Many investors may overlook the necessity of comprehensive estate planning as part of their overarching financial plan because thinking about death can be overwhelming. However, not taking the time to think about what may happen to your assets after you die may have dire consequences for your family.
In this light, you should be considering estate planning, understanding the death claims process for your investments and the steps that may be taken to ensure they can be distributed to the correct nominated beneficiaries.
Tips for getting your financial affairs in order
- Keep your Will up to date
Is your Will valid and up to date? It’s in your best interest to consult a finance professional and lawyer to ensure that you can update your Will whenever a life-changing event occurs such as marriage or birth of a child.
- Keep the beneficiaries of your various policies up to date
Should your savings products such as a living annuity, endowment fund and tax-free investment be structured as a life policy, it’s typically required that beneficiaries are nominated. Make sure that your service provider has a record of them so they can receive intended benefits (when necessary) speedily.
Start with your Will
Have you drafted and executed a Will? If not, and you’re not sure where to start, it’s worth considering speaking to an independent financial adviser or attorney. A valid Will typically requires you to comply with certain legal requirements.
In South Africa, should you die without a valid Will, your assets can be inherited by non-nominated beneficiaries according to the Intestate Succession Act. Furthermore, it could also make the resolving of your estate much more time consuming and costly.
There are particular investments such as unit trusts and offshore investments that can be included in your Will; however, others, including retirement funds, are typically subject to different legal processes. Let’s take a closer look.
Investments that are recommended to be included in your Will
Unit trusts
If you have invested in unit trusts, it is in your best interest to ensure they are included in your Will because they form part of your estate. The executor can then distribute them to the nominated beneficiaries.
Offshore investments
If you have offshore investments, they should be included in your Will. Your South African executor may then ensure that your investment is distributed according to your wishes.
Investments that do not need to be included in your Will
Retirement funds
Should you die while you’re a member of a retirement fund, the Pension Funds Act states that trustees of the fund will determine how funds are distributed to your dependants and nominated beneficiaries. They are required to inform your dependants; allocate the benefits equitably and decide how the benefit should be paid.
Types of retirement funds:
- Pension funds
- Provident funds
- Preservation funds
- Retirement annuity funds
Other investments that can be left out of your Will include
- Living annuities
- Tax-free investments
- Endowments and sinking funds
No one likes to confront and discuss their mortality, but it’s an inevitable event, and the best thing that you can do is have a solid financial plan in place that can take care of your loved ones.
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