Creating a legacy of intergenerational wealth

The importance of estate planning

Estate planning is such a powerful tool in so many ways. Not only does it ensure that your loved ones are well-looked after once you pass away, it also ensures a smoother transition of intergenerational wealth. Estate Planning encompasses more than merely drafting a will. Whilst a valid will is certainly one of the most important documents, an estate plan includes far more and can be incredibly impactful as part of a holistic family financial plan.

Completing an estate duty and liquidity plan will give you a clear picture of the financial impact your passing will have on your family and dependants. For example, it will give you a better understanding of whether any assets would need to be sold to generate liquidity to settle debt and other expenses like capital gains tax, and help you to structure an estate to reduce estate duty. You might have a large estate in terms of value but with little or no liquidity. It is thus important to understand what assets will be available to create liquidity and provide for your family.

Whether your beneficiaries are tax residents or not will also have an impact on their inheritance. According to Statista, South African emigrants cumulatively amounted to roughly 915 000 individuals in 2020. The vast majority of these emigrants settled in the United Kingdom, followed by Australia and the United States.

The trend towards family-focused financial planning

There has been a gradual move towards family financial planning. Structuring a financial plan around a family unit as a whole has numerous advantages, such as those listed below.

• Beneficiaries have a clear understanding of the family’s financial situation, so having a family financial plan in place helps create a smooth transition for beneficiaries.
• Shared responsibility within the family can help minimise potential tension between family members in cases where disagreements regarding assets arise. Constant, open lines of communication ensure that assets are transferred to the next generation as intended.
• Structuring assets in a way that is beneficial from a tax perspective, e.g. nomination of beneficiaries and ensuring they are updated and reconcile with the wishes in your will.

Obtaining the correct bespoke advice is so important as individuals’ situations differ. Speak to a financial adviser who can guide and assist you with difficult but important conversations with your family. Make sure you have the most appropriate financial plan in place to have peace of mind not only for yourself, but for your loved ones as well.