In an increasingly uncertain world, the significance of comprehensive estate planning is not just reserved for the wealthy but is vital for individuals of all backgrounds.
David Thomson, senior legal adviser at Sanlam Trust, stresses the importance of taking proactive steps to safeguard assets and provide clear instructions for the distribution of wealth. He underscores that failure to do so can leave children grappling with overwhelming emotional and financial burdens.
“When parents pass away without proper estate planning, their children are often left to pick up the pieces, and this can be an emotionally and financially taxing experience.
“Estate planning while your parents are alive is crucial for preserving and managing their assets. However, these are difficult conversations to initiate. We often find that people need guidance to help get their parents’ affairs in order and make decisions that are in the best interest of the beneficiaries.”
Thomson advised professionals seeking professional guidance to facilitate the process and make decisions that are in the best interest of beneficiaries.
To ease the estate planning process, he offered the following advice for families to consider:
Confirm the existence of a valid will: Ensure that parents have a properly executed will that clearly outlines their wishes for the distribution of assets.
Create a comprehensive list of assets: Compile an inventory of insurance policies, investments, bank accounts, and retirement funds to prevent any assets from being overlooked during the estate settlement process.
Obtain a general Power of Attorney (POA): If parents desire assistance in managing their affairs, granting a general POA can authorise their children to act on their behalf.
Involve a financial adviser: Encourage parents to include their financial adviser in discussions about important financial matters, providing expert guidance for managing assets.
Identify signs of mental incapacity: If parents display signs of mental incapacity, consider establishing a trust to manage their assets, ensuring their financial affairs are appropriately handled.
Plan for liquidity: Account for sufficient liquidity to address financial risks that may arise after a parent’s passing, such as cash shortages during the transfer of assets. Estimate the required liquidity and explore options such as life insurance proceeds or other arrangements.
Recognising the challenges associated with discussing estate planning, Thomson emphasises the importance of addressing these matters pro-actively. By tackling estate issues in a timely manner, he said, families can effectively minimise potential legal, financial and emotional obstacles that may arise upon the passing of parents.
“As difficult and uncomfortable as this conversation can be, you must have open and honest conversations about your parents’ finances to help mitigate legal, financial, and emotional challenges when they’re gone.”
However, he said, it is crucial to avoid certain mistakes when managing your parents’ affairs.
These include refraining from commingling parents’ funds with one’s own, acting as a trustworthy trustee, practicing good budgeting, considering parents’ life expectancy, respecting their autonomy, recognising the possibility of mental and physical deterioration and appointing a curator if necessary. These measures, according to Thomson, aim to ensure clarity, prevent complications, avoid financial difficulties, and promote harmony within the family.
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