry out the instructions to manage the affairs and wishes of the deceased. Trust and confidence in an executor/ix is a determining factor in the choice made.So what’s all the fuss about and why is a Will important ?1. It saves time, money, and stress for your loved onesAll deceased estates have to be reported to the Master of the High Court to start the legal process overseeing the distribution of assets. However, when you don’t have a will, the court process — known as intestate administration — can get especially complicated. Without a will, the court has to name an administrator to administer your estate and this can be time-consuming, expensive, and even contentious for your loved ones. One of the top reasons to have a will is to streamline this court process. When you have a will, you can choose the person you want to handle your estate, making it easier for your loved ones.2. It determines who will manage your estateAs mentioned above, deciding who will handle your estate is a great reason to have a will. When you draft a will, you become a “testator/ix” and have the opportunity to nominate an “executor.” This is the person who will be in charge of wrapping up all your affairs. Being an executor is an important job. Their responsibilities may include everything from closing bank accounts to liquidating assets. You should choose someone who is capable and who you trust to carryout these activities. If you don’t choose an executor in your will, the court will pick one for you — and it may not be the person you ordinarily would have chosen.3. You get to decide on who gets your assets and property — and who does notMost people know that a will lets them decide who will get their property. As the testator, you can name people as beneficiaries for specific assets. You can also name beneficiaries for any property that you don’t list — the “residuary” of your estate. When your executor handles your will, they’ll be in charge of distributing these assets. You might not be aware that you can also use a will to help ensure that some people don’t receive anything. For example, you might want to prevent an ex-spouse from receiving an inheritance. Or, if one child received your support through school, you might want to make sure a second child gets their fair share, too.4. You get to choose who will take care of your minor childrenIf you’re a parent, you can use your will to nominate a guardian for your minor children. The surviving parent will usually get sole legal custody if one parent dies. However, if both parents pass, this is one of the most important reasons to have a will. A guardian will be responsible for all your children’s daily needs, including food, housing, health care, education, and clothing. If you don’t nominate a guardian in your will, a court will have to choose one for you. This could mean that someone you would not have chosen will be raising your kids. It’s an ideal opportunity to utilise a Testamentary/Will Trust fund as a fiduciary vehicle to protect minor children’s inheritance.5. What about your “Fur Babies”? Provide a home for your petsOwning a pet is a great reason to have a will. With a will, you can make sure that someone takes care of your pet after you die. The law considers pets to be property, so you can’t leave any assets to your pet with your will. You can name a beneficiary for your pet, leaving them to a trusted friend or family member. You can ask that person to act as a caretaker or guardian for your pet, and even leave them funds to provide for your pet’s care.6. You can leave instructions for your digital assetsYour digital assets may include online accounts, such as Facebook or email, and digital files or property (photos, videos, domain names, etc). In your will, you can name a digital executor to manage these assets after you pass. You can leave them to specific people, and also include information on how you want them handled (e.g. if you’d like an account closed).7. You inevitably lower the potential for family disputesIf you have complicated family dynamics, there’s a good reason to have a will. When you die without a will, your family will have to guess at what your final wishes were. Chances are, they won’t always agree. This ambiguity can create friction, and even feuds, which sometimes lasts a lifetime. Creating a will solves the problem by eliminating the guesswork.

8. You can support your favourite causes and leave a legacy

Many people want to leave a positive impact on the world after they pass and a great way to do this is to support the charities or causes you love most. When you write a will, you can preserve your legacy by leaving a part of your estate to a charitable organization. Along with this, you become eligible for a tax deduction. This can be a great Estate planning tool to minimise taxation.

9. Provide funeral instructions

You may not want to think about your own funeral. But if you do think about it now, and leave instructions with your will, you can lessen the burden on your loved ones after you pass. While these instructions aren’t legally binding, they can give your executors and loved ones some guidance on your wishes. When you include instructions, you can name a funeral director to manage the process, give suggestions for the service and location, make requests for your final resting place, and more.

10. Have a Living Will

Euthanasia is illegal in South Africa. One way to ensure that your wishes are carried out, should you be kept alive under artificial conditions, is by having a Living Will. This document outlays the Testator/ix wishes to be removed off a ventilator when diagnosed to be in a “vegetative state”. What this essentially does, is that it takes the burden away from family members to have to make such a traumatic and sometimes controversial decision.

In essence we have covered the complexities of the emotion trust, emotions of fear, psychology of money and attitude thereto, familial associations or influence of money and basically reasons as to why people tend, not to give the Estate Planning, Will drafting and sign-off the due attention it deserves. Some people procrastinate the drafting or updating of their will because they assume their loved ones will automatically get an inheritance. This is not true.

A will only addresses your current circumstances. You should update it over time as your needs and the people in your life change. When you draft or update your will, you can look after your loved ones and give them an easy blueprint to follow, after your demise. This gives many people peace of mind, making it one of the most important reasons to have a will. It’s easier than ever to make a will. You’ve worked for yourself and loved ones. Why not address your psycho-social concerns and draft your Will? At FNB Fiduciary we can help you draft a valid Will as well as store it in our safe custody facility . Follow the link for more detail:

https://www.fnb.co.za/insurance/deceased-estates/wills.html

Burying your head in the ground will not make your concerns disappear but the fate of your family will remain your responsibility. You have now been equipped with enough education, so do the right thing. Don't fall into that statistic of 70% of South African having no Will in place. Draft your Will, but more importantly, sign it correctly to give effect to your estate wishes.