Empowerment investment holding company African Rainbow Capital (ARC) has acquired a 25% shareholding in specialist financial services firm Capital Legacy for an undisclosed consideration.

Capital Legacy is a major player in will drafting and estate administration.

Operating since 2012, the company has identified improved, efficient and cost-effective solutions to will drafting, estate planning and execution.

These solutions are significant in South Africa, where only one in four people has a valid will in place at death.

Inefficiencies in estate planning could result in as much as 30% of the value of the estate being used to cover costs.

Moreover, execution could take years and not months to conclude in the absence of adequate planning.

This poses many financial risks to the dependants of the deceased. These include financial concerns, such as a lack of liquidity to settle debts, estate taxes and other legislated costs relating to the administration of the estate.

For example, if a person dies intestate (without a valid will in place) with minor dependants, those inheritances may either be reduced to cash and transferred to the Government’s Guardian’s Fund or transferred to the minors’ appointed guardians – as opposed to what the deceased originally intended.

In addition, the estate is distributed according to the laws of intestacy and the specific regulations thereof.

Capital Legacy offers the services and expertise required to provide the planning and documentation every individual needs to ensure his or her assets are dealt with properly and efficiently after death.

This role – referred to as a fiduciary responsibility – covers estate planning, financial planning to provide funds for costs arising upon death, and estate and trust administration.

Professionals with both legal and financial knowledge advise clients about their unique needs, such as whether to include provision for a testamentary trust in their will, and what costs their estate is likely to be liable for one day.

In addition to the legal advice provided, Capital Legacy offers financial solutions to specifically make provision for the potential impact of legislated costs associated with an estate.

The transaction allows ARC to complement its existing financial services investments and facilitate synergistic opportunities between Capital Legacy and companies in which ARC is invested.

Capital Legacy stands to benefit from ARC’s empowerment status as it will improve its own empowerment rating.

This is likely to result in Capital Legacy drawing more business flows and thereby improve its overall business success.