Estate, Trust & Corporate Structure Planning

What exactly is Estate Planning?

Estate Planning in general, deals with how you own your assets and how these assets will be dealt with on your divorce or death.

Or, as ​per the Wikipedia definition : “Estate Planning is the process of anticipating and arranging for the disposal of an estate during a persons life. Estate Planning typically attempts to eliminate uncertainties over administration of probate and maximize the value of the estate by reducing taxes and other expenses."

Or, as per the definition by Meyerowitz (South African) : Estate Planning is "The arrangement, management and securement and disposition of a person's estate so that he, his family and other beneficiaries may enjoy and continue to enjoy the maximum from the estate and his assets during his lifetime and after his death, no matter when death may occur."​

When is Estate Planning necessary?

Estate Planning is an ongoing process and should be started as soon as one has any measurable asset base, debt or you just want to know that your estate is going to be dealt with in line with your specific wishes.

It is an area which most of us tend not to pay much attention to as it doesn't effect us in our day to day ​lives... until one day, it suddenly does.

It is an area of planning that is incredibly important and vitally important to keep relevant and correctly in place.​

This area of planning can also be incredibly complex and is therefore important to get someone who knows what they are doing to advise you correctly.

What do I need to Plan for and What areas do I need to look at ?

Estate Planning touches many areas of ones life and involves not only ongoing planning for death but also planning during ones lifetime.

Here are some of the areas which should form part of any comprehensive Estate Planning exercise.​

Financial Planning

Health Planning

Matrimonial Property Regime Planning

Income Tax and Business Planning

Offshore Planning

Retirement Planning

It is vitally important that your estate planning is built around you and your families needs and future goals.

Aims and Benefits of efficient Estate Planning:

  • Efficient, legal, flexible and cost effective estate planning and administration
  • Ensuring that your estate is distributed according to your wishes.
  • Providing protection for your dependents and minor beneficiaries.
  • Minimize tax on your estate
  • Ensure proper liquidity in your estate.
  • Provide for structuring and efficient allocation of assets within and outside of your estate, locally as well as offshore.
  • Provide for a Living Will if desired.

Some of the Tools to use as part of your Estate Planning:

Last Will & Testament

This is one of the most important parts of your estate plan. If you are over the age of 18 you should have a Will, which you should review and update on a regular basis.

A carefully structured and written Last Will and Testament can meet the planning goals of most people, including reducing estate duty liability, providing for dependents and achieving efficient administration..

Trusts

Trusts offer various benefits to the estate planner in that they can serve a dual function of protecting assets as well as creating certain taxation benefits. 

The concept of a Trust is over 900 years old and originates from English Law. Over time the South African Law on Trusts has been developed by the legislature, the courts and legal practitioners into what we find today. 

A Trust is a separate legal entity but not a legal persona or a juristic person per se. A Trust is created by a contract called a Trust deed which is entered into by certain parties. 

A Trust can be described as a legal relationship created by a person (known as the Founder), by placing assets under control of another person (known as the Trustee), during the Founders lifetime (known as an Inter Vivos Trust) or on the Founder’s death (known as a Testamentary Trust) for the benefit of third parties (the Beneficiaries).

Donations

You may donate some of your assets or cash to another and so reduce your estate during your lifetime, creating an estate duty saving. 

Donations are regulated by the Income Tax Act and subject to donations tax, which is payable within 3 months of the donation. There are however exemptions which may apply and can form a useful part of your estate planning. It is important once again to ensure you are guided correctly when using donations in your planning.

Matrimonial Property Regimes

It is very important to understand, before you get married, the different aspects of the different Marital property regimes. 

The tress most important forms of marriage are: In community of property, marriage with ante nuptial contract (ANC), and the Accrual marriage. The Civil Union Act provides that any references in any law include a civil union, and thus these tree forms will also be applicable to a civil union.

In Summary, 

Marriage in community of property: The Estate is shared 50/50 by the spouses, at all times.

Marriage with ANC: Each spouse retains their own assets pre as well as post marriage.

Marriage with Accrual: Assets pre marriage can be retained but post marriage all assets are accumulated and shared 50/50.

It is important to understand the legal implications of marital property regime, especially when drafting a Last Will and Testament and also when entering into marriage - as which regime you choose is going to affect your assets.

Assurance Policies

Life Policies: The main aim of this tool is to provide liquidity in your estate. You may wish to take out life assurance cover, not only to provide your spouse and /or dependants with liquidity on your death, but for the purpose of providing for estate duty liability or to cover the mortgage bond liability over a fixed property, vehicle finance agreements, taxes and winding up costs such as executor’s fees.

To prevent the executor from having to sell an asset out of your deceased estate to cover these liabilities, it may be preferable and cost efficient to take out life assurance to ensure estate liquidity.

Living Annuities: An annuity is a policy taken out that will provide a pension to you from the age of 55 years and older. Upon maturity, you then convert the Annuity into a Living Annuity which then provides you with an income. When you pass away, your beneficiaries receive the proceeds and NO estate duty is applicable.

By making contributions to an annuity fund during yourlifetime, you effectively:

  • Take income out of your estate to create a fund which will have no bearing on your estate;
  • Create an income tax saving (by deducting monthly premiums from taxable income).

Important to do's..

Please check on all of the above aspects of your planning and ensure that you have everything accounted for and correctly addressed and that you fully understand the implications of your planning.

This can be a complex area of your planning but is a vital aspect so please do not ignore this part. It may not effect you now, but can become a nightmare for your dependants if not planned and implemented properly.

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