By the time an executor is appointed to a deceased estate, he or she can change very little of an existing will and estate plan to ensure a speedy and cost-effective liquidation of the estate. A smooth transfer of assets from the estate to the heirs requires planning in advance. Financial advisers play a valuable role in the estate planning process, working with fiduciary specialists and sharing information, and can help to ensure a well-considered, timeous and holistic estate plan.
Once an estate owner has died, the Master of the High Court will appoint the executor to take control of the assets in the deceased estate and to transfer these assets (after the payment of any liabilities) to the nominated heirs in the last will and testament of the deceased.
This seems simple enough because the Administration of Estates Act and the provisions of the deceased’s will govern the winding up of the deceased estate. However, there are factors that can prevent the executor from carrying out his or her duties and cause estates not to be wound up timeously. These issues include:
- A lack of detail about the investment portfolio;
- Insufficient life cover to pay estate duty, liabilities in the estate and the maintenance claims of a surviving spouse, children and other dependants;
- Undeclared offshore assets owned by the deceased and his or her family;
- The absence of an investment mandate authorising the financial planner or investment adviser to continue managing the deceased’s investments until these are transferred to their nominated heirs; and
- Undeclared or uncertain business interests.
One of the most important issues to address when drafting a will is to consider the needs of minor children in the family after the death of a parent. The nomination in the will of a guardian for the minor children needs careful consideration. Even more important, however, is to set up a testamentary trust for the benefit of the minor children. If the will does not make provision for a testamentary trust, the inheritance of minor children will be paid into the Guardian’s Fund, which falls under the administration of the Master of the High Court.
Financial advisers often have deep insights into family issues, and this information can help when it comes to setting up testamentary trusts for the estate owner’s minor children. Some of the issues to consider are:
- The estate owner’s wishes about how capital and income are to be distributed;
- How the estate owner viewed certain types of investments during his or her lifetime;
- The need to appoint the children as co-trustees once they reach the age of 18 and become majors; and
- Whether any of the children should be precluded from acting as a trustee.
A properly drafted estate plan takes these intricate details into consideration and is the result of a structured process. In such a process, the financial planner and estate adviser blend all these requirements to do a proper analysis of assets and liabilities before a plan is structured and implemented.
The estate plan should focus on the goals of the estate planning exercise, as opposed simply to trying to avoid taxes. Many well-structured estate plans have failed because, although they were very tax-efficient, they neglected the needs of family members and their unique circumstances.
A team approach to estate planning that involves a number of experts in their respective fields is more likely to achieve better outcomes.
Willie Fourie is the head of estate and trust services at PSG Wealth.