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Ok. Got itWe look at the importance of estate planning in an ever-changing environment.
It is important to review your estate plan regularly to ensure that it meets your changing needs
Benjamin Disraeli once said:
'Change is inevitable. Change is constant.' In today's fast-paced life this is even more relevant. We make time to service our cars regularly and renew our cellphone contracts, but very few of us review and make time to update our estate plans.
An estate plan needs to be updated when you experience a life-changing event
When should you review your estate plan? When a child is born into your family, when you get married, divorced, have a death in the family, buy or sell a business or when legislation changes. Many people tend to focus on tax changes as playing a key role in an estate plan, but this has a very small influence on an estate plan.
An estate plan can ensure that your wealth is structured optimally during and after your lifetime
An estate plan is drawn up during your lifetime to cater for your and your family's needs. It should ensure that your wealth is structured at the outset to ensure peace of mind both during and after your lifetime, knowing that your loved ones are taken care of when you are no longer able to do so. A holistic estate plan should take into
consideration your current structure locally and offshore, as well as your current objectives.
A sound estate plan makes use of a range of estate-planning tools
1. A last will and testament
You should review this if you get married and it should cater for your marital regime. If you are married in community of property you can only deal with your undivided 50% of the joint estate. If you are married under an ante nuptial contract (ANC) with accrual, the estate plan should make provision for a possible accrual claim in your estate. You also need to review this if you get divorced. If this is not done within three months after the divorce, your ex-spouse remains a beneficiary in your estate, which might not be your intention.
On the arrival of your first-born it will be important to include provisions for guardian nominations. A testamentary trust (a trust established in terms of your will) can be a very useful estate-planning tool to provide for your minor child. It's important to note that if you don't provide for a trust like this in your will, the money could end up in the Guardian's Fund, which is not ideal. When you create a testamentary trust, you choose your trustees and have peace of mind about the administration of the trust and it giving effect to your wishes.
When nominating an executor, consider that if you appoint an individual as an executor and that person passes on, you will need to amend your will to appoint a new executor. If this is not done, the Master of the High Court will have to consult with your heirs to appoint an executor. This could cause delays in the administration of your estate. Consider appointing a corporate executor to avoid this situation.
A properly constructed estate plan will identify any liquidity shortfalls and highlight possible solutions to address such shortfalls to ensure that your estate has sufficient liquidity to settle all debt and expenses. If this is not done, the executor may be forced to sell assets to settle the debt and your beneficiaries will not receive the actual asset as intended. For example, the executor could be forced to sell your family home.
2. Business assurance
If you have business interests, a sound estate plan will consider the use of buy-and-sell agreements, key-man policies and the provision for contingency liabilities to ensure a smooth transfer of your business interests when you pass on.
If you do not have the necessary business assurance, your heir might be burdened with running the business. If you have business partners, would they want your heir to participate in the running of the business?
3. Trust deed
A properly structured estate plan will include the review of any existing trust deeds to ensure that they remain valid in terms of any legislative or regulatory changes.
It will also provide guidance as to the viability of establishing a new trust and how it should be administered properly. You need to open a separate trust bank account, the trust must be registered for tax purposes, tax returns for the trust must be submitted annually, minutes of trustee meetings must be recorded, and annual financial statements should be prepared for the trust. If you appoint a professional corporate trustee, the trustee could attend to this on your behalf.
4. Structuring
An estate plan should also consider whether you should establish any offshore structures, such as an international trust to house your international assets.
Please contact your relationship manager to schedule an appointment with a fiduciary specialist, who will assist you with a review of your existing estate plan or create one from scratch.
DISCLAIMER The Fiduciary Focus Newsletter is intended for general information purposes only and should not be construed as tax, legal or accounting advice. This communication is based on our bona fide interpretation of legislation, rules, regulations and publications. Nedbank Private Wealth provides estate and tax planning advice; however, we do not provide tax, legal or accounting advice and you are requested to consult a professional tax advisor or professional in this regard.