Estate Planning – 4 Pitfalls to look out for

You have an Estate Plan which has been quantified and your Will has been amended to ensure that the costs of your Estate can be paid as well as your dependents are cared for financially. This is only the first step!

Over the years of winding up Estates, we have seen some pitfalls which we thought we would share with you. Below we look at the top 4 we have encountered thus far.

  1. Bequeathing the residue of your Estate

In an Estate which we previously wound up, the deceased had a firearm which was not specifically mentioned in the will. This was then dealt with as part of the Residue Estate. The firearm was bequeathed to the surviving spouse, who did not have a license for any type of firearm and did not want the firearm. We would therefore recommend that you specifically bequeath certain assets within your Estate and not leave them to be dealt with in the residue.

  1. Adequate Cover for settling debt

The deceased had a bond on a property which they had been living in for a couple of years. There was no life cover to settle the bond on his death and there was not enough cash in the estate to settle this. This meant that:

  1. the property would have to be sold to settle the outstanding bond putting the surviving spouse on the street and searching for a property during a very difficult time; or
  2. the selling of other assets to settle the outstanding bond if there were enough financial assets which could be sold; or
  3. the surviving spouse having to apply for a bond on the outstanding amount, also during a very difficult time, but ensuring that they could live in the property.

It is therefore imperative that there is enough cash in your Estate or cover in place to ensure your loved ones are not left with the financial burden after your death.

  1. Updating your Will regularly

The Will was last updated in the eighties and has since then not been updated. “As the bequest was the same as years ago, there is no need to update the Will, right?” No, this is incorrect. There were problems retrieving the original Will. Subsequently, the Estate had to be wound up in terms of Intestate Succession, which has its own administration issues. We therefore recommend that you review your Will at least once a year. Naturally your Will does not need amending every year, but ensuring that it is updated, is crucial.

  1. Testamentary Trusts for minor children

Whether the creation of a Testamentary Trust for minor children is needed in your Will, is dependent on your specific situation. One thing to consider is the amount that you would like to leave to; let’s say, your grandchildren, in a Testamentary Trust. You should consider the costs to operate the Testamentary Trust and the management of the money within. To leave an amount to each of your grandchildren or minor children in a Testamentary Trust which would be zero after a few years due to the costs, does not make financial sense. There are ways around this and should be discussed with your Financial Planner.

When you meet with your Financial Planner, you should not only discuss the markets, your retirement plans, your risk cover needs or your medical aid for the next year, but also ensure that your Will is up to date and that your loved ones are taken care of when you are no longer here.

Get in touch should you need assistance with your Estate Plan.

By |2018-04-23T19:34:11+00:00April 23rd, 2018|