Pitfalls in Estate Planning

There are many pitfalls in estate planning. Read about the  top four pitfalls that we have helped our clients avoid.

Pitfalls in Estate Planning

There are many pitfalls in estate planning. The top 4 pitfalls that we have helped our clients avoid are:

  1. Estate Planning is only for the Wealthy
    This is a big mistake. Estate duty may only be payable on estates over R3 million, but if you have assets, regardless of their value, you should think about what will happen to these assets when you die.
  1. Failure to Make a Will
    A will is the key to estate planning, yet many people don’t prepare one. If you don’t have a will, the law will decide for you. The results may be very different from what you would have wanted. While a will should be as simple as possible, it is a legal document and should be professionally prepared. Read about how to draft a will.
  1. Leaving Everything to your Spouse
    All estates over R3 million must pay estate duty. The estate will include your life insurance policies even if they are paid directly to a beneficiary. When you add up all your assets, you may be surprised at the size of your estate. While your spouse may be exempt from estate duty, the tax man will catch up when your spouse dies. Rather leave up to R3 million - which will enjoy exemption - to your children or in a trust for the benefit of your spouse and children. The balance can be left to your spouse, resulting in a double exemption being applied. Read about how to reduce estate duty tax.
  1. Not Enough Cash in Your Estate
    It is important to work out how much cash your estate will need when you die (i.e. your estate liquidity). Your creditors will have to be paid as well as Executor and Master fees. Executor costs are 3 percent of the gross value of the estate plus VAT. Then there are Master's fees of up to R600, advertisement costs and funeral expenses. In addition, cash may be required to pay mortgage bonds, overdrafts, credit cards, income tax, hospital and medical expenses and the living costs of your family. Should there not be enough cash in your estate, assets may have to be sold. Read about how to ensure that your estate has enough cash.

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