10 November 2011 by

What is the difference between Estate Planning and a Will?

In essence, a Will is an essential component of an estate plan, but estate planning is far more encompassing and relates to your estate both before death as well as after death. An estate plan can never be complete without a Will.

Estate planning is as an ongoing process. It involves implementing a plan, using certain tools to protect and grow your estate during your lifetime and facilitate the orderly and efficient transfer of your estate to your beneficiaries after your death.

Estate planning involves multiple disciplines and the co-ordinated input of various professionals such as brokers, financial advisors and succession practitioners.

Some important stages and structures that you can consider and implement to achieve these goals include:

  • You should objectively consider the matrimonial regime governing any marriage or union you enter into. The obvious technique is to separate your assets from those of your spouse. This is achieved by concluding an antenuptial contract with or without the incorporation accrual.
  • This mechanism can form a basis for protecting of your estate from claims by your spouses' creditors or your spouse if you terminate of the relationship. In turn, it would provide similar protection to your spouse.
  • On entering the working arena, you should consider the importance of disability cover to compensate you in the event that you suffer some form of physical or mental disability or accident that prevents you from working and earning an income. Disability cover is vital if you have dependents.
  • You should have adequate life cover to take care of the needs of your dependents, such as minor children in the event of your early death or death while you are still working and building up an estate. The need for disability and life cover will reduce, as these claims on your estates become less with advancing years and the larger your estate becomes.
  • If relevant, you may also make use of more complicated structures, such as taking out key man insurance and/or partnership insurance. This gives you the means to buy out a key man or partner on their early demise and to protect the business entity in which you may be involved. Alternatively, it ensures that your partner or company can buy out your estate in the event of your untimely death.
  • As you develop and accumulate assets, you might consider creating one or more inter vivos trusts to protect your estate from creditors, and to provide continuity if you became disabled, and as to maximise the savings in the form of capital gains tax and estate duty.
  • Considered loans or donations to children to provide them with a deposit for a growth asset or to set up a business, may be advantageous to both the donor and donee.
  • Another aspect of estate planning would be ensuring that adequate funds are set aside from your income to provide for retirement. Vehicles such as retirement annuities can be employed to maximise tax benefits while contributing, simultaneously protecting the savings from creditors and easy access during the period of saving or change of employer.
  • Ultimately, you may need to employ a testamentary trust created in your Last Will and Testament to provide for individuals with impediments or beneficiaries who are under age.
  • You should also ensure that your Will, is safely stored and that someone you trust and who is accessible to your family or dependents, knows its whereabouts. On a practical level ensuring that your important documents like title deeds, policies and details pertaining to your assets and liabilities are in order and up-to-date, makes up part of a prudent estate plan.

Johann Jacobs

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