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estate planning

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TRUSTS: EFFECTIVE ESTATE PLANNING & TAX-SAVING MECHANISMS

In order to effectively organise your financial security and legacy, you need to start by establishing your estate planning questions. These questions often touch on the complex topic of tax and trusts. To bring these concepts together takes a certain skill and expert understanding. This is where estate planning professionals are crucial.

We’ve put together a guide of some of the fundamentals when it comes to the relationship between trusts, estate planning, and tax considerations. Keep reading to find out if trusts are the right vehicle for you and your family. 

WHAT ARE TRUSTS?

Lady holding pen

A trust can be defined as a tripartite legal relationship that exists between a founder, a beneficiary, and a trustee.

The trust is created by the founder, who places his or her assets in the trust, and then administrative control is given to the trustee. This is often done for the benefit of the beneficiary.

Trusts can provide advantages in several areas, such as:

  • Estate planning and management
  • Asset protection and preservation
  • Maximisation of tax-saving
  • Flexibility and confidentiality

Trusts can also operate independently or form part of a broader financial strategy. They are often used as an instrument to allow for the preservation and transfer of assets between generations. They can also be used as a means to manage and protect your assets, after or during your lifetime.

WHAT ARE THE TYPES, USES, & BENEFITS OF TRUSTS?

Two people discussing finances

In South Africa, there are many different types of trusts available. For our purposes, we will be discussing living (inter vivos) trusts and testamentary trusts. Each type has specific uses and benefits.

A living trust, or family trust:

  • Is established by the founder, or family, during their lifetime
  • Becomes effective at the time of its registration
  • Carries with it the benefit of enabling the wealth-building of its beneficiaries during the lifetime of the founder
  • May be used as a means to protect assets

A testamentary trust:

  • Is created by the terms stipulated within the will of its founder
  • Only comes into effect after the death of its founder
  • Offers the benefit of protecting both minors and vulnerable family members
  • It does not safeguard assets during the founder’s lifetime

There are several questions you can ask yourself to assist you with choosing a trust type.

Do you want peace of mind about the management of your children’s inheritance, and what may be left behind when you are gone?

Or, do you want to protect your current assets and build a lasting stream of growth for your family?

Contact us so we can help you find the right trust for you and your family.

TRUSTS FOR ESTATE PLANNING

Woman in discussion with couple

Setting up a trust, as opposed to a will, is an effective estate planning measure. It can result in faster transfer processes, lower administrative costs, and tax reliefs.

Because the growth of the trust does not directly form part of the estate, and instead belongs to the trust itself, the trust is afforded protection against estate duties (unlike with a will). This will also effectively protect the assets from creditors in the event that your estate goes insolvent.

In addition, it can also be used as a means to specify the type of wealth accumulation that you envisioned for your family assets.

For example, instead of providing a lump sum of capital, or splitting up the funds amongst the beneficiaries, the fund can remain unified, continue to grow, and subsequently be used as a source of consistent income.

ENDOWMENTS AS A TAX SOLUTION

Man putting money in a jar

Trusts are not without their drawbacks though. Two of the major pitfalls in establishing a trust in South Africa include:

  1. Heavy tax burdens on income that is kept at the trust-level (between 36-45%)
  2. The inability of the trust, as an entity, to directly invest off-shore

However, there are effective tax-saving mechanisms that can exist within a trust to counter these disadvantages.

For example: if a trust were to invest in an endowment fund, it would reduce its income tax to a flat rate of 30% and their capital gains tax (CGT) to as low as 12%.

An endowment fund also allows for the creation of offshore investment opportunities. This can not only diversify your investment portfolio, but also act as an effective tax-saving mechanism.

IS A TRUST THE RIGHT MOVE FOR YOU?

There are conditions under which it would be beneficial to set up a trust:

  • If your assets exceed 3.5m
  • When you have minor children or vulnerable family members
  • If you want to retain your family’s wealth well into the future

Before you make your decision, it is vital to know that the creation and management of a trust comes with more administrative requirements than that of a standard investment account.

