By Maryanne Leicher, Financial Planning Specialist at Chartered Wealth Solutions
As the year winds down, many of us are counting the weeks to that well-deserved year-end break – whether it’s an exciting trip with loved ones or a peaceful retreat at home. However, before you shift into holiday mode, now is the perfect time to pause and take stock of something extremely important – your estate plan. Ensuring everything is in order now will give you peace of mind for the year ahead.
A common response to most estate planning questions is: “I have a will, I’m sorted, thanks.” But as a Chartered Accountant CA(SA) and Certified Financial Planner CFP, with a passion for comprehensive estate planning, I have seen the true value of having a well-considered estate plan ready to meet your loved ones’ needs.
What many people overlook is that estate planning extends far beyond having a signed will in place. Vital aspects need to be considered while reviewing your estate plan. Below is a list of some important points – but there are more to consider:
- Is there sufficient liquidity in your estate?
- Have you considered the level of estate duty and capital gains tax applicable to your estate, and what can be done now to minimise these wealth taxes?
- Should the unexpected happen, how long will it take for your family to wind up a deceased estate, and will your heirs need financial support in the interim?
- Have you been made aware that there are some assets over which your will has no authority?
- These assets include: retirement funds, living annuities, life policies and offshore endowments, which we term ‘non-will assets’. Thorough estate planning involves considering the nominated beneficiaries of these non-will assets to ensure they align with your wishes.
- Who has the necessary skills and contacts to wind up your estate? Should you burden a family member with a sole executor appointment?
- What can an executor charge a fee for?
- Have you thought about other miscellaneous costs incurred in the winding up of an estate, such as: conveyancing fees, tax consultant fees and the Master’s fee?
- Are you associated with a private company or family trust, and how do the shareholdings in and loans to and from these legal entities impact your estate plan?
- If you own and manage a successful family business, have you considered proper succession planning for the children involved in the business? Having this in place is crucial and ensures that family wealth continues in the most tax-efficient way for future generations. Passing on intergenerational wealth via a local or offshore trust and investment holding company structure is one potential solution.
- If you’re a high-net-worth individual in possession of offshore immovable property, have you considered where that property is domiciled? This will directly impact the succession of the property. For example, immovable property in France is subject to French succession law. Forced heirship rules protect direct descendants and surviving spouses, which must be adhered to regardless of what your will states. For example, if you have one biological child, he or she automatically takes ownership of 75% of that immovable property, while your surviving spouse receives only 25%. Your heirs will also be personally liable for any liabilities relating to this immovable property according to France’s succession laws.
- In terms of bank accounts domiciled in the UK, probate in the UK is required. Probate is the official proving of a will. Planning ahead with a financial planner well-versed in cross-border estate planning can help avoid potential delays in winding up your worldwide deceased estate and reduce high costs associated with UK solicitors.
- For ownership of UK immovable property, we look to the succession laws in the UK. Fortunately, like South Africa, the UK adopts freedom of testation. However, it is recommended that a UK will be drafted to address this immovable property.
- Estate planning is invaluable for the global investor and is a discipline in itself. If you are a South African owning direct offshore shares, this can be attractive from a rand hedge and South African political and economic perspective. However, this is not the case from an estate planning point of view. It is important to note that there is a risk of foreign inheritance tax that could apply to these direct shareholdings upon your death, as the situs (location) of the shares will determine additional tax consequences. Only a few countries have double inheritance tax treaties with South Africa. Properly structuring these offshore shareholdings can make a significant difference and help avoid the risk of hefty foreign inheritance tax.
All of the above may seem overwhelming, which is why I advise my clients to dedicate time to their estate planning, starting with smaller, more manageable tasks and gradually working up to the bigger issues. Here are some practical tips:
Granting a general power of attorney to your spouse and adult children has proven to be incredibly useful should you ever fall physically ill but retain your mental capacity. South African banks, however, will only accept their own special power of attorney for your bank accounts, so it is important to have this in place. I also encourage my clients to update their digital estates template once a year to keep their various online usernames, PINs and passwords valid and stored with recent copies of their will and general power of attorney.
Drawing up a monthly spending plan detailing how bills are settled (debit orders vs EFTs) and keeping it up to date is a simple task I recommend my clients manage consistently. Should the unexpected ever happen, your surviving spouse and adult children will be better equipped to navigate their new normal with financial guidelines to assist them.
A letter of wishes can be a thoughtful and meaningful way to communicate your desires for the distribution of sentimental items. It allows you to provide clear guidance to family members and avoid misunderstandings or conflicts after you’re gone. Yes, it’s about the big things, but also the little things that prove to be so powerful when a loved one passes away. The overall aim is to have an airtight estate plan that makes things as stress-free as possible for those you leave behind.
