We don’t like to think about our mortality. At the same time we don’t want to leave our affairs in a mess for our family and friends to sort out. Not giving careful thought to our estate could reduce the benefits to our beneficiaries. It could also be financially harmful to them.
The starting point: what do I own and what do I owe?
- Write down all of your assets. To ensure you account for them all, check your records and check with your accountant and any other financial advisers you have. It is funny how sometimes assets pop out we never knew we had.
- What are my liabilities? Most of the information should flow from our assets. Don’t forget things like sureties you may have provided – these may be called up on your death. If so, you need to plan accordingly. You also need to be aware of what happens to your liabilities after you die. Some will be paid out with insurance policies, like mortgage bonds and others will, as with sureties, fall due for payment. We need to plan for any eventualities.
What falls into my estate for estate duty and what is excluded?
Some of your assets do not fall into your estate such as certain exempt life insurance policies (others are “deemed” to be property in the estate). These proceeds go directly to your nominated beneficiaries. The important consideration here is to keep track of all beneficiaries and make sure they are registered with your insurance company, so that paying them out runs smoothly after your death. As you can see, your will is an ongoing process and needs continuous updating – diarise to do so at least annually.
Other assets excluded altogether from your estate are pension fund and other retirement payments made due to your death. Be aware that pension fund trustees have the right to alter amounts you leave to your heirs.
The first R3.5m of your estate is exempt from estate duty, as is anything you leave to a surviving spouse (a bequest to your spouse firstly falls into your estate, but is then allowed as a deduction). As the R3.5m abatement per estate is now portable between spouses, correct estate planning could give you a potential total rebate of R7m in the estate of the second dying spouse.
These exclusions and abatements are important as estate duty of 20% will be levied on the remaining gross value of your estate. Clearly, you will want to minimise estate duty payable.
- The assets mentioned above do not fall into your estate for estate duty purposes, but they may be taken into account when calculating executor’s fees etc.
- Estate planning is a complex exercise, and there are many potential pitfalls – you need for example to take possible Capital Gains Tax implications into account. Seek proper advice to ensure that your estate is optimally structured, and consider having your will drawn professionally.
Who do I want to leave it to?
Once we are on top of our assets and liabilities we need to decide who will be a beneficiary and how much will each one inherit? Again we need to give this careful consideration, bearing in mind the discretion pension fund trustees have.
Should I appoint an independent executor?
You need to satisfy yourself that your executor(s) has the requisite skills to administer your estate. You should also bear in mind that your heirs may fall out over the will. If you have doubts, it will be worth appointing one independent executor who will bring experience and impartiality to the winding up of your estate.
Estate planning should not happen in your old age. Start as early as you can and keep monitoring and, if necessary, updating your will.
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