It is a good idea to make yourself aware of these processes and costs before you make your decision. If your top priority is to save on taxes, then a tax-free investment might be a better option for you.

Start planning your future, today. Contact us on the details below.

+27 11 839 2302

info@maysure.za.com

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Estate Planning: Questions You Should Be Asking

When it comes to preparing your estate plan, it’s natural to have questions. The thought of getting your affairs in order can be mind-boggling. Especially when you consider all the moving parts of an estate plan, such as legal documents, wills and testaments, setting up trusts, and the executorship.

We’ve put together some of the most frequently asked questions about estate planning. We hope this will help you with your estate planning endeavours.

Will Vs Trust: What’s The Difference?

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When it comes to bequeathing your assets, the choice between drafting a will and forming a trust can seem confusing. Both wills and trusts are estate planning tools that help to ensure your assets are protected.

A will is a legal document created to express how a person wishes his or her property to be distributed at death. It also names a person to manage the estate during its final distribution. Keep in mind that a will can only become active after your death.

In contrast, a trust is a fiduciary arrangement that allows a trustee to hold assets on behalf of a beneficiary. Trusts become active the day you create them. A grantor, the person who creates the trust, may even list the distribution of his or her assets before death.

What Is Better; A Will Or A Trust?

Women looking at two documents

Having a trust can quicken the process of transferring your estate after you die. With this tool, your loved ones may be able to avoid the potentially drawn-out process of distributing your estate.

On the other hand, if you have minors or any other dependents, a will naming a legal guardian may be crucial to protecting them and their inheritance. A will is also typically less expensive and easier to set up than a trust.  

The bottom line is this. Having a will or a trust, or both, can help you ensure your assets end up where you want them to go. Contact Maysure Financial Services to decide which options are best for your estate.

I Am Not Wealthy, Why Do I Need To Have An Estate Plan?

Man with model house and key

The benefits of estate planning are not just for the rich. With a proper estate you can:

  • Derive the maximum benefit from your assets during your lifetime
  • Provide for the maximum transfer of wealth to the next generation
  • Create funds for the payment of any liabilities that may arise when you pass away
  • Ensure your estate is administered correctly
  • Minimise costs and estate duty taxes
  • Ensure your future asset growth is not limited
  • Protect your assets

These are just a few of the financial solutions estate planning offers. If you choose not to form your own estate plan, the state or even legislation could end up making these decisions for you.

Who Should I Trust To Handle My Estate Planning?

Couple shaking hands with advisor

Selecting the right partner to assist you to plan your estate is important. Not all estate plans are the right fit for you and your family. A plan that is inferior to your needs can lead to unfulfilled potential and wasted time.

The process of finding the right financial advisor doesn’t have to be a difficult one. While the family lawyer may seem like the perfect person to handle all your financial affairs, you could end up paying more for someone without all the relevant financial knowledge. You are better off consulting an expert than risking unintended errors.

When it comes to an estate planner, you need to be able to trust this person implicitly.

Before you commit, ask your financial advisor about their experience in dealing with clients with similar needs to your own. These needs could be anything from a closely-held business, a disabled child, or Shariah investment criteria.

Don’t Wait, Plan Your Estate

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Life (and death) happens when you least expect it. A good estate plan can act as a shield against worst-case scenarios. At its core, estate planning is a sure-fire way to protect your assets and your loved ones.

With the right partner, your estate plan can actually grow your asset base. Maysure Financial Services provides you with the right combination of tools to help your assets realise their full potential. Whichever way you look at it, your future can only benefit from a well-thought-out estate plan.

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Get started on your estate plan today. Contact us here:

+27 11 839 2302

info@maysure.za.com

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Writing Your Will: Frequently Asked Questions

You’d be surprised at how many people believe that writing a will is not essential. They assume their hard-earned money will be left to intended beneficiaries automatically when they pass away. Unfortunately, this is not always the case.

Other people tend to procrastinate – a real roll of the dice since we don’t know when the end will come. We know first-hand that writing a will can be daunting. To help with the process, we’ll answer some frequently asked questions about creating your last will and testament. 

