Planning your estate

What is Estate Planing?

An ‘estate’ is comprised of all the assets and liabilities that the so-called ‘estate planner’ accumulates during his or her lifetime – such assets and liabilities which will be left behind at his or her death.

Estate planning is then the process of creating and managing a programme to preserve or protect the assets as well as setting out how they would like to distribute such assets at their death.

A Will is not the only means to do this and although commonplace, it is not always the best means to most effectively and most beneficially distribute assets in accordance with the estate planners wishes.

So What Are Options?

When planning an estate, a multiplicity of options are available. Some of the tools which are used are:

• Last Will and Testament
• Bequests
• Trusts
• Donations
• Choosing an appropriate matrimonial property regime
• Using insurances
• Annuities
• Tax Considerations

Some of the Interesting Aspects of Each Tool

With the Will and Last Testament, there are certain requirements to make such a Will valid:

• The Wills Act sets out certain formal requirements to execute a valid Will;
• A person can validly execute a Will from the age of 16;
• A person can sign as a witness to a Will at the age of 14;

When drafting a Will, it is important that careful consideration is made when nominating the executor and trustee.

Consideration should be made when deciding on Heirs and Legatees – the former being a person who inherits the residue of the estate (that which is left after debts have been paid and legacies distributed) and the latter being a person who inherits a specific item or amount of cash specifically bequeathed to them.

With a Trust the Trust Property Control Act defines the terms of a trust.

• A trustee is the owner of the trust property and is required to administer it in terms of the trust deed.
• Beneficiaries can be named or belong to a specified group.
• Essential elements for the creation of a trust are
  • A serious intention to create it;
  • Such intention is expressed in a manner which is legally valid in order to create an obligation;
  • The trust property must be determined or easily determinable;
  • The trust object must be clear and lawful.
• There are certain types of trusts, namely:
  • Inter Vivos (Living) Trusts;
  • Various Kinds of Inter Vivos Trusts;
  • Testamentary Trusts;
  • Family (Private) Trusts;
  • Special Trusts

The differences between these trusts is beyond the scope of this article and you are welcome to contact us if you have any questions regarding trusts.

With Donations, an estate planner may choose to donate one of his or her assets or cash to another during his lifetime, such donations are regulated by the Income Tax Act.

Donations are taxable, but there are certain exceptions such as:

• Donations between spouses;
• Donations by natural persons which do not exceed R100,000 per year;
• Donations where the done will not benefit until the death of the donor;

This list is not exhaustive and for a full exposition of donations, feel free to contact us.

Matrimonial Property regimes have already been explained in a previous article, thus for the sake of brevity, they will only be mentioned:

• Marriage in community of property
• Marriage out of community of property
  • With Accrual
  • Without Accrual

Assurance Policies are important as understanding the long-term financial needs, allows the estate planned to plan for them.

Proceeds can be used:

• To replace income that the planner would have generated to maintain his dependants while he or she was alive;
• Pay estate expenses such as funeral, income tax, estate administration, estate duty, etc;

Reasons For Revising the Estate Plan

Certain events which may come about during the lifetime of the estate planner should encourage the revising of one’s estate plan. Some such events are:

• Divorce;
• Sale or donation of asset specifically mentioned in Will or Inter vivos trust;
• Newly Married;
• Birth of a child or grandchildren;
• Acquisition of significant property or other assets;
• Downturn or significant increase in planner’s financial position;
• New business ownership;
• Changes in law which may impact the estate plan. 

Final Word

Should you be considering your estate plan, whether it is a new one, amendments to a current one or just concerns surrounding estate planning, feel free to contact us.

We will assist in deciding whether it is practical and viable to amend your plan and documents or to create an entirely new plan and documents for your estate plan.