Real Estate Investor Magazine South Africa August 2018 | Page 62

WEALTH MANAGEMENT
Death and Taxes
Why you need a will and testament
BY JOSE’ DELGADO
I
magine if you had a crystal ball or a time machine with
which you had the ability to see what the future holds.
Imagine having the luxury to take a step back into the past.
What would you have done differently?
We only really have NOW to make the right decisions, and
these are decisions that have a major influence on our families
and their financial well being tomorrow.
Now we are all aware that death is not the favorite topic
for dinner conversation, but none of us can ignore it. There
are so many facets to a well-constructed plan for after you are
gone such as asset protection, achieving tax efficiencies, and, of
course succession planning.
Let us now embark on our imaginary journey.
Meet Lucy and Angela. Both are just like you and I; they
want to live great lives and ensure that their families are safe,
taken care of, and prosperous. Angela has a plan. Lucy does
not.
Case Study One - Lucy
On Lucy’s demise the following situation will transpire since
she has no will:
The estate will be frozen, this will severely prejudice her
dependents as they will only have access to assets when the
estate is wound up;
Submissions or claims will have to be made for the appoint-
ment of an executor (this person might not have Lucy’s best
interests at heart).
Lucy’s minor children could be at the mercy of a family that
is squabbling due to her not having appointed a guardian to
be their custodians. This will result in major emotional trauma
and forever escalating legal.
Due to Lucy’s children being minors they cannot directly
inherit from her estate. When the estate is eventually wound
up any assets that they could have inherited have to be sold
and converted into cash to be held and administered by the
Guardians Fund. A very scary notion. The fund pays a low
interest rate, but the ultimate cash received versus the assets
they could have inherited will be miles apart.
Lucy had forgotten to review her financial affairs and her
life policy will be paid out to her deceased ex-husband’s moth-
er.
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AUGUST/SEPTEMBER 2018 SA Real Estate Investor Magazine
When Lucy’s children eventually get their inheritance
when they turn 18, the fast life beckons and within a short
period of time the cash has run out and they are destitute.
This scenario paints a grim picture.
Case Study Two - Angela
In contrast to Lucy’s dealings, Angela, despite dreading the
thought of her death and what will happen to her family after
she’s passed, has settled a valid will with a legal professional.
Furthermore, Angela has set up a proper structure to minimize
taxes and to save on capital gains taxes, executor fees and estate
duty.
The following will happen to Angela’s estate:
There is minimal prejudice to her dependents as estate
freezing is a minor issue. Cash and assets continue to provide
for her family within the structures it is set up in.
Angela had appointed an executor of her choice and agreed
on the fees on any assets that remained in her estate, thus en-
suring that excessive fees are avoided.
Her minor children are going to be cared for by her nom-
inated Guardian whom the children know and feel safe with.
As the bulk of the assets are structured, the children, wheth-
er they are majors or under 18 will always be looked after if
they do not have the capacity to manage funds or properties,
or are not financially astute.
Angela’s family is poised to succeed as they have the cor-
rect platforms in place to secure assets and minimize all major
taxes.
Now, let’s fast-track back to the future….
The very least you can do is to ensure that you have a Last
Will and Testament in place, with the provision for the cre-
ation of a Testamentary Trust. Alternatively, if your estate and
income warrants the necessity of establishing a structure, then
do so.
Death, as much as it is unpalatable, is inevitable, and your
action or lack of action will have a grave impact on how your
family moves on after your death. Be the Angela!
iProtect Executor Exchange has been established to help
people with their Wills and the administration of estates.
These services are carried out by specialist estate planning at-
torneys at very competitive and agreed rates.