Why Is It Important To Have A Will?

Man looking at a document

When you are alive you have absolute control of your estate. But, upon death, that can all change. A will helps to regulate what happens to your estate after your death. It can even contain provisions that guarantee care for your dependents after you are gone.

Merely leaving verbal instructions or simply having the intent to execute a will is not sufficient. Even an attempt to draft a will yourself could render the document invalid if all the prescribed formalities are not properly followed.

Leaving a professionally drafted will that applies effective estate planning strategies ensures your vision becomes a reality. A will helps ensure that your hard-earned work is not needlessly devalued.

When Should You Consider Drafting A Will?

Woman and child hugging in forest

Anyone with assets would benefit from drafting a will. Legally, any person over the age of 16 is allowed to make a will unless he/she is mentally incapable of doing so.

You can choose to write a will at any point in your life. However, there are certain life events that may make the decision more necessary. Events such as having children, starting a business, or inheriting a large sum of money make having a will more urgent.

What Should I Put In My Will?

Family laughing on the floor

While you can virtually do what you want with your estate, there are a few limitations of which to take note. For example, there can be no provisions in your will that are unlawful, against good morals, too vague, or impossible to perform.

Additionally, any minor children have a common law claim to maintenance. Certain legislation may also limit one’s freedom of testation. Such as in a case where pension funds or spousal maintenance is concerned.

When drafting a will, consider these crucial elements:

Guardianship

Most parents want to ensure that their children are properly cared for in the event of their deaths. Without a will, it could solely be left up to legislation to govern what happens to your children.

Having a will gives you and your loved ones needed relief. You are free to clearly indicate who you would prefer to raise your children.

Assets

One big factor to consider when creating a will is your assets. Assets can include anything from money and business to heirlooms and other valuable items.

With a will, you can outline which individual should inherit which asset. This part of the will must be as clear as possible. The asset must be clearly described so that it is not left up for interpretation.

Property

The decision of how to split your home is obviously more complex than giving away a favourite heirloom. If you have one home but many beneficiaries, you’ll want to clearly outline your expectations for dividing the property.

Who Should Be My Executor?

Couple listening to an executor

The role of an executor is an important one. It should preferably be a person or institution that is familiar with deceased estate administration.

Professional establishments like ours at Maysure Financial Services give you the option to appoint a skilled executor together with a surviving spouse or a direct family member. As a result, your estate is left in the most capable hands.

It is the executor’s job to do the bulk of the work. By sharing this responsibility, your loved ones can feel included in the decision-making. It can also help to bring important family issues into consideration.

Certified Financial Planners vs Bank Executors

While the bank might seem like the obvious choice to handle your will and estate, it could create difficulties for your surviving spouse or heirs. Having a financial institution as your estate executor means your family has much less control.

Your loved ones are left at the mercy of an impersonal financial institution. And, the process of completing your estate could take years. In the meantime, your family members will have no access to estate funds, which could lead to unwanted debt and financial struggles.

Estates are often complicated and the “standard draft will” provided by the bank might not fit your individual needs. Although its affordability makes it attractive, it usually is not equipped to render the service best suited for your situation.

Plus, these wills are never truly inexpensive. Often banks will seek to be appointed executors in order to gain the executor’s fee that works out to 3.5% of the value of the estate assets.

A serious drawback to having a bank as an executor is this. If, after your death, the bank decides the estate has little value, the institution could refuse to take the appointment as executor.

Your heirs would be forced to approach the Master of the Court to appoint a new executor. This could lead to more delays and frustration for your loved ones.

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In contrast, a financial advisor assists you to map out the relevant costs as part of your estate planning. He or she can give you invaluable advice that will help you make the most out of your will and estate.

An advisor can also act as your executor. With your financial planner, you can negotiate your executor’s fees by discussing related factors, such as age, asset values, and the estate’s complexity. In that way, you can keep costs to a fair and reasonable minimum. And, you’ll ensure your will and estate administration are watertight.

