So what are you going to do this year that you neglected to do last year…?
- Are you planning on losing weight?
- Will you be going to gym more regularly?
- Is it finally time to kick the habit?
- Or like me, is it all about spending more quality time with friends and family?
Regardless of whether you believe in setting New Years resolutions, each one of us starts the year with fresh expectations.
We end up asking ourselves questions like:
“Will this be the year that I end up making a difference?”
“Will this be the year when I find my dream job?”
Our batteries are recharged and once more we are gifted with another year in which to make a difference in the lives of, not only ourselves, but also the lives of those we love.
All too often we focus on improving some major area of our lives without giving much thought to the small improvements we can make…
And while I’d love to write an article on making a difference in the lives of others, today I’d like to focus on you, your family, and why succession planning - followed closely by estate planning - should top your list of financial resolutions for the year ahead!
Why it’s vital that you have a succession plan in place!
Mike – after a messy divorce several years ago – had recently remarried. What really complicated the situation was the fact that he had two children from the previous marriage. After his divorce, Mike immediately removed Cathy (His ex) as nominated beneficiary on his life insurance and replaced her with the two children.
Anyways, life got busy for Mike, and while he intended to draft a will which would look after the needs of both his children and his new wife, he never got around to it.
Sadly, Mike passed away in a car accident recently, leaving his new wife with tons of debt, and his children’s inheritance in the hands of the Guardian’s fund.
With a little foresight – and ten minutes of his time – Mike could have made sure that
- his beneficiary nomination was changed to his estate, and
- that a valid will was drafted which would provide for his two children and his new wife
Succession planning is all about making sure that your wishes are carried out in the event of your untimely death, and that your chosen beneficiaries inherit in the way you intended.
So which is more important – succession planning or estate planning?
It’s the old ‘which comes first’ scenario – the hen or the egg!
While you may have the best of intentions when deciding on who inherits what, you need to consider the cost of doing so.
In my instance, I’d like to leave my property to Julie, but there is one small problem…the matter of the bond.
ABSA was most kind in financing the purchase but I’m sure they’d like me to settle it upon death!
And considering that Julie has recently purchased a second property, I doubt she could afford – or want – to continue paying the existing bond.
Estate planning looks at ways to minimise the costs of dying while at the same time ensuring that your loved ones inherit as per your last wishes.
So what are the costs we’re talking about?
Well here’s a list of the more common ones.
- Personal debt
The role of the executor is to wind up your estate and one of those chores is settling all your debt.
- Capital Gains tax
Death is considered to be a disposal of an asset in terms of our tax laws. All your assets are valued at market value and capital gains is calculated and, if applicable, becomes payable. No debts are taken into consideration when calculating the tax liability.
- Estate duty
Depending on the size of your estate, and to whom you leave your assets, you might end up paying estate duty. Fortunately your liabilities are taken into consideration here!
- Accrual claim
Married ANC with accrual? Your spouse has a legal claim against your estate, which if not taken into consideration, could topple the best of plans. An estate plan will include an accrual claim calculation and in so doing make you aware of any potential problems.
- Executor’ s fee
Few of us work for free and neither does an executor! This fee only becomes known once your estate has been valued. An estate plan is a helpful guideline in preparing for this anticipated – but as yet unknown – cost.
So there in a nutshell you have it. For those who have never had a financial plan prepared now is as good a time as any! For those who have had one prepared in the past, now is a good time to have it revisited!
Couldn’t care a hoot about estate planning since you’re too busy just trying to survive?
Start off by making sure you have a succession plan in place…believe me, your family will thank you!
I sincerely wish you and yours a truly wonderful 2011!
Related posts:
- Financial Planning | We Are Married COP And My Spouse Is Insolvent
- Financial Planning | What Happens If You Pass Away Without A Will?
- Financial Planning | Why Would You Want A Trust Anyway?
- Financial Planning | Do You Really Need A Will?
- Financial Planning | Dying Intestate And Leaving Small Children Behind
Article by Lawrence
Someone, who as he gets older, finds he has more questions than answers
Lawrence has written 150 awesome articles for us at Insurance Fundi
