Financial Data
Updated 30 Sep 2020

When it comes to estate planning, it’s not always about death

When it comes to estate planning, it’s a difficult concept for many to handle. Thinking about death isn’t a top priority for many, but as a business owner, your death may affect many more lives than just your family’s. 

Bruce Fleming, 26 August 2016  Share  0 comments  Print

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Benjamin Franklin once said: “But in this world nothing can be said to be certain, except death and taxes.”

Unfortunately, estate planners have often taken that quote to heart and acted as though estate planning is fundamentally about death and the avoidance of a resulting death tax.

To the contrary, the fundamental purpose of estate planning is to leave a legacy for the living. It is not that death and taxes are unimportant, they just pale in significance to the legacy you leave behind.

Estate planning is often misunderstood in being only for the wealthy and to try and minimise death duties. This could not be further from the truth.

Planning for one’s death is never easy, but it is important that one does it, because the last thing one wants is to leave a wave of confusion, unnecessary costs and stress for those you love after you are gone. 

Related: Succession planning for farmers far more than just life insurance

Two of the most critical components in planning your estate are:

1.  An updated Will

  • If you don’t have a Will, you will die “intestate”, which means your estate will be wound up in terms of the Intestate Succession Act. Contrary to popular belief, however, your estate will not go to the state, but by not having a Will, you will take away the testamentary freedom of distributing your estate in terms of your own wishes. 
  • Make sure that you get a professional to draft your Will. This will ensure that it is drafted correctly, all laws are complied with and your Will reflects your wishes. 
  • You must review your Will on an ongoing basis, especially when there is a change in your circumstances.
  • Your Will takes care of all the assets in your name and you can leave your assets to whomever you wish, in whichever proportions you wish.
  • You are also able to set up a “testamentary trust” in your Will for those beneficiaries who, for whatever reason, aren’t able to look after the funds they inherit, such as minors. 
  • Should you also have minor children, you are able to nominate a guardian in your Will to look after your children after you have gone. 

You are able to decide who will manage your estate when you are gone in the form of:  

  • An executor for the estate, who will be responsible for the winding up of your estate. It is best that you nominate a professional, whether it is a lawyer or a trust company, as your executor because of the potential complexity.
  • A trustee/trustees for any testamentary trust mentioned in your Will. It is advisable that you nominate both an independent professional as well as a family member who knows the dynamics of your family.

Related: Succession planning – it pays to do it

2.  Life insurance policies

Life -insurance -policies

  • If you do not nominate a beneficiary on your life assurance policy, the proceeds will devolve in your estate and will be dealt with in terms of your Will. The advantage of leaving one or more of your life insurance policies in terms of your Will is that they will provide you with liquidity to pay any debts in your estate or any financial legacies you wish to provide for in your Will.
  • The disadvantage of leaving your life insurance policies in your estate is they will pay into your estate and your beneficiaries will only have access to them once your estate has been wound up; and because they are part of your estate, they are subject to executors’ fees.
  • The advantages of having beneficiaries on your life insurance policies are;
    • They pay directly to the beneficiary nominated and therefore bypass your estate; 
    • They pay out a lot quicker; and
    • They provide liquidity to those beneficiaries while your estate is being wound up.

At its core, estate planning is about the legacy that you leave behind. Will that legacy be one of conflict, confusion and cost, or a process that positively extends the impact of your life?

You don’t have to plan to fail your family; nor fail to plan either.

Get assistance from a professional such a certified financial planner, who will assist you to strategise and leave a legacy for your loved ones.

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About the author

Bruce Fleming

Bruce Fleming, CFP®, FPI Financial Planner of the Year 2016

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