The tragic and untimely death of someone close or perhaps a person in the media reminds us all of the fragility of life. Estate planning is not a subject which engenders much enthusiasm and it is normal to adopt the view that there is 'plenty of time' to plan for events which we hope are still years away. But a simple estate plan can be essential and by preparing for the future, you can help your family enormously.
Without a plan you may leave your nearest and dearest with unanticipated legal problems and tax burdens. What's more your property may not be distributed as you intended but instead will pass according to the law of intestate succession. Whilst this law attempts to be fair it may result in a completely different outcome than expected.
The most common forms of estate planning are joint ownership, wills and trusts. The most suitable way to provide for those who you would wish to benefit from your estate will depend on the value of the estate, the nature of the assets and family circumstances.
Owning property with a partner in the legal form of joint tenancy with right of survivorship with result in the property passing automatically to the survivor. This is the basic form of estate planning, which is followed by many, but cannot be recommended for complex estates.
Preparing a will is a basic step in estate planning. With a properly prepared will, you can arrange for assets to be distributed to whoever you wish and ensure that your estate is administered in an orderly manner through the personal selection of executors.
A will can make provision for persons outside the family circle and include charitable or political bequests. It can nominate a guardian for minor children or appoint a trustee for an incapacitated person. The requirements for making a will are complex and legal advise must be sought.
Trusts have for many years been used as part of an estate plan either in conjunction with a will or as an alternative. A trust is an arrangement in which property is transferred to a trustee for the benefit of one or more individuals called beneficiaries.
With a trust you can maintain control of assets during your lifetime but ensure professional management at your death or incapacity. Arrange for your spouse to receive an income for the remainder of her lifetime and retain capital for your children. You can also control the timing and amount of distributions by specifying for example that a child should only receive income from the trust and not the capital until they reach a certain age.
A significant advantage of trusts over wills is the confidentiality which is achieved through the use of a trust. In contrast a will once it has been proved in court to be valid it is a public document.
Whichever form of estate plan is chosen it is important that it is reviewed from time to time. As family circumstances change or new assets acquired plans can easily become outdated. The benefits of planning are appreciated in most aspects of life and estate planning is no exception. As with many things there is no time like the present.
This article provides a general outline on the subject at the time of writing (December 1996). It is not intended to be exhaustive nor to provide legal advice in relation to any particular situation and should not be acted on or relied upon without taking specific advice.
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