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Tips for Careful Estate Planning to Protect your Legacy

Estate planning is an essential part of the overall financial strategy to secure a financially stable and sustainable future.

There are many parts that make up the whole, all of which need to be addressed in order to protect the legacy you leave behind and all the rightful heirs and beneficiaries.

What is Estate Planning?

It’s the process of creating a comprehensive plan to manage your assets and provide financially for your loved ones after you pass away.

The main goal of estate planning is to ensure that your assets, both moveable and immovable, are properly allocated and transferred to your chosen beneficiaries.

Estate planning - Financial Planning Johannesburg

Estate Tax South Africa – How Can I Reduce Estate Duty in South Africa?

Finding ways to transfer your estate with the least amount of tax burden possible is also an important part of the estate planning process.

This can be done in a variety of ways, including off shore investments, tax free savings accounts and donations among many others.

Estate Planning - What You Need in Order to Protect Your Legacy

Generally speaking, there are 6 essentials for proper estate planning. However, there are many other aspects related to financial planning such as retirement annuities and other smart investment plans.

However, in this article we will be focussing on the following:

  • Assigning power of attorney
  • Wills and trusts
  • Designating beneficiaries
  • Healthcare power of attorney
  • Designating guardianship
  • Letter of intent

Assigning Power of Attorney

A power of attorney is a specific legal document which officially gives one person the power to act on your behalf should you pass away or become incapacitated in some way.

The power designated can be limited or broad and these terms must be stipulated in the power of attorney document. Furthermore, you may revoke the POA rights at any time you see fit.

The elected individual will then proceed to make decisions and enter into various financial transactions on your behalf, ensuring that your estate is properly managed and distributed.

Wills and Trusts

What is the difference between wills and trusts?

A will is a legal document that clearly indicates who receives your estate and how much of your estate each beneficiary must receive.

A trust is a formal arrangement between you and an entrusted individual or organisation who becomes responsible for managing your property on behalf of your beneficiaries. Trusts often help reduce estate taxes and other legal challenges.

These are arguably the most important components of your estate plan, regardless of the amount or value of your assets.

In order to circumvent family feuds and other hostile situations such legal battles, your will must be written clearly and your wishes must remain consistent with how you’ve allocated your assets that pass outside of your will.

Designating Beneficiaries

There are many non-probate assets that can be passed to your beneficiaries and for this reason, it’s extremely important that you designate rightful beneficiaries as well as contingent beneficiaries to prevent your funds and assets from landing in the hands of the court.

A contingent beneficiary is the person who will receive assets should the  primary beneficiary be unable to receive the proceeds for the following reasons:

  • He or she is deceased
  • He or she is unable to be located
  • He or she refuses the inheritance

It’s important to remember that beneficiaries must be of legal age and mentally competent in order to receive their inheritance.

Healthcare Power of Attorney

This document gives an entrusted individual the power to make decisions about your healthcare and medical treatment if you are unable to.

Such a person should share the same values as you and who you will trust to make the decision to follow the course of action that you would have if you had the capacity.

It’s also advised to have a contingent agent in case the individual you initially chose is unavailable at the time that a decision needs to be made.

Designating Guardianship

By default, many wills and trusts have guardianship designation as a clause. However, some don’t and if you have minor children or if you intend on having children, it’s absolutely crucial that you designate a guardian for them.

You want to choose a guardian who is firstly, willing to raise your children should something render you incapable to do so.

Secondly, your chosen guardian should be financially stable and share your values, outlooks on life as well as preferred parenting methods.

Once again, a contingent guardian should be elected in case the primary guardian is unable to take guardianship of your children.

Letter of Intent

Although a letter of intent on its own may not be seen as valid in the eyes of the law, it can assist the probate judge in understanding what your intentions are regarding the distribution of your assets in cases where, for some reason, your will has been deemed invalid.

Your letter of intent is usually left to your executor or primary beneficiary and clearly defines how you want your assets to be managed and distributed.

This letter can also include other special instructions as well as details of how you wish your funeral to be conducted.

Olemera – Financial Planning in Johannesburg

Estate planning forms only a part of the whole of financial planning. However, to protect your assets and your beneficiaries, thorough estate planning is crucial.

For further assistance with financial matters, or to find out more about how our financial advisors can assist you with planning, please feel free to contact us.

Comments are closed for this post, but if you have spotted an error or have additional info that you think should be in this post, feel free to contact us.

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