Having an estate plan is an important responsibility to ensure that the distribution of your assets upon your death is done in accordance with your wishes. Yet, many people do not have one. The reality is that death can happen at any time, and being prepared as early as possible provides peace of mind for both you and your loved ones.
There is a common misconception that estate planning only involves having a valid will and nominating an Executor. This could not be further from the truth. Sound estate planning incorporates multiple elements, such as financial and tax planning, to limit the tax implications on your estate and maximise the benefits to your heirs.
This article will explore key components of a comprehensive estate plan, and highlights financial planning products that can help reduce the dutiable value of your estate, thereby limiting estate duty.
Estate Planning:
Creating a roadmap to ensure that your assets are distributed in the most efficient manner requires expert advice. All too often, estates are tied up in lengthy legal processes due to insufficient planning.
Your starting point should be having a valid Will in place, which outlines how and to whom your assets should be distributed. If you die without a valid Will, the Intestate Succession Act will apply, and the distribution of assets may not reflect your wishes.
You must also appoint an Executor to manage the administration of your deceased estate. This person should be impartial and knowledgeable about the legal and procedural complexities involved in the administration of deceased estates.
Minimising tax implactions upon death should be a high priority to ensure that your beneficiaries receive the maximum benefit. Estate duty, capital gains tax and executor fees should be managed through sound financial planning. It is best to prepare for these payments while you are still alive to ensure they do not become a financial burden on your heirs.
Creating liquidity in your estate is also essential. There must be enough cash available to settle any debts, pay taxes and cover any immediate family expenses – without having to sell off assets. Life insurance policies can be highly effective tools to provide this liquidity.
Ultimately, establishing a comprehensive estate plan can be complex as there is no one-size fits all solution. Everyone’s circumstances are different, and it is advisable to consult a certified financial planner to guide you through the process.
Financial Planning:
Although your goals and requirements may change over time, planning ahead and early enough gives you the opportunity to review and adjust your financial plan regularly.
Estate duty is levied at a rate of 20% of the dutiable amount of an estate up to R30 million, and at 25% on any amount above that. . The Estate Duty Act provides an abatement of R3.5 million for all individuals, which is deducted from the net asset value of the estate before the applicable rates are calculated.
Retirement funds such as the 27four Retirement Annuity and the 27four Pension and Provident Preservation Funds are excellent investment products to reduce your estate duty and executor fees. This is because death benefits from retirement funds are not considered part of a deceased estate. Instead, these benefits are distributed to the deceased’s financial dependants and/or nominated beneficiaries in accordance with Section 37C of the Pension Funds Act.
Investment-linked living annuities are also excluded from estate duty. The policyholder can freely nominate beneficiaries, who may either withdraw the full amount (subject to tax) or transfer it to another living annuity in their own name, thereby excluding the deceased’s annuity from the administration of the deceased estate process.
Certain key person life insurance policies and policies ceded to a spouse or child may also be excluded from estate duty. Professional advice is essential to determine the most appropriate structure for your needs. It is never too late to begin. Getting your financial affairs in order will go a long way in ensuring peace of mind for you and your loved ones.
For investors looking to invest in a Shari’ah compliant manner, we have a comprehensive fund offering that caters to every investment objective and risk profile. Our range of diversified, Regulation 28 and Shari’ah-compliant funds are ideal for long-term wealth creation.
Our consistent application of our investment approach is designed to deliver superior risk-adjusted performance over the long term.
If you have any questions or require assistance, speak to your financial advisor or call us, we are available to take your call.
You can reach us on the contact details below:
Website: 27four.com , Call: 0800 000 274, Email: info@27four.com , WhatsApp: “Hi” to 011- 442 2467