As the year begins many of us will be focused on the best strategies for getting a better job, making more lucrative business deals and generally accumulating more wealth.
However, as much as we may want to plan for a better life, we must also plan for the possibility that we might face an unexpected demise.
A conversation that is commonly had among working professionals is that they work hard for their children, for posterity, that they might enjoy the fruits of their labour. Oddly enough, those same people seldom plan how their wealth can be best put to their families’ benefit when they pass on.
This is why estate planning is important; to know that as hard as we work for our families, the wealth we accumulate will not go to waste or cause unending squabbles when we die. This is often an uncomfortable subject to broach with clients, but it is indeed a necessary one.
The importance of estate planning
People generally tend to believe in one of two myths regarding estate planning: (1) estate planning is all about taxes, and therefore, it’s only for the ultra-wealthy or (2) estate planning is all about what happens to your assets after you die, so it’s only important for older or sick people.
The main objectives of estate planning are asset protection, orderly distribution of property, income continuity, welfare planning, tax mitigation, beneficiary security, and philanthropy. The tools used for effective estate planning include powers of attorney; wills; insurance; proper identification and titling of assets, beneficiary designations and trusts. Taxes must also be considered, including estate tax. Ultimately, estate planning is an effective method of establishing an inventory of one’s wealth, determining how it will be protected, who it will go to and finally how your assets can be best used to your benefit while you live.
Role of lawyers in administering estates
It is as always advisable to engage a lawyer to advise on estate planning options that are available to you. When properly structured, estate planning can be a means of revenue generation instead of just asset protection. It’s not just about having assets, it is about moving them around so that they generate income instead of lying idle. I will list some of the services lawyers provide in estate planning below.
Drafting and registration of wills – A properly drafted will guarantees that valuable assets, both monetary and sentimental, are appropriately preserved and dispersed. A will permits you to name a trusted executor, heirs of your choosing, and even guardians for your minor children. Ultimately, a will is the foundation of any effective estate plan.
Formation, registration and administration of trusts – A trust is one of the most secure ways to safeguard your assets and ensure that your money is passed down through generations, ensuring financial assistance and protection for your loved ones.
Lawyers help with trust establishment and registration, including advice and assistance in drafting trust documents, depositing trust deeds, and property transfers to protect your assets and beneficiaries. The most common trusts established for estate planning clients are:
Testamentary trust – established on death and works to protect the interests of minors and other dependents who are not able to look after their own financial affairs.
Inter vivos trust – this is created during your lifetime and is designed to provide protection of the family wealth over generations. This is the option I would recommend if you also intend to use the trust for your personal benefit while also catering to your loved ones.
For example, you may have houses that you place under the trust. The trust (through its trustees) administers the houses and collects rent.
That rent is then allocated to you in terms of the trust as disposable income. So instead of doing the work yourself, you can have a trust do the work for you while ensuring that you reap the benefit. You may also have certain clauses that only kick in when you pass on, for example, how revenue that was payable to you while you were alive should be treated.
Deceased estate administration – Estate administration is the process of winding up an individual’s lifetime financial affairs and distributing their property and assets after they die. Lawyers in this regard, once appointed as executors, often handle all dealings with the Master of the High Court on clients’ behalf.
This includes obtaining valuations of assets and liabilities and winding up the deceased estate, resolution of disputes and claims of all creditors and heirs and payment of liabilities and distribution of net assets to beneficiaries.
Litigation surrounding succession issues arising out of a person’s death — issues often arise in estate administration like certain beneficiaries wanting to exclude others or, more commonly, previously unknown beneficiaries claiming a part of the estate for themselves. The list is endless. It is important to have lawyers on board to assist with these eventualities.
Safe custody services – Lawyers can also keep sensitive and important documents safe until such a time as they are needed. Wills can be kept safe until the testator’s death. Share certificates and other important documents such as title deeds can also be kept on behalf of clients.
The above are just some of the aspects to consider when talking about estate planning. It is as critically important to do estate planning as it is to do it right.
If done without the proper advice, the dissolution of your estate may occur as though you did not plan your estate to begin with. For anybody looking to plan their estate, ample advice is available.
In next week’s article, I will look at some questions surrounding estate planning that are often asked by clients. I will also look at some of the duties of executors and what is expected of beneficiaries.
Muza is a duly admitted lawyer with expertise in business advisory, labour law and commercial litigation. He writes in his personal capacity. For feedback, email him at hilarykmuza@gmail.com or call on +263719042628.