Planning your way to financial freedom: The inevitability of death and retirement

When the past is history and the future is uncertain, the present is all you have. In the financial world, as is with much else in life, nothing is certain except for death and taxes. When a man retires without having proper estate and retirement planning, his wife gets twice the husband, half the income. Sadly, this isn’t too far from reality for many of us. Prepare as they may for retirement, sooner or later many find themselves being debtors or creditors to someone. The same can be said about the unexpected death of a breadwinner – failing to have the proper arrangements in place may eventually leave family members out in the cold.

For many, the prospect of retirement and the inevitability of death are two very distressing concepts. Some shiver at the thought of not knowing whether or not they will have a sufficient income that will sustain them and their families in the future. Many individuals think that estate and retirement planning are only for high-net earners. This is, however, not true considering that high-net earners and their families are less likely to experience financial difficulties at retirement and/or death. Absolutely everyone should have the fundamentals in place, which include a proficiently drafted will and regular estate and retirement planning to address any tax implications or cash shortfalls for retirement, and the financial assistance needed by their family and loved-ones immediately after their death.  Explaining what normally happens in the event that these practices are not in place emphasises how imperative estate and retirement planning really are.

A professionally drafted will is certainly the single most important legal document one can possess. Unfortunately, its value is often overlooked and underestimated. Without a signed will at the moment of delatio (death), a person’s estate will devolve according to the rules of intestate succession. Without a valid will, there is also no nominated executor. In such a case, nominations for an executor would have to be obtained from the deceased’s closest relatives – this will undoubtedly delay the process of winding up the estate. The appointed executor may charge a maximum fee of 4.025% (including VAT) of the estate’s gross value. A fee this high can reasonably be expected from an executor who did not want to be the executor of the deceased’s estate in the first place.

The public is so fixed on trying to save on estate duty by pegging the growth of their estates, they forget to address the money-craving elephant in the room. Having structures in place to save taxes are great, but without enough liquidity in the estate to pay these taxes, executor’s fees, transfer costs, and other expenses, some or all of the assets in the estate may have to be sold. After retirement, most people soon realise that there is too much time left at the end of their life-savings. They normally do not have enough money to fund their previous lifestyles. The question is therefore not at what age you want to retire, but rather at what income.

It is evidently clear from the above exposition that estate and retirement planning are incredibly important to secure a person’s financial freedom and avoid any unforeseen financial difficulties. The impeccable value of estate and retirement planning is immeasurable considering how one can reap the benefits by receiving a glimpse of their financial futures and having the opportunity to do something about it now.

Our fiduciary team at BVSA has decades of experience in estate and retirement planning and is professionally equipped to assist you with any of related matters.  For more information on estate and retirement planning, please contact any of our financial advisors for expert advice.

Reghardt Draper – CFP; LLB; LLM

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