National Wills Week from Monday 12 to Thursday 16 September is a good reminder to re-look the legacy you are building, rather than just focus on the will you’ve had drawn up.
Although a will is essential, holistic estate planning ensures that the next generation has financial freedom. This may seem obvious and straightforward, but there are many considerations and legalities that can make this process hard to navigate on your own.
Hilary Dudley, managing director of Citadel Fiduciary, explained estate planning is part of an investment strategy. It assists in transferring assets, deals with the settlement of any outstanding debts and taxes, and ensures your wishes are carried out.
Here are five insights to consider:
One size does not fit all
Your estate refers to all the assets you have accumulated, such as cars, cash, properties, investments, policies, loan-account claims and shares in listed businesses or your own business. Estate planning is a mechanism to protect assets and ensure it’s left to your heirs in an efficient manner.
“Estate planning is never a one-size-fits-all formula since each family’s situation differs,” Dudley explained. He said an estate plan should be tailored to one’s own specific needs. “The complexity and location of assets will differ, and both family size and where family members live should be taken into consideration. Planning for a smaller family may differ vastly compared to a larger family with more beneficiaries.”
Family affected
A will is the foundation for the transfer of wealth to the next generation, continuing your legacy even after you are gone. Legalities surrounding wills may be complex if they are not correctly drafted and executed. The last thing you want is for your will to be invalid because it does not meet the legal requirements or has ambiguities which create uncertainty, causing further emotional distress for your family and delaying the estate administration process.
“Even with a valid will, the process of winding up a deceased estate takes at least a year, provided there are no complications like disputes, tax audits or businesses that need to be sold,” Dudley pointed out. “Queries around the validity or content of a will delay the process and not having a will at all can also cause delays and emotional stress.”
Executorship is essential
“Naming an appropriate executor in your will to administer your estate upon your death is essential. An executor can either be an individual or a company represented by an individual.”
Although the Administration of Estates Act, 66 of 1965 stipulates that the Master of the High Court appoint an executor for the deceased estate in the event of the person not having nominated an executor by will, this rescue provision usually applies when a person dies intestate – that is, without a will. Not having a will can delay the commencement of the estate administration process because this cannot start without the appointment of an executor. Where there is no will nominating an executor, the appointment process requires the consent of family members.
If you nominate an individual as your executor, consider nominating an alternative person who can step in if your initially nominated executor dies, loses their mental capacity, emigrates or is otherwise unable to accept the nomination.
Transfer wealth over generations
Estate planning is key to transferring wealth effectively from one generation to the next. About 70% of intergenerational wealth transfers fail according to a 20-year study in the USA conducted by The Williams Group. It found that seven in 10 wealthy families were losing their fortune by the second generation, while nine in 10 lost it by the third generation. These odds can be beaten, though, as the study revealed one in 10 who managed to make their fortunes last more than three generations did so through strong estate planning that involved the next generation.
Talk about succession
“Death is an uncomfortable topic, but it is your responsibility to have these conversations with the ones you love for the sake of the next generation,” said Dudley.
Sharing your family’s long-term financial mission, and strategy for achieving it, gives your heirs the bigger picture and helps them understand what their role will be in achieving this for generations to come. It also empowers them to take on some responsibility while you are still around.
