What is estate planning and why do you need it?

During our lives, we have the opportunity to put together a protective plan that benefits 'our loved ones', when we are no longer around.

What does 'estate planning' mean?

"Planning is defined as the process of creating documentation and managing applicable assets and liabilities", Stoch explains. An estate plan is designed to preserve and legally protect assets, during a person's lifetime, so that the subsequent distribution of these to succeeding generations is effective. The objective is to ensure that loved ones are taken care of as per a person's specific wishes.

"Estate planning is also about structuring assets and finances in a way that ensures sufficient liquidity in the estate. In addition to managing the distribution of inheritance aspects, it's also about ensuring that financial obligations are met without becoming a burden for the beneficiaries."

How is an 'estate' defined?

"The assets and liabilities that you accumulate during your lifetime effectively define 'having an estate'," says Daniel Stoch, Senior Risk Specialist at Discovery Life. "These include things like your banking accounts, investments, car, home, furniture, valuable jewellery, artworks and other personal possessions."

"Just about every adult has an estate. An estate is not defined by a set amount of wealth. You can have a modest amount of assets or many components. Rather, it is defined by what you have in your name", he adds.

Who should consider developing an estate plan?

Any person who wishes for their assets to be transferred to one or more loved one, should consider an estate plan. "For anyone who is married or been married, has children, including those from different relationships, or relatives that are financially dependent on them, estate planning is especially important to consider," says Stoch.

By having an estate plan, legal processes can be structured to best support your wishes. Without these instructions, South africa's legislation will determine the distribution and heirs/beneficires of your estate. This outcome could be very different to what you'd have chosen while alive. By being involved in the process of estate planning, you can avoid the likelihood of financial uncertainty or even legal hassles that can sometimes happen when no estate plan is in place.

When should you start and what should you consider?

"The sooner you start with an estate plan, the better," says Stoch. "You don't really need to wait until later in life, once you've started a family or even after acquiring assets," he adds.

"Begin with what you have and can afford. You can start as a single adult and update your plan if you marry, have children, divorce, acquire or sell property, take out life insurance, start a business, lose an income or develop an illness. Your plan can be expanded or changed in accordance with how your life plays out. Any one of these things can happen and you can adapt the plan as needs evolve or change. Rather make a start and minimise any opportunity for your family to be caught off guard and left unprepared."

Who should be involved in an estate planning process?

"Ideally, it takes a team of experts," says Stoch. "An attorney, accountant and financial adviser are the best people to involve in the process. Each professional will apply their area of expertise in structuring the right plan for you. Discovery has recently launched its Discovery Wills and Trust Services company, which will provide professional services needed to put together a sound estate plan. The services include the drawing up of a Will, appointing of an executor and trustee appointments, deceased estate administration, testamentary trust administration and estate property transfers."

"A new supplementary offering aimed at funding the costs around the winding up of an estate is the Discovery Estate Preserver. This will help cover the costs of executor, testamentary trust and conveyancing attorney fees, as well as providing liquidity."

When should an estate plan be revised?

"There is flexibility when you establish an estate plan. That's why it's important for people not to have the mind-set that an estate plan can only be drawn up once and; therefore, must be put together much later in life. You can change your intentions and objectives at any point, even without a significant life event occurring," offers Stoch.

Stoch suggests you "plan to revise your plan once a year, when a significant change happens, or even if legislative amendments are made that will impact your estate plan". He concludes that we should "consider estate planning as a protective means to leave a legacy and ensure financial security for those you love."

Speak to your financial adviser today about holistic estate planning with Discovery Life.