Proper estate planning ensures that your estate is set up in such a way that it benefits you during your lifetime and your beneficiaries after your death. We are often told that the sooner attention is paid to your estate, the less the frustration that will be paid by you and your loved ones. However, when exactly should you start creating an estate plan? And how often should you review it?
An estate plan should be seen as a necessity and not as a privilege reserved for the wealthy. An estate plan can be as simple as having a valid will. In fact, the best estate plan is often the simplest to execute and the most flexible to adapt; irrespective of the size of an estate.
What should you consider?
A will that is kept up to date and remains executable is the foundation of an effective estate plan. If there is no will, there is no estate planning as you would then not be the one who decides who should benefit after your death.
Estate planning is not only about money, it also involves the interplay of personal relationships as family dynamics often have a determining influence. And while healthy family relationships may not be dependent on money, it is important to ensure that your loved ones are protected when you are no longer there or able to care for yourself or them.
A typical estate plan considers the following aspects:
- Liquidity analysis to determine if sufficient funds exist in an estate to cover costs such taxes, claims against the estate (including an accrual claim), executor fees, Master’s fees, funeral expenses and cash bequests. It makes no sense to have a voluminous document expressing your last wishes if your wishes cannot be realised because of insufficient funds.
- Provisions for dependents and maintenance claims of a surviving spouse (or previous spouse in terms of a divorce order).
- Comments on an existing will and/or trust deed to ensure that its provisions still meet your wishes but also leads to a reduction in costs/fees.
- Business succession and protection planning.
When should you start?
Money and relationships are, in most cases, not grown overnight and, as such, estate planning also takes a long-term view. It is important to start planning your estate in a timeous and orderly manner and to ensure that it is adaptable to changes in legislation and personal circumstances to give voice to your objectives.
Sorting out your estate plan as soon as you start earning an income makes sense – it’s truly never too early to have an estate plan. Although your plan should be relatively simple at this stage, it’s still worth having to ensure your assets are transferred as you would intend. Starting your estate planning early can help establish a platform you can fine-tune as your personal and financial situations change.
How often should you review your estate plan?
There are various milestones in life that should trigger you to review your estate plan with your qualified financial planner. Here are some examples:
- Buying a home - this is one of the most valuable assets you will likely own and it’s important to think about how you would like the property to be handled when you are gone.
- Having children – in addition to managing any issues of inheritance, you should document all your other wishes for your children’s care. Don’t just presume that certain family members will be there or that they share your child-rearing ideas and goals. If your children are minors, you should carefully consider who would be the best choice as guardian.
- Getting married (or separating) –this is a good time to review your beneficiaries, specifying who will inherit your assets, who will take care of settling your estate and, if necessary, who will care for your children if you or your spouse are unable to.
- The five-year check-in – even if you haven’t experienced one of these triggering life events recently, you should review your estate plan at least every five years. There is value in checking in regularly with a qualified financial planner who can provide detailed advice on your responsibilities.
Speak to an adviser
If you have doubts about the estate planning process, it will be worthwhile to consult a qualified financial planner to help you determine if you’re on the proper estate planning path. Speaking to a professional may not only save you money in the long run but can also foster an endearing legacy of care.