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Are both your holiday and estate planning in order?

A busy year is drawing to a close and the holiday season is almost upon us. Soon you’ll be packing the car and driving the family to a destination where your extensive holiday planning will become a reality.

As 2013 is running out, there is another planning process that is much more important than planning your holiday – estate planning. Unfortunately, few people realise the importance of estate planning and its benefits.

Estate planning ensures that there is a holistic plan in place to take care of your personal and financial matters should you pass away. It has been defined as the process of creating and managing a programme that is designed to:

  • Preserve, increase and protect an individual’s assets during his/her lifetime, and
  • Ensure the most effective and beneficial distribution of the deceased individual’s estate to succeeding generations in accordance with his/her wishes.

Although a last will and testament is an important aspect of estate planning, it is by no means the only one. Estate planning is a multifaceted process. Ever-changing factors such as one’s financial, economic and psychological needs have an impact on one’s estate, therefore it is also a continuous process.

Proper estate planning has several benefits:

  • It ensures efficient estate administration and smooth transition to your nominated beneficiaries, thereby preventing delays in the settlement process.
  • Unnecessary taxes such as estate duty, donations tax, capital gains tax and VAT are avoided.
  • It ensures liquidity in your estate, thereby preventing the forced selling of assets, or leaving beneficiaries without income as they try to prevent this.
  • It provides for dependants and protects minor beneficiaries.
  • It prevents friction amongst beneficiaries where assets cannot be divided equally.

Both the intricacy and importance of estate planning are evident. The question remains: Where does one begin?

Follow the following six easy steps to ensure that your estate planning is in order by the end of the year:

  • Make an appointment with your financial advisor. He/She can assist you with a detailed estate duty calculation and drawing up a well-planned will.
  • With the guidance of your financial advisor, structure your affairs and the terms of your will in such a way that the effects of income tax, estate duty, capital gains tax and VAT are minimised or eliminated.
  • Take care to sign your will correctly to ensure its validity.
  • Select a qualified executor with a proven record who, after your passing, will handle your affairs to the best interest of your beneficiaries.
  • Take care to include sufficient cash reserves in your estate to ensure that your executor is able to cover all claims, administration costs, taxes and cash inheritances.
  • Store these important documents and contracts in a safe place. Make sure your family members know where the documents are kept.

Do not underestimate the value of involving a qualified person in estate planning. A knowledgeable person will be able to advise you about the available structures and relevant taxation legislation that can help you set up a cost and tax effective estate plan. You can steer clear of the pitfalls and reduce the intricacy of estate planning by contacting your financial advisor.

This year, make sure that both your holiday and estate planning are in order before going on vacation.

For more information, contact Michelle Steenstra of Exceed Asset Management, tel 021 852 0382 and e-mail michelles@exceed.co.za.