Now Is The Best Time To Start Your Will

Woman discussing will with man

Wills are the best way to plan ahead. While there is no “perfect” time to establish one, it is a tool that can offer you and your family peace of mind. Will drafting is a delicate process that must be handled with the utmost care.

We suggest employing a professional who can assist you with this process.

Maysure can connect you with an experienced, qualified professional to handle your affairs. We offer a range of services to assist you in planning your estate at any stage in your life. It is our life’s work to ensure you feel like your last wishes are being respected.

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Trust us with your last will and testament. Contact us here :

+27 11 839 2302

info@maysure.za.com

Maysure Financial Services is a registered financial services provider. FSP 15173

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Inheritance Tax & Estate Duty Guide

Many people have a mental block when it comes to the topic of tax. Who can blame them? Trying to make sense of tax laws in South Africa can be an incredibly difficult undertaking. However, this is not an excuse to leave your assets to fate.

When creating your estate plan, you need to have a basic understanding of inheritance tax and estate duty. In that way, there won’t be any surprises for your loved ones later.

In this guide, we’ll take you through inheritance tax in South Africa and Estate Duty.

Inheritance Tax In South Africa

When a natural person passes away, that person’s assets are collectively placed into an estate. This deceased estate has to pay certain inheritance taxes as well as personal income tax for the deceased’s final tax year.

The estate assets can include property, movable property (like cars and keepsakes), money, or even business shares.

Several different laws apply to inheritance tax in South Africa:

  1. The Estate Duty Act (Act 45 of 1955): This law places an estate duty on the deceased estate.
  2. The Administration of Estates Act (Act 66 of 1965): This Act handles the disposal of deceased estates in the country.
  3. The Wills Act (Act 7 of 1953): This law influences all testators (those who have written a will or given a legacy) with property in SA.
  4. The Intestate Succession Act (Act 81 of 1987): This Act covers all deceased people who own property in SA and have not left a valid will.
Five red houses in a row

Inheritance tax is divided into the following types of tax:

  • Personal income tax for the deceased
  • Estate duty tax
  • Capital gains tax
  • Donations tax (if relevant to the deceased estate)

We’ll take a look at estate duty tax below.

What Is Estate Duty Tax?

Documents for Estate Duty

The estate beneficiary/beneficiaries do not have to pay tax on what they inherit. The inheritance is not seen as part of their gross income.

Estate duty is deducted from the estate before it reaches the beneficiaries. Usually, it is the estate executor’s responsibility to pay this tax.

As mentioned, estate duty is regulated according to the Estate Duty Act. This tax applies to the transfer of assets and wealth from the deceased estate to the beneficiaries. It applies to the dutiable amount of the estate.

The tax amount differs depending on the value of the estate.

  • For an estate under R30 million, the estate duty is 20% of the estate’s dutiable amount.
  • For an estate over R30 million, the estate duty is 25% of the estate’s dutiable amount.

There are some exceptions and limits applicable to this type of tax. For instance, in some circumstances, double taxation may occur. This happens when the deceased’s assets are subject to estate duty within South Africa and a foreign country.

Fortunately, South Africa has estate duty agreements with several countries to avoid double taxation. You can find out more about these tax agreements here.

Estate Duty, Debt, & Life Cover

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The winding-up of a deceased estate can take anywhere between five months and several years, even if there is a valid will in place.

This can lead to a trying time for loved ones and family members in a financial and emotional sense. Even more so when estate duty and debt are added to the mix.

When it comes to estate duty and debt, life cover is a useful tool that can help to reduce debt and assist loved ones. The payout from a life insurance policy goes directly to the beneficiaries. It does not form part of the estate, meaning no estate duty tax is applied.

This means your life insurance beneficiaries will receive immediate relief upon your death, instead of having to wait for the estate wealth transfer to be finalised. This gives plenty of value to your loved ones.

In the case of any debt you may have outstanding, life cover is also beneficial. If you nominate a family member as your beneficiary for the policy, the payout is protected from creditors, ensuring your family’s financial security.

