Why an estate plan & a financial plan need to co-exist

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Mariska Redelinghuys | Legal Specialist | Advice | PSG Wealth | mail me |


When we think about estate planning, we think of a plan outlining a tax-efficient way to deal with our assets when we pass away.

Instead of viewing this as a ‘death plan’, try to think of it as a ‘life plan’ – a strategy created during your lifetime to ensure that your wishes are fulfilled, and that your loved ones benefit as intended after you pass away.

Estate planning must not be seen in isolation from your retirement savings, investment portfolio or business succession plan. All aspects of your financial plan ultimately serve the objectives of your estate plan.

Growing & protecting your assets

Your estate plan should incorporate a strategy to grow and safeguard your assets in line with your financial objectives, taking into consideration your individual circumstances. This involves selecting appropriate products and underlying assets for investment, as well as the investment vehicles through which you invest.

Your strategy should encompass a diversified investment portfolio across various asset classes, with allocations determined by your risk tolerance and investment timeline. Additionally, factors such as the need for income from your investments and the desire to preserve capital for future generations should be considered.

Liquidity

An estate plan should identify, and address, liquidity needs within your estate, including income requirements for yourself and your dependants in the event of disability, as well as cash requirements for outstanding debts and estate administration costs.

Insurance products offer a cost-effective and reliable method to provide for anticipated cash needs, both in the event of death and in case of disability. Don’t underestimate the importance of an emergency fund.

By making provision for unforeseen circumstances, you are less likely to find yourself in a position of needing to compromise on insurance premiums and the effectiveness of your estate plan.

Minimising cost

Where possible, your estate plan should include a focus on minimising taxes and other costs. Estate duty and executor’s fees are major factors when deciding on the appropriate strategy, but capital gains tax, donations tax, transfer duty and income tax also play a role.

Choosing products on which you can nominate a beneficiary and making use of available tax rebates, deductions and roll-overs are just some of the ways to reduce your tax liability.

Succession planning

Your estate plan must provide for the efficient administration of your estate and the smooth transfer of assets to your beneficiaries, ideally with as little interruption as possible. It is crucial to regularly review and update your will.

Ensure that it is drafted by a professional and appoint a qualified and experienced executor to administer your estate. An inter vivos or a testamentary trust is often a valuable tool for intergenerational wealth transfer. All relevant documents should be preserved and, where appropriate, kept in safe custody for future use.

Flexibility

Your estate plan should be flexible enough to adapt to changing circumstances. When your needs, assets, liabilities, marital status, dependants or other factors change, your estate plan should be adjusted to accommodate these changes.

Your estate plan also needs to be able to accommodate any modifications to your wishes and how they should be carried out. Planning for the legacy you want to leave behind enables you to live the life you deserve.


 



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