Many people think estate planning is something to be started in middle age. Yet an unexpected death at any age can leave relatives with the burden of having to wind up an estate and deal with assets and liabilities, including business interests, without the guidance of a legal, valid and executable will and comprehensive estate plan.
In the absence of a proper estate plan, managing a deceased estate can be a very complicated and costly process. One complication is that assets are frozen until the Master of the High Court has issued letters of executorship. An estate plan is there to provide a contingency plan, which will make cash available at the time of death until estate execution can get under way.
Essentially, an estate plan is a set of financial goals and a strategy for achieving them, as well as a time-frame for the plan and a list of people who will execute this programme in the event of death. An estate plan is important for individuals of any age, marital status or wealth bracket, and is always tailored to that individual's personal lifestyle and objectives.
Usually the goals of an estate plan are to preserve any wealth created during the person's lifetime to pass it on to family and succeeding generations, as well as to provide liquid funds for executing the estate plan at the time of death.
This will also minimise taxes such as estate duty. An estate plan is always flexible and can be updated as circumstances and lifestyles change.
There are various ways a suitably qualified estate planner can help to ensure that an estate is liquid at the time of death; that a person's spouse and children can be taken care of; and wealth preserved in accordance with the person's wishes. One of the most important tools to achieve this is a last will and testament.
A will is one of the most important tools an estate planner will use to meet the individual's goals and ensure efficient administration of the deceased estate. Anyone older than 16 years can validly execute a will.
When a person has a last will and testament drawn up by an estate planner, the person becomes the “testator”, and every testator has a lot of freedom in deciding how to dispose of their property at the time of death, as they see fit.
A will is not a generic form. Rather, it is a unique document intended to ensure any accumulated wealth is utilised for the maximum benefit of spouse and dependants at the time of death. It is also there to appoint heirs and distribute assets. Without a will in place, the estate will be dealt with in accordance with the law of intestate succession.
The result could be that the person's assets are divided up and transferred among spouse and dependants differently from what they would have wanted, because there is no legal document to indicate their wishes.
Importantly, where there is no last will and testament in place, there is then no executor appointed. This means the office of the Master of the High Court will require nominations from interested parties and will appoint someone from among these nominations. This often causes significant delays.
Floris Slabbert is a director of Ecsponent Financial Services.