Ensure that the Right People Benefit with Effective Wills and Estate Planning

When it comes to wills and estate planning, we often have a head-in-the-sand approach. Nobody wants to come to terms with or recognise their own mortality, but the fact is that it has to be done, or the inheritance that you are planning for your loved ones may be severely affected by tax deductions, if it is not planned carefully. Effective estate planning helps your loved ones to reap the benefits of your hard-earned money, without the tax man getting too much of the pie.

Here are some tips on estate planning and wills that may help to alleviate the tax burden.

  • Retirement annuities: Investing in one of these can help you to plan your estate, as well as leave a substantial portion of your investments both in life and after death. Usually, tax is charged from your contributions in the year that you invest in them, and after that, you can revel in the growth of your retirement annuity, as it gets older. Your retirement annuity is also not part of your estate; hence it is exempt from your estate when you die. It also means that if your annuity is passed on to a loved one after your passing, they will not have to pay tax on it. You are also able to transfer lump sums of your retirement annuity before your death, in order to avoid hefty tax penalties.
  • Invest in life insurance to pay the duties on your estate assets that are not part of a trust: If you are serious about leaving money or assets as part of your estate to children or other persons, it helps to purchase growth assets, but often it costs a lot to move these assets into a trust after your death. This means that it will benefit you if you invest in life insurance that will cover the cost of the taxes that are payable on your death. This way, your loved ones will not have to hand over a portion of your estate to the taxman when you pass away.
  • Set up a trust for lifestyle assets: Often, the purchase of a holiday home or other types of property and assets may increase in value over time, and this also means that once these assets are transferred to others, they may be subject to paying larger tax payments or penalties. Effective wills and estate planning are crucial here, meaning that you will be able to better deal with capital gains tax and inheritance duty. Both of these are able to vastly reduce the value of the estate when you pass away. Put these kinds of assets into a trust in order to avoid paying the transfer costs, if you want your heirs to be able to benefits as much as possible.
  • Donate money to your trust: If you can, donate as much as possible to your trust, but less than a hundred thousand rand per year to your trust. This will reduce the growth of your estate, but increase the value and growth of the trust, and this means significant savings when it comes to paying out after your passing.

We all need to be a little more tax-wise when it comes to the assets, wills and estate planning nowadays. If you need some expert advice, give our team at Velile Tinto & Associates a call, and we will happily steer you in the right direction.