Contact us to discuss life insurance and how it can improve your estate planning.

Final Thoughts On Inheritance Tax & Estate Duty

Life belt on ship

Inheritance tax and estate duty may seem complicated at a glance. Yet, with the right information and help, you can easily navigate through it.

Having life cover policies in place will be instrumental for your estate planning. This type of cover will alleviate the financial stress that the eventual estate transfer process will have on your beneficiaries.

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Feel free to contact us with your queries about inheritance tax and estate duties.

+27 11 839 2302

info@maysure.za.com

Read more about life cover and financial health from Maysure Financial Services.

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Estate Planning, South Africa: Write a Will

The global pandemic has made plenty of people aware of their own mortality. Many of us have caught ourselves thinking of what would happen to our loved ones if we passed away. Would they be alright? Would they be financially secure? 

These thoughts can be the start of the process of estate planning. By looking to the future, we can secure a legacy for our families and our businesses. 

In this post, we’ll look at the process of writing a will, what happens if you don’t draft one, and how a will relates to estate planning in South Africa. 

What Is a Will? 

Blank will with pens

According to South African law, any person has the freedom of testation. You can plan to distribute your estate how you wish. This means that you can decide how your assets will be dealt with when you die, as long as it doesn’t go against the public interest. 

Writing a will enables you to nominate an estate executor. This is the person who will act on your behalf and manage your assets after you die. You can also nominate a guardian for your children if they are minors. 

Do I Need to Write a Will?

Fountain pen

No, you don’t, but we advise that you do. 

If you pass away and you haven’t written a will, the Intestate Succession Act takes effect. This piece of legislation is generally quite fair, ensuring that your estate and assets are distributed between your spouse and children. 

If you don’t have a spouse or children, your assets will be split between your blood relatives according to a hierarchy: your parents, then your siblings, then your other relatives. If you decide not to write a will, it’s your responsibility to get familiar with the Intestate Succession Act. 

According to this Act, your asset distribution can be influenced by customary or religious law. This is one of the reasons we suggest every individual should draft a will. They can ensure their legacy and assets are left in their manner of their choosing. 

If you pass away without leaving a will, problems can arise:

  • Your assets may not be passed on to the person of your choice.
  • There can be extra and unnecessary costs for your loved ones.
  • There can be a lengthy time period before an executor can be appointed. 
  • This can cause misery and conflict in your family due to the lack of clear instructions about how to deal with your estate. 

Writing a Will: Requirements

Hand signing a will

Below, we’ll take a look at the requirements for drafting a will. 

Who can draft a will?

Anyone who is of sound mind and is over 16 years of age can write a valid will. Although, we do recommend you get help from the experts. 

Asking an attorney to draft your will is a good move as they are qualified in law and can help you with potential problems that may arise in the drafting process. Attorneys also have the legal knowledge to ensure that your will is valid and fulfils your wishes.

We also recommend seeking the expertise of a financial advisor. By asking your financial advisor for insight, you can take action to secure your legacy for the future. By consulting the experts in the process, you engage in considered and effective estate planning. 

What makes a will valid?

For a will to be valid, it needs to:

  • Be in writing
  • Have been signed on every page and at the end by the person writing the will
  • The signature must be conducted in front of two witnesses (older than 14 years and they cannot benefit from the will)

Signing a Will: What You Need to Know

Man looking at a screen with quizzical expression

There are a few things you need to consider when signing a will. Firstly, you cannot sign your will and then email it to your witnesses to add their signatures. The will writer (testator) and the witnesses have to all be present at the signing of the document. 

Your witnesses cannot be benefactors, the appointed guardians, or the executor of the will. Also, interesting to note is the fact that your witnesses don’t need to read the will. Their primary function is to witness you signing the will. 

Estate Planning and Wills

Family walking on pier by sunset

Estate planning is inspired by your life. These plans usually include a will and other documents that act as a map for fulfilling your wishes, before and after death. 

