A scientist has said the first person who’ll live to be 150 has already been born. It might be you. But in the end we all die. That’s why you need a will – a document spelling out what should happen to your estate. If you die intestate, which means without a will, legalities kick in and it will take time before your beneficiaries get their inheritance. Meanwhile, they might be struggling to pay the bills, starting with your funeral.
But before you draw up a will, you should do estate planning. First add up your assets and other sources of income, then deduct your liabilities and debts to determine your net worth. Determine what and how much you would like to leave to each dependant or loved one. Allocate money for all costs to the estate.
How you’re married, is important. In community of property means you and your partner have a joint estate which is split equally in the event of death or divorce. Out of community of property (without accrual) means there is no joint estate. Whatever you bring into or add to the marriage, remains yours and will not be split at death or divorce. Out of community of property (with accrual) means you can declare what you bring to the marriage and that remains yours. Whatever is built up during the marriage is split equally at death or divorce.
A trust can ensure your wealth is managed properly. It is a transfer of assets from the estate to the trust. A trustee is appointed to manage the trust according to the trust deed.
An inter vivos trust is established and becomes operational while you, the founder, are still alive. A trust deed states who the parties to the trust are – the founder, one or more trustees and and beneficiaries – and defines powers and duties.
A testamentary trust is set out in your will and only becomes operational at death. It might, for instance, be established to manage the assets of the beneficiaries until they reach legal age or a specified event takes place. After that it is dissolved.
Death is expensive and if the costs rise too much, your estate could even become insolvent. Life insurance is the best way to cover estate debts. The advantage is that the policy is paid out immediately and it is tax-free. An executor carries out the wishes in your will and handles all the formalities.
You’re about to make big decisions and draw up a vital document. A professional, like a financial adviser from Old Mutual, can help you get it right. Talk to one today.
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