People tend to measure their success by the milestones they attain during their lifetimes. The usual markers are: levels of wealth, power, and influence. However, over time, most who amass some measure of wealth and success, undergo a shift in focus. They become more concerned with leaving something behind that endures long after they are gone. In other words, in the natural order of things, most will someday ponder on their legacy. This desire to leave something tangible behind in some well thought out and organized form, creates the need for appropriate estate planning.
Estate planning involves preparation for the transfer of assets from someone who owns the assets (a grantor) to the intended "inheritors" or beneficiaries (grantees). Such transfers most commonly take place through Wills and Trusts. Whilst most grantors rest in the assurance that their legacy will be given effect exactly as planned, in reality numerous agreements which they have entered into during their lifetimes often diminish the likelihood that they will have their posthumous wishes realized.
Many potential grantors don't realize that the contracts they enter during their lifetimes, could place restrictions on their ability to transfer their assets when they are gone. The legal principle that sums up the predicament of many a grantor, is that you cannot give what you don't have. This may appear commonsensical, but if not appropriately taken into consideration, its effects are multifold. Firstly, the grantor cannot have his/her wishes followed to the letter. Secondly, it makes the grantor's transferable assets uncertain and vulnerable to misappropriation.
The challenges to intentional and successful estate planning can be surmounted by coordinating your estate/wealth management plan with a review of all relevant contracts entered during your lifetime. This can only be accomplished by engaging a sound legal practitioner who has experience in company law, real estate practice, banking law, and even family law. This is because many agreements entered in these areas have clauses limiting or regulating the asset owner's ability to dispose of or transfer his/her assets. Individuals interested in preparing a well-thought-out estate plan must avert their lawyer's mind to any such agreements that may affect their ability to transfer their assets to intended beneficiaries.
A few estate planning tools are commonly used in estate planning, with each tool presenting its own unique advantages and challenges. For instance, one could set up a company for the sole purpose of acquiring assets or some other singular objective not associated with actual commercial enterprise. This is perfectly legal and referred to a special purpose vehicle, or "SPV". An SPV can acquire/hold assets on behalf of a real person for tax, control, and other regulatory reasons. SPVs are commonly used by high and average net worth individuals as proxies for purchasing assets discreetly. However, SPVs can be limited by the terms creating them as well as by company law. What this means is that SPVs though very useful, are not fool proof, and some 'standard' company agreements entered into may actually undermine their usefulness. To avoid this, the grantor's lawyer must have access to both the estate planning instrument, and all the SPV's corporate documents and agreements.
Another frequently deployed tool of estate planning is the 'trust' mechanism. A trust is an arrangement where one person is appointed to hold property, on behalf of another or others. The trustee cannot use the property for his personal enjoyment, and neither does the person who has appointed him. Assets given to a trustee to hold and manage no longer forms part of the testator's estate and as such care must be taken not to include those assets when planning to dispose of assets via a Will or other estate planning mediums.
When two or more persons co-own a property, that is known as joint ownership. This kind of arrangement is common between husband and wife. As part of a joint succession plan, joint ownership could reduce tax liability, attorneys' fees, etc. What many people fail to realize is that generally, joint ownerships comes with right of survivorship. This means that when one of the joint owner dies, the property does not become part of the deceased's estate; rather, the other owner continues to own the property, with the last surviving owner becoming the full owner. So, if the intention is for 'Mr. & Mrs.' for example, to retain the power to pass on their own share of property to a beneficiary of their choice when they are gone (rather than the surviving partner taking all), they should consider creating an arrangement where each party has distinct ownership of their own share of the property with no right of survivorship. This arrangement is legally known as tenancy in common.
Finally, many 'routine' financial agreements such as those associated with some pension accounts, insurance policies, and other receivable agreements already stipulate what should occur upon the demise of a person. Usually, the documents will make provisions for who the intended beneficiary of the policy will be. Some of these kinds of transfers operate outside the ambit of a Will or other testamentary document that the grantor may have prepared.
A comprehensive estate plan, in addition to considering many of the above planning tools, should provide for the wellbeing of the grantor and his or her spouse and dependents in the event of long-term incapacity, illness or death. In order to achieve this, it is important to ensure that the estate planning document of the grantor is properly drafted with the support of a well-seasoned legal practitioner.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.