Why pay more than you have to?  

Does anyone enjoy paying taxes? Does anyone enjoy more legal fees than he or she absolutely has to? Wouldn’t a person like to put an estate plan together that would take care of all assets so that he or she would not have to pay any more taxes or legal fees than would be absolutely necessary? Unfortunately in most estate plans today there are certain very common and costly mistakes that people make.

If a person has made a will he or she has probably made a mistake

There are four hidden flaws in a will which should be considered:

  1. The will probably does not control all a person’s assets. Insurance policy payouts will be paid to the person nominated as a beneficiary in terms of the policy and not to the person referred to in the will;
  2. The assets referred to in the will are required to be dealt with in terms of the process stipulated in the Administration of Estates Act. This is costly, time consuming and a public process;
  3. A will does not prevent a curator from taking control of all of a person’s assets;
  4. A will does not prevent your assets from falling into the wrong hands.

Not considering the effect of joint ownership

The effect of the demise of a joint owner with regard to jointly owned assets is not carefully considered and can result in hardship for the surviving joint owner or the beneficiaries of the deceased joint owner.

 

Not doing anything

As many flaws as a will has it is probably better than doing nothing as there are some instructions.

If a person has a trust and has not changed title, he or she either has an unfunded trust or a testamentary trust

The process of changing title of a person’s assets during his or her lifetime may be easier than on demise. The advantages of a living trust should be carefully considered when a testamentary trust is contemplated.

A trust does not have to die when a person dies

When a person dies his or her trust can go on and provide some control in regard to the assets intended from his or her beneficiaries.

Not using the right trustees

If a person should no longer be able to act in that capacity some of the considerations in selecting these trustees are their availability, the interest that they have in the beneficiary’s welfare, the costs they will levy and the confidence one has in their ability.

Not planning estate taxes

A person should pay his or her share of taxes but is not required to pay any more than legislation requires. Estate taxes are an “everything tax” and can be a devastating tax, resulting in assets having to be sold. There should accordingly be proper planning.

 

Leaving it all to a spouse

This would result in the R3, 500,000 deduction being lost. This can easily be avoided by arranging for this to be bequeathed to a family trust saving the estate whilst still providing adequately for the surviving spouse.

Holding onto everything until a person dies

The donation tax exemption of R100, 000 per person per year could be relied on to reduce the value of a person’s estate. The living trust is only one of the clubs and all of the other clubs must be gathered and placed in a bag known as the estate plan.

Not seeking out good advisers, whether they be financial planners, attorneys or accountants

A person should enquire as to the knowledge and ability of the advisers attending to the various aspects of an estate plan.

Every time a financial plan is being structured these issues should be considered. However, a person should not wait until he or she finds a solution for every contingency and should make a start and let it grow with him or her.

DR MERVIN MESSIAS

JD (Juris Doctor) / BA, LLB (Wits) / TEP (Trust & Estate Practitioner) / MTP (Master Tax Practitioner – S.A)

 

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