7 estate planning benefits you can’t afford to overlook

Estate planning is often misunderstood as something that only comes into play at death. In reality, it is an ongoing process of structuring and managing your assets and liabilities during your lifetime so that your financial goals can be met both while you are alive and after you are gone. At its heart, estate planning is about creating certainty for yourself, your loved ones, and your legacy. Below, we outline seven compelling benefits of estate planning.

• Safeguarding liquidity in your estate: One of the most important elements of an estate plan is ensuring that your estate has sufficient liquidity to cover costs, taxes, and debts, keeping in mind that during estate administration, Sars and creditors must be paid before any inheritance can pass to your heirs. If there is not enough cash available, your executor may be forced to sell assets such as your family home, car, or holiday property, sometimes at unfavourable prices, to settle debts, which, in turn, can compromise your family’s financial stability. An effective estate plan ensures that adequate liquidity is in place so that your assets pass smoothly to your heirs without unnecessary disruption.

• Keeping beneficiary nominations up to date: Beneficiary nominations are not a once-off exercise, and as your life evolves, marriage, divorce, children, or changes in financial priorities, so too should your beneficiary nominations. The type of product also matters in the context of beneficiary nomination. For example, retirement fund benefits are governed by Section 37C of the Pension Funds Act, which empowers trustees to allocate benefits among your financial dependants, even if this differs from your stated wishes. Our advice is to regularly review your nominations to ensure they remain valid, practical, and aligned with your overall plan.

• Putting your legacy documents in order: An estate plan is only as strong as the documentation behind it. Over and above a valid, updated Will, your file should contain documents such as your marriage certificate, antenuptial contract, title deeds, share certificates, trust deeds, and maintenance orders. Be sure to include practical information like safe codes, digital passwords, and alarm codes, as this can spare your loved ones unnecessary stress and ensure a quicker, more efficient estate administration process.

• Protecting inheritances for minors: If you have children under the age of 18, estate planning becomes even more critical as minors lack the legal capacity to inherit directly. Without effective estate planning, assets bequeathed to minors may be transferred to the state-run Guardian’s Fund until they come of age. To avoid this, you can establish a testamentary trust in your Will, naming your minor children as beneficiaries. This allows your trustees to manage the assets responsibly until your children reach the age of majority, ensuring their inheritance is preserved and used for their benefit.

• Ensuring smooth estate administration: Delays in winding up an estate often stem from poor preparation. Simple measures, such as appointing a professional executor, validating your will, and making sure your family knows where the original is kept, can save months of frustration. Remember, missing documents, such as a marriage certificate, mean the executor must approach Home Affairs, in turn slowing down the process. An efficient estate plan is one that makes administration easier, faster, and less costly for those left behind.

• Minimising tax liabilities: While you cannot avoid taxes altogether, estate planning gives you the tools to reduce unnecessary tax burdens. Estate duty is levied at 20% on the first R30 million of your estate’s dutiable value and 25% above that threshold. Mechanisms such as compulsory retirement funds, living annuities, trusts, and correctly structured domestic life policies can be used to create tax efficiency within your estate, thereby enhancing the financial legacy you leave to your loved ones.

• Structuring growth assets for the future: It’s important to know that death triggers a capital gains tax (CGT) event, meaning Sars treats you as though you disposed of all your assets at market value on the day of death. While the once-off R300 000 exclusion provides some relief, large estates with property or equity investments may face significant tax liabilities. With this in mind, establishing an inter vivos trust during your lifetime can protect these growth assets. By transferring assets into the trust, you ensure that any future growth accrues outside your estate, reducing the tax bill while securing intergenerational wealth for your heirs.

Estate planning is not a task to be left for later years; it is a lifelong process that evolves as your personal and financial circumstances change. By addressing liquidity, updating beneficiaries, protecting minors, organising documents, reducing tax, and structuring assets effectively, you create peace of mind for yourself and security for your loved ones. More importantly, you ensure that your financial legacy is passed on smoothly and according to your wishes.

* Tapfuma is a Certified Financial Planner professional at Crue Invest.

PERSONAL FINANCE