As Benjamin Franklin famously said, nothing in life is certain except for death and taxes. Having said that, planning your death may not seem ideal but it is necessary, this ensures that your loved ones are cared for after your passing. With the help of experts, Justmoney discusses the importance of estate planning, how much it costs, and whether or not it can be done for free.
Why is estate planning necessary?
For those who are unaware, the aim of estate planning is to ensure a smooth transition of your personal wealth and assets after your death. And while many believe it simply entails drafting a will, Ester Ochse, channel head for First National Bank (FNB) advisory explained that this isn’t the case. She stated: “Estate planning makes use of various structures, such as wills, trusts and life cover to ensure that the dependants are looked after if something should happen to the breadwinner.”
She also added that proper estate planning will include looking at the liquidity in the estate ensuring that the dependants can continue living in the family home and continue with the standard of living that they are used to.
However, if your affairs are not in order this could result in dire consquences for those you’re leaving behind. Candice Du Toit consultant at Sovereign Trust said: “If you haven’t planned for what will happen to your assets after your death, and specifically if you have no will in place, your assets will automatically be distributed accordingly to South African intestate succession law.”
Therefore, structuring your affairs is fundamental. The following should be considered:
- Drafting a will: Who will inherit your wealth?
- Life insurance: Do you have sufficient assets to take care of your family? Or do you need to take out additional life insurance?
- Tax: How much tax will your estate have to pay and is their sufficient liquidity in your estate to satisfy this debt?
The cost of estate planning
There are numerous costs to consider when undergoing estate planning, Ochse explained that normally there is a commission fee for both life cover and drafting a will. Also, if you make use of trust, there will a set up and management fee.
With regards to the actual amount you would have to pay, Du Toit explained that this could vary greatly. She said: “This would all depend on how extensive the planning needs to be and the nature of the assets involved. Generally, the bigger the estate, the more complex the planning will need to be and the higher the costs will be.”
Can estate planning be done for free?
Many feel that estate planning is only for the affluent but having a valid will is important to ensure your assets are properly dealt with after your passing. If you’d like to save on costs, Leon Jacobs, legal manager at Standard Trust Limited, has said that there are entities such as university law clinics and pro bono legal practices that will assist with drawing up a basic will free of charge. There are also campaigns, particularly National Wills Week each year, during which drafting services are offered for free.
Ochse concluded that it’s important that you look at your estate plan and liquidity in the estate on an annual basis. “Have a personal finance day, where you check your will. Chat to your financial advisor and ensure that the Estate plan is according to your goals and wishes.”