WHAT EXACTLY IS ESTATE PLANNING?
Estate Planning is the process of arranging and managing your assets so that when you pass away, your estate is distributed according to your wishes and direction. The best way to ensure that your final wishes are realized and are of legal force and effect, is to have a valid Will in place. Most of us are not sure how our final days will be spent on this earth, it is therefore important to make a Will while you still have capacity to do it.
WHY IS ESTATE PLANNING SO IMPORTANT?
There are numerous reasons as to why is so very important – let us look at these 5 most important reasons you should get your estate in order.
- Protection of your Heirs and Beneficiaries
Many of you reading this are probably parents and some might even have younger children. Should you pass away while they are still young, it is very important that you have a plan in place for how they will be taken care of.
In your final will and testament, you can nominate a Legal Guardian. This is the person that can step into that parent role, should yourself and the other parent of your child .
There are mothers out there who find themselves in a situation where they do not trust that their child’s other parent will assist them in managing their inheritance well and for the benefit of the child. In such an instance, it is advisable to include the creation of a Testamentary Trust in your will; that is a Trust that is created once you have passed away. Then nominate a Trustee who is someone that you trust to assist your child manage their inheritance effectively.
We may want to leave our assets to loved ones who we do not trust to manage their inheritance well and use it for their best interests. You would like to leave something to this loved one, but you worry that they will squander their inheritance on things that won’t benefit them in any way. In such an instance, you need to structure your estate plan in such a way that your heirs/beneficiaries will be protected from their own bad decisions through your Will by making provisions for a Testamentary Trust, which will manage such an heir’s inheritance.
If you have a dependent with special needs, then your Will can direct that your estate make provision for them to have their needs catered for at a specialized care facility.
Having a valid will is important, especially when you have people who are dependent on you and the income you provide.
- Ensure that there will be efficient and effective administration of your estate
The second reason for Estate planning is that when a person passes away, their estate needs to be reported to the Master of the High Court. This is done by completing the necessary reporting documents and submitting them to the Master of the High Court.
The best person to take charge of this process is the NOMINATED EXECUTOR. When you do your Will, you will nominate an executor therein. It is highly recommendable that you nominate an executor who has the required knowledge and experience in dealing with the administration of deceased estates.
Should you die without a valid will in place, what will usually happen is that your family would have to submit a nomination form together with the reporting documents to the Master of the High Court.
A nomination form is a form in which your family members nominate a specific person to be appointed as an Executor for your estate.
This can easily spark a conflict between your loved ones because they might not agree on who needs to be nominated as executor. The conflict can be detrimental to your estate because while your family is busy fighting, your assets are not going to be .
So do ensure that you have a valid Will in place, for your family’s peace of mind.
- Reduce the impact of taxation on one’s estate
Following on from the previous point – there is a saying by Benjamin Franklin that states: “Only 2 things in life are certain: death and taxes”. Your estate will be accountable for upon your death. It is best to plan for them while you are still alive, so that the tax impact will not compromise your heir’s inheritance.
- Create provision for liquidity in one’s estate.
There are certain costs which arise when administering a deceased estate.
For example, if you had a house and that house needs to be transferred to someone, transfer costs to transfer the property into the name of someone else would have to be paid for.
Provisions for essentially means provisions for having money available. That money will then cover such costs, so that your beneficiaries do not have to take money out of their own pockets to be able to inherit an asset from your estate.
Should you partner with an , they will be able to assist you in informing you of how you can utilize certain insurance products to provide for liquidity in your estate.
- Consideration of individual circumstances
The last valuable point to bear in mind is that all of us have an estate, but our estate plans will not be identical because we all have different circumstances.
If you pass away without a valid will, your estate gets distributed in terms of intestate succession law, where your heirs are already chosen for you.
This might not be ideal when your own personal circumstances are considered. It is important to create the best plan for when you pass away, while you are still alive.
Every person should have a Will, regardless of their asset value. A lot of people put off the drafting of their will until a certain event occurs, such as getting married, having a child, buying a car or house. I would encourage you to start with whatever you’ve got; at whatever stage of life you are. Knowing how to plan for and manage R1000, means who will be better equipped to manage your estate as it grows.
Author:
Boipelo Parage – Non-practicing Attorney at Nexus Fiduciary Services.
