Having a conversation about finances with our loved ones is often uncomfortable. Add the taboo subject of death and it becomes a topic we would altogether rather avoid.
“The reality is that if you have dependents and you die without planning for this, you put their financial future at risk,” says Thandi Ngwane, head of strategic markets at Allan Gray.
She explains that without a will, legal proceedings around winding up your estate and payments to beneficiaries may become protracted, placing a heavy financial and emotional burden on those that you care about.
Having a will is therefore a vital part of getting your financial affairs in order. Below she explains five things to consider when drafting a will.
Get your will drafted by a qualified professional
A valid will needs to subscribe to strict legal requirements, which could impact the validity of your will if not followed. Your attorney, financial adviser or a reputable trust company can assist you with this process.
Children? Nominate a legal guardian and consider using a trust
Having to think about who would take care of your minor children is uncomfortable, but necessary. Be careful when leaving your assets to children under the age of 18, who will need a guardian to sign any documents on their behalf. Consider using a trust to administer assets in your children’s best interests.
The value of estate planning
Estate planning is an important part of your financial plan that cannot be overlooked. When it is done right it can reduce estate duty and ensure liquidity in your estate. Estate duty is a tax on the value of your estate (which includes property, investments and cash both within SA and abroad) after you die. These costs can run into the hundreds of thousands or even millions, but a good independent financial adviser can help you manage this. An important, overlooked aspect is ensuring that you provide for immediate expenses that your loved ones would need to settle, such as funeral and household expenses and medical bills. These expenses often cannot be delayed until your estate is distributed.
Once drafted, ensure your will is kept up to date
A change in your personal circumstances, such as marriage, the birth of a child or divorce can have an impact on how you wish your assets to be distributed after you die. A good habit to get into is to review your financial plan, an element of which is your will.
Leave clear directions as to where your will can be found
“Tell someone you trust where your important documentation can be found. Once you are no longer around, this vital step will save your loved ones the hassle of jumping through hoops to access your signed will,” says Ngwane.