In 2011, I have decided that I will use my blog to shed some light on some of the personal and commercial services that accountants are offering. Often services are misunderstood or the value of a service is not immediately seen due to a lack of available information. By covering a range of popular services I hope to dispel any myths and inform you, the reader, of how a service may benefit or even be of vital importance to you. We will start of this series of blogs by looking at Estate Planning.
Before we go into the details, it is important to understand what an estate is. You may have a certain idea that an estate encompasses rolling green lawns on a handsomely large property. This is not the case! The Estate we are referring to is anything that you, as a natural person, would have laid claim to in your lifetime. This would consist of any assets of a real or personal nature.
Therefore Estate Planning is the process of structuring your finances so that when you pass away your assets or your business’s assets are sufficiently protected and/or will not be a burden on your family. “Ah, but I have life cover”, I hear you say. “Why do I need Estate planning?” Although life policies are taken into account on a deceased estate they are no substitute for proper planning which involves wills, trusts and donations.
By spending only a few hours with your accountant who understands taxes, specifically estate tax, you can rest assured that when you pass away your estate duty is minimised, inheritances are protected and you have sufficient liquidity to meet your estate’s financial obligations. Neglecting to complete this planning process could see your family left with outstanding debt due to high estate taxes which could have easily been avoided.
Typically some of the points that will be covered in the Estate Planning process are:
- Creation / Review of a Will
A Will is of particular importance in the estate planning process, especially if you have children. A will should constantly be reviewed and updated. Also a family must be made aware of who holds copies of the Will in case of your untimely death.
- Appointment of guardians and trustees for minors
If you have young children then you must ensure that you have appointed them guardians as well as trustees. Guardians will act as parents and care for your children should they be orphaned. Appointed trustees will manage the inheritance on behalf of the child.
- Limiting Estate taxes
There are numerous methods available to limit the taxes payable on your estate. One such method is the use of donations which is often good for larger estates.
- Ensuring Estate liquidity
This is another important point of estate planning where your liquidity is weighed against amounts owing on mortgages, vehicle finance, etc. Where there is a shortfall, life insurance can be organised so that unpleasant situations such as forced sales can be avoided.
- Provisions for foreign estates
Should you have offshore assets then a foreign Will may be required as your SA Will may not meet the legal requirements of that country.
For peace of mind that your estate planning is in order, please contact Brett at Dirmeik Consulting today. Phone 021 421 4444.