Did you know that you already have an estate plan? That is right. Our government has general, default laws that apply in the event of your physical incapacitation or death without a valid will called intestate succession. Most times these laws will not manage your estate how you would want it to be managed – you would essentially be letting a complete stranger make decisions regarding your health and your assets. You do not want this to happen, so it is best to create a plan that manages your estate on your terms.
We know that being sick or dying is something you would prefer not to think about. You may also think that setting up an estate plan is expensive, or that you are too young to have one, or do not have enough assets to make such a plan worthwhile. It is important for everyone to prepare an estate plan. By having one in place, you will remove any doubt around your wishes when it comes to protecting your family, loved ones, and assets, in case you are unable to do so.
What is estate planning?
Estate planning is the act of preparing for the transfer of your wealth and assets in case of illness or death. Items that are part of your estate include your financial assets, life insurance, pensions, house, cars, personal belongings, and debts. At its core, an estate plan can be broken down into two phases of time:
Before death. Examples of some of the important decisions to make at this stage include Instructions for how to manage your finances in case you are unable to do so due to illness, injury, or old age, and whom you would want in charge of carrying out these instructions.
After death. Examples of some of the important decisions to make at this stage include: Assigning guardianship over your minor children and how your assets will be distributed across your beneficiaries.
Key documents of your estate plan
Last Will and Testament: Your will is the document that determines who will inherit any assets if no joint ownership or beneficiaries are listed. If you did a good job at naming beneficiaries for most of your assets, this document will mostly be reserved for personal belongings. However, a Will has other important features, such as naming a guardian to look after your underage children, and naming an executor, the person who is charged with ensuring your wishes are carried out.
There are some situations where you may not need a Will. First, where you have no minor children and you do not own anything of value or that you want to bequeath to someone. Second, where you do have assets, but all of them are transferable without a Will, these include retirement accounts, assets like homes or bank accounts that are owned jointly, and any assets that will transfer on death to a named beneficiary.
Trust: You as a trustor will assign a trustee (usually also yourself) the right to hold title to your property or assets for the benefit of your beneficiaries. A trustee is named to oversee your estate, allowing for increased flexibility, privacy, and control, even after you pass away. For this reason, trusts are more expensive than basic Wills. Keep in mind that there are many different types of trusts and an estate-planning professional can help you decide which one is best for you.
Taking the next steps
The best strategy for estate planning is to focus on what you would like to happen today, rather than anticipating events and circumstances into the future. A solid estate plan is an important step to ensure that you and your assets are protected in the worst-case scenario. While you now have the basics, this is just the beginning. The laws of the state change overtime and every personal situation is different, we highly recommend speaking with a wealth manager to help you navigate this journey.
Head of Investments
Sphelele joined Inkunzi Wealth Group in 2013 and has 9 years’ experience in the investment management industry, having had previously worked for Allan Gray and Regarding Capital Management. Apart from being an active member of our investment team, Sphelele is also responsible for the management of our business. He holds a BCom degree in Economics from the University of Pretoria.