Leaving a legacy, intergenerational wealth, or succession planning?

Whatever you call it – leaving a legacy, intergenerational wealth, or succession planning – these terms ultimately all refer to transferring your assets to your beneficiaries. This can be done in various ways and times, either while you are alive or once you have passed on, provided, of course, that there is a plan to do so – your estate plan.

Estate planning encompasses more than merely drafting a will. And it can be a powerful tool. Not only can it ensure that your loved ones are well looked after once you pass away, but it can also ensure a smoother transition of intergenerational wealth. Estate planning encompasses more than merely drafting a will. A good choice is undoubtedly one of the most important documents, but an estate plan includes far more. It can be incredibly impactful as part of a holistic family financial plan.

Completing an estate duty and liquidity plan will give you a clear picture of the financial impact your passing will have on your family and dependents. For example, it will give you a better understanding of whether any assets need to be sold to generate liquidity to settle debt and other expenses like capital gains tax and help you structure an estate to reduce estate duty. You might have a large estate in value but with little or no liquidity. It is thus essential to understand what assets will be available to create liquidity and provide for your family.

Whether your beneficiaries are tax residents or not will also impact their inheritance. According to Statista, South African emigrants cumulatively amounted to roughly 915 000 individuals in 2020. Most of these emigrants settled in the United Kingdom, Australia, and the United States.

The trend towards family-focused financial planning

There has been a gradual move towards family financial planning. Structuring a financial plan around a family unit as a whole has numerous advantages:

• Beneficiaries clearly understand the family’s financial situation, so having a family financial plan in place helps create a smooth transition for beneficiaries.
• Shared responsibility within the family can help minimise potential tension between family members in cases where disagreements regarding assets arise. Constant, open lines of communication ensure that assets are transferred to the next generation as intended.
• Assets can be structured in a way that is beneficial from a tax perspective, e.g. nomination of beneficiaries and ensuring they are updated and reconciled with the wishes in your will.

As with anything relating to your family, obtaining the correct bespoke advice is essential to structure your family plan correctly. A financial advisor can assist with this process, and I implore you to partner with a financial advisor you and your family are comfortable with. A financial advisor can guide and help you with difficult but necessary conversations with your family to ensure that you have the most appropriate financial plan to have peace of mind for yourself and your loved ones.

Robyn Laubscher is an advice and product specialist at PSG Wealth.