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Ok. Got itProtect your loved ones' financial future with proper estate and tax planning.
While we can't control life and death, we can control how we plan for it
Death isn’t really a topic that any of us enjoy dwelling on. But it’s a reality that we cannot avoid. While we may not have any control over how and when it happens, we do have control over how we plan for it and how it affects our loved ones.
One of our most important priorities is to ensure that our families and loved ones are taken care of when we pass away. But to ensure they truly benefit from your wealth, requires careful planning.
Six tips for effective estate and tax planning
1. Make sure you have a valid will
Arguably the most important document we all need to have is a will that reflects our current wishes as this will become our voice when we no longer have one. Ironically, this is also often the most neglected document. The saying, ‘where there’s a will, there’s a way’ sounds clichéd but in fact, when it comes to estate planning, you can apply it, and having a valid will can save your loved ones from added heartache and frustration when you die.
2. Make provision for covering the costs of dying
On death, there are various costs that will need to be settled:
Make sure there is sufficient cash in your estate to cover these costs, otherwise your executor may have to sell assets to pay these costs. Reporting an estate and getting letters of executorship can take a few months, so if your family are financially dependent on you, it's important to take steps to ensure they have access to cash. There are different ways to do this, for example:
3. Invest in a retirement annuity (RA)
An RA is a highly tax-efficient investment vehicle – both during your lifetime and after your death. Your RA contributions are tax-deductible (up to certain limits) and your returns are tax-free. On death, no estate duty will be payable on the tax-deductible contributions but excess contributions will be subject to estate duty. Proceeds can be paid to your beneficiaries immediately and there are no executor fees. What's more, your beneficiaries have the option to take a cash lump sum or receive an annuity or yearly income.
4. Structuring your wealth optimally
There are different ways to structure the legal ownership of your South African and international assets for during and after your lifetime. These include the following:
These ownership options all have different estate- and tax-planning consequences. The ownership structure determines, for example, how your assets will be distributed after your death, and whether you can make provision for your dependants. To make an informed decision about which ownership option may be best for you, it’s essential to understand the impact of each and to get professional advice.
5. Consider setting up a trust
A trust is a useful estate planning tool that can help protect your assets after your lifetime for your beneficiaries. By creating a trust, you give someone else – namely the trustees – the power to manage your assets on your behalf to the benefit of your beneficiaries. Different trusts have different purposes, benefits and limitations, so it is important to ask an expert what type of trust (if any) is appropriate for your specific needs and circumstances. For example, a testamentary trust is created in your will and only comes into existence after your death. It is often used to protect the interests and inheritance of minors or vulnerable family members. So, if you have small children, a testamentary trust can provide for their financial needs.
6. Plan for significant life events
Planning for significant life events helps ensure your finances and assets are structured optimally for these events and their impact.
Whether these events are predictable and within your control, like getting married, or unpredictable and out of your control, such as being in an accident and becoming incapacitated, putting the right plans in place can help ensure you and your loved ones make the most of your assets the way you intended, whatever happens.
Estate and tax planning can be complex and personalisation is key
As demonstrated above, there are ways to ensure your family and loved ones benefit from your wealth the way you intended after you pass away. However, the different legal ownership structures and their tax implications are complex, and what may be a good option for someone else, may not be appropriate for you. Getting expert advice is therefore in your and your family's best interest.
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Connecting you with expertise, advice and ways to structure your wealth optimally both during and after your lifetime.
We connect you to so much more than great advice. We provide insights, technical expertise, global opportunities, and a wide range of solutions and services.
Read our brochures for more information on how our globally integrated advice will connect your current financial reality to the future you want.