Effective planning includes structuring of estate duties so taxes are minimised and ensuring the protection of your heirs’ inheritances. Estate planning is not restricted to life policies. All your assets are taken into account by your advisors, such as wills and trusts, marital contracts, and income tax.

Estate planning is essential to protect those you love because, without a plan in place, the negative consequences could impact them for years to come. 

For more information about estate planning and wills, feel free to get in touch:

+27 11 839 2302

info@maysure.za.com

See our estate planning service here: https://maysure.co.za/services/

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Maysure Estate Planning: Leave a Lasting Legacy

Leaving a lasting legacy for those you love is ultimately the final gift that you will be giving them. Although it is not a subject that one likes to dwell on, your life cycle is just that, a cycle; and if planned properly you can leave a lasting legacy that will set up those who have been with you on your journey, for generations to come.

A pivotal part of your planning should include estate planning. Simply put, this is ensuring that your lifelong assets such as your car, home, other real estate, savings accounts and other personal possessions and policies are effectively managed in the most appropriate and financially savvy way during your life so that they can keep on giving after your life.

Estate planning is inspired by your life and plans generally consist of a will and other documents that are meant to provide a map for fulfilling your wishes both before and after death. Effective planning includes structuring of estate duties so that taxes are minimised, ensuring sufficient liquidation to cover all your estates financial obligations and protection of inheritance options for future heirs. This planning is not restricted to life policies, and all your assets will be taken into account by your advisors, such as wills and trusts as well as marital contracts and income tax.

It is important to remember that estate planning is so much more than just planning physical assets, but should also include:

  • Provisions for your intrinsic values. Who you are and what you believe in are the cornerstones for your family and should be documented and included. This can include things such as your religious wishes, education choices and family values.
  • Instructions for care should you become disabled. This is vitally important because you might not be of sound mind and your wishes need to be documented before hand should the unforeseen happen.
  • Ensure that instructions for minor children are set in place including the naming of guardians as well as inheritance trustee’s.
  • Trust planning for children who might leave South Africa to either work or live permanently overseas. Ensuring that your legacy is left for them in a protected trust in South Africa, leaves you and them with the peace of mind that they will be looked after, no matter where they decide to lay down their roots.

With the above in mind, an important consideration when undertaking the estate planning process is to set up provisions for the needs of any children who might have disabilities. This can be covered as a “Special Trust Type A”. and should this be relevant to your circumstances, it must be discussed from the outset with your financial advisor, so that it can be included in your directives.

The professionals at Maysure know and understand that to your family, you are their world, and because of this, their expert advice and guidance is inspired by your life. No two clients are the same, and no two clients will be advised the same. Your unique place in life, your personal journey, and the exact position that you are in on this journey will be taken into account, and from there all advice will be tailored and varied to determine the exact services we will offer you to ensure that your unique financial goals are reached.

It may seem like a daunting task to take stock of and financially plan the assets that you have accumulated, but death is not an ‘if’, it is a ‘when’, so doing the necessary groundwork now can reduce burdens of hundreds and thousands of rands for your loved ones. Some pertinent questions to ask your financial advisor should include:

  1. Do I have a will in place?

This is the first step that should be completed whether you have small or large assets. A will establishes how your assets are distributed and without one you will have no control over your wishes upon your death.

  1. Have I designated beneficiaries for all my assets?

This may seem obvious but ensuring that you have properly completed a beneficiary designation form ensures that your assets are transferred correctly and timeously upon your death to the person you have designated.

  1. Have I planned for joint ownership?

A pivotal question when planning your estate, jointly held assets ensure that upon the death of one of the named owners, the assets are passed on the joint owner without the need for laborious court proceedings.

Estate planning is essential to protect those you love, because without a plan in place, the negative repercussions could impact them for years to come. Coming to terms with our own mortality is hard and is usually not something we want to think about. However, if we want our families to be protected and if we want to protect the assets we’ve created, the earlier we start thinking about estate planning the better.

Let the Experts at Maysure advise you on the course of your journey, so that you are free to live your best life, with peace of mind that your legacy is in good hands.