The importance of Estate Planning
31 March 2021 | Marili Orffer
People generally have a misconception about estate planning in that they think they require a large estate in order to have to plan their estate. This is not true. Estate planning is an effective process which can increase your wealth, safeguard your assets and honour your wishes once you have passed on.
Here are some of the frequently asked questions concerning estate planning:
- What does my estate consist of?
Your estate consists of all your assets and liabilities. In the instance where you are married in community of property, you and your spouse have a joint estate. This means that you are a half share owner in your spouse’s assets and vice versa. You and your spouse will also share 50/50 in each other’s liabilities. Where you are married out of community of property without the accrual system, you are the sole owner of your assets and your spouse does not share in your liabilities, and vice versa.
- When must estate planning be done?
It is advised that estate planning be done as early as possible. When you start sooner, rather than later, you may be able to reach your financial goals sooner. It is important to note that estate planning is not a process that should only take place once – your estate plan needs to be reviewed as you acquire or sell assets, acquire or settle debt, or welcome a new member to your family. Through the different phases of life, our financial wants, needs and obligations change. It is important that your estate plan accommodate you in every season. For example: Your plan will be different when your goal is to save pay for your child’s tertiary education, in comparison to you saving for your retirement.
- How is estate planning done?
Your estate planner will evaluate your assets and liabilities, consider your short term and long term goals and set out a plan to get you where you want to be. Your estate planner will also ensure the effective and beneficial distribution of your assets to your desired heirs.
Your estate planner will achieve the above by using estate planning tools, such as, but not limited to: drafting a last will and testament for you, tax structuring, Trusts, advise you on marital property regimes, etc.
- Why is estate planning essential?
Estate planning is essential for the following reasons:
- Estate planning will assist you in meeting your financial goals throughout your lifetime.
- It ensures that your wishes are executed after your passing.
- It can provide for liquidity in an estate. Liquidity, or rather the lack thereof, is a difficulty that we face on a daily basis when dealing with a deceased estate. This often leads to the assets being sold in order to cover liabilities and administration costs, and subsequently the Testator’s wishes are not honoured.
- It ensures that beneficiaries are protected. In the case where the deceased has minor children, the estate planner ensures that a guardian is appointed for the minors and that there is adequate safeguarding and administration of any assets bequeathed to them.
- A proper estate plan will also assist in the reduction of tax liability during your lifetime and at death.
Kindly take note that this is not a closed list and we do recommend that you see an estate planner in order to assist you. Contact us for assistance in respect of your estate plan.