Ten Estate Planning Tips
- Review or Update your will
- Review beneficiaries
- Trusts for Minor children
- Appointing guardians for minor children
- Records and files
- Donations
- Estate taxes
- Estate Liquidity
- Offshore assets
- The Living Will Society
1.Review or Update your will:
At certain times of you r life it is CRITICAL to review or update your will. Some of these occasions are : When you buy or sell a house; when you marry or divorce; when you have children; when your spouse dies; when your financial circumstances change dramatically. Having a Will is the cornerstone of any estate plan. For anyone with children the consequence of not having a Will may be devastating for those children. Make a will and then review it regularly. Also make sure that your family know where your will is filed. If you are not around to show them it could have disastrous consequences.
2. Review beneficiaries:
With changing circumstances you may need to make changes to your will to take account of new beneficiaries. You may also need to change beneficiaries in life insurance policies, trust deeds and other documents which may list beneficiaries. As your family situation changes over the course of a lifetime, you may need to change the names of beneficiaries not only in your Will but also in life insurance policies and other documents that list beneficiaries, such as trust deeds and group life funds.
3. Trusts for Minor children:
A common mistake that many people make is to confuse guardians and trustees. A guardian looks after and acts in the capacity as a parent to minor children whereas trustees are appointed in the will to look after the monies inherited by the minor children and to ensure that those monies are adequately invested to provide an income for the minor children and to preserve the capital (as far as possible) to pass this on to those minor children on reaching a certain age. If trustees are not appointed for minor children (ie those under the age of 18) then the minor’s cash inheritance will and must be paid over to the Guardian’s Fund which is administered by the Master of the High Court.
4. Appointing guardians for minor children:
People overlook this important aspect in their will generally assuming that the surviving parent will remain the guardian. However the chance exists that BOTH parents may die in an accident or within a short period of one another. In this case it is really important to specify a guardian in the case of their joint deaths. The High Court has ultimate jurisdiction over all minors and in the event of both parents dying without nominating a guardian this could be taken care of by the High Court. But, do you really want some other person to make this call on your behalf? Deciding who should raise your children in the event of your death is a difficult conversation to have but at least it is a conversation to have while you are both still alive. Take the time to discuss this carefully and then stipulate the guardian in your will.
5. Records and files:
When someone dies it is traumatic for those left behind. They have the burden of coping with their loss, the funeral, possibly injured family members. If your records and files are in a shambles how much more difficult this becomes for them. It is critical to keep a list of all essential information and to explain where this information is to be found. Make copies of your will and explain where the original will is filed. Let a trusted family member or friend have this list. It can sometimes be years between when a will is made and when that person dies. The person who drew the original will may have been long forgotten by the family. If their name and address and contact details are easily filed it saves a lot of time and effort.
6. Donations:
At present in terms of section 56(2) of the Income Tax Act , a person is allowed to donate up to R100,000 each tax year, free of donations tax, to children, trusts or other persons. Spouses may donate any amount to one another tax free. A large estate can be significantly reduced by making donations.
7. Estate taxes:
In terms of the Estate Duties Act, estate duty will be paid in circumstances at a rate of 20%. It is possible to limit both estate duty and Capital Gains Tax depending on how big your estate is and what your family situation is. This has so many variables that we simply mention it here for what it is worth. You will need to discuss these implications with your professional adviser.
8. Estate Liquidity:
Do you have sufficient cash in your estate to pay estate liabilities such as vehicle finance and higher purchase agreements, conveyancing costs and executors fees, estate duty and capital gains tax. If no funds are available it could result in a disastrous consequence such as the sale of a family home to pay these costs. An easy way to ensure that there are sufficient funds it to take out a basic life insurance policy..
9. Offshore assets:
Do you have money, shares, property or other assets offshore? If so this means that you will also have a foreign estate to deal with. Different laws apply in different countries which deal with their own wills formalities and the winding up of estates. Your will probably find that your South African will won’t meet with the legal requirements of the country or countries outside of South Africa where you have assets. You may need to sign a separate will to comply with each country’s legal requirements. In the case of a substantial estate you should consider taking professional advice from an estate professional in that country and contemplate signing a separate will for each foreign jurisdiction dealing with those assets.
10. The Living Will Society:
This society is spreading the concept of a Living Will . This document signed just like a will dealing withy your assets encourages people to make informed choices about how they wish to be treated in the event that they are unable to communicate their needs. The Living Will was devised to stand as a declaration of one's non-consent to artificial life-support in the event of one being unable to communicate when dying.
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