Estate Planning

The purpose of estate planning is to ensure that your heirs may reap the benefits of your life-long toils after your death.

When a person dies, all their assets and liabilities, as at the date of death, form part of their estate. If your estate is not planned thoroughly, it may unnecessarily expose the estate to estate tax which you should at all times try to minimize. The only way to achieve this is through proper planning of your Will and estate, and also ensure that there is sufficient cash to cover the liabilities in the estate to prevent a forced sale of assets.

All decisions that one makes regarding obtaining and use of assets during one's lifetime, and the division of these assets after one's death, are estate planning decisions.

The dangers of not having done proper estate planning are the following:

- Your heirs may be exposed to several disadvantages
- The finalization of your estate may be unnecessarily delayed
- The extent of the inheritance may be diminished by a shortfall in the estate

The shortfall in the estate may further cause:

- Interest-bearing claims attracting further interest because they are not completed speedily enough
- Unnecessary taxes such as capital gains tax and VAT to be payable
- Assets to be sold in an economic climate where reasonable prices are not attainable
- Forced sale of assets. For instance a farming concern, that may have belonged to a family for generations
- Heirs to be left in a financial crisis while trying to avoid the forced sale of estate assets
- Friction to arise between heirs if, for instance, some assets cannot be divided equally

Estate Planning Procedure

- Have a practically executable and well-planned Will drawn up.
- Select a qualified Executor with a proven record to handle your affairs in the interests of your heirs and other parties involved after your death.
- Plan your estate for the eventuality that you and your spouse die shortly after each other or simultaneously.
- Plan for heirs that are minors. Consider in such instance the creation of Testamentary Trusts from which you can provide for the needs of such minor heirs.
- Plan your estate that the effect of Income Tax, Estate Duty, Capital Gains Tax and VAT are minimized or eliminated.
- Plan to include sufficient cash reserves to cover all claims, administration costs, taxes and cash bequests.
- Store important documents and contracts to be accessed by your Executor safely. Inform close family where to find your documents and contracts.
- Ensure that your estate planner informs you of all the costs involved in the administration of an estate.

by Salome Tyrrell

Senior Estates Administrator

To be continued...