Estate planning is the collection of preparation tasks that serve to manage your personal and financial concerns in the event of your death. It does not involve just managing your will. There are multiple areas that need to be addressed when planning your estate. Estate planning involves financial, economic, social and financial matters in relation to your estate, yourself, your family and your beneficiaries. If done properly, it can significantly reduce your expenses on death. It is not a once-for-all activity but a process over time. For this reason, it is good to be aware of these top tips as you continue the process of effective estate planning for your life.
9 top tips for estate planning
- Keep your will up to date. Be sure to review your will on a realistically regular basis. Update bequests, beneficiaries and other provisions where necessary. Major life events such as the death of a loved one or birth of a child/grandchild are good times to check in on your will.
- Review your beneficiaries regularly. This goes beyond the beneficiaries in your will. Your life insurance policies, trust deeds and group life funds all have beneficiaries. Your family situation will change over time, with either losses or additions to the family. Who benefits from your will or policies might need to reflect the changes that occur in your life.
- Where you have minor children, be sure to appoint guardians in your will. Where there is one surviving parent, that parent becomes the guardian of the children. However, having an appointed guardian becomes relevant in the event of the simultaneous death of you and your spouse. While a difficult matter to consider, planning this ahead of time allows for your child to be protected with the guardian of your choice if both of you pass at the same time.
- Appoint trustees for your minor children. Trustees are there to administer any money inherited by your children via a trust. This way, their inheritance can be protected and accessed at the appropriate time. Creating a trust and appointing trustees for the money you leave to your minor children is crucial. Failure to do so means that the Master of the High Court Guardian’s Fund takes control of the money for safekeeping. This could make matters more complicated.
- Create a record of where all of your important information can be located. Give this record to a loved one or someone you trust so that in the event of your death, all necessary documentation can be found.
- Ensure you have sufficient liquidity in your estate. In the event of your death, you do not want to be left without enough liquidity to pay off your liabilities like your mortgage bond or vehicle finance. You want to avoid the forced sale of assets like your family home. Life insurance is an effective way to provide you with sufficient liquidity on your death.
- Minimise your estate taxes. Taxes such as estate duty and capital gains tax could be payable on your estate. You can use a life insurance policy to offset the taxes payable. A carefully worded will can also go a long way to reducing what needs to be paid. Donate where appropriate. Spouses may donate any amount to one another tax free. To your children, trusts and other persons, you may donate a total of R100 000 per year, free from donations tax in terms of our current legislation. By making appropriate donations, you may convert a larger estate to a smaller one and thereby avoid significant estate taxes.
- If you have offshore assets, execute a separate will. Each country has its own laws dealing with inheritance and wills. Your South African will might not meet the requirements of the law in the country where your offshore assets are found. Draft a separate will for those assets and execute it in terms of the law of that country.
- Make a living will. A living will provides directions for the care you wish to receive if you are sick or injured and are physically incapable of communicating in person where there is no hope of recovery or significant improvement.
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