Page 22 - Waterfall Issue 8 2021

Waterfall News

WHy Risk iT?

DIY estate planning can cost you

By Gerhardt Meyer CFP®, Strategic Technical Manager, PSG Wealth

With online solutions popping up on your newsfeed

and promising to crank out an estate plan in under

30 minutes, you may be tempted to do-it-yourself

(DIY). After all, you will be avoiding all the costs that

come with professional assistance, right? Well, going

the DIY route might cost you more than you think. Gerhardt Meyer

m any people mistakenly view wills but, in the process, caused a lot of situs. In the uK, this results in tax at a

unintended harm and hardship. A poorly
estate planning as being
rate of 40% for assets over the value of
confined to the wealthy.
In reality, it is important drafted will, where the wording used £325 000, and in the uS, tax at a rate
is unclear or ambiguous, often leads
of up to 40% for assets over $60 000.
for everyone and essential to ensure to disputes, court actions, unnecessary
that your loved ones are looked after delays, and additional costs to the estate. Should your uS situs assets amount
and that your estate is transferred This can easily be avoided if you enlist to more than $60 000, there will be an
without unintended consequences. the help of a professional to draft your obligation to report the assets to the
Estate planning is not a ‘one size fits all’ will, ensuring that the language used Internal Revenue Service (IRS). The cost
exercise. There are various risks involved, clearly expresses your wishes and the of making the necessary filings through
especially when you attempt to do it formalities are strictly adhered to. a uS lawyer is approximately $5 000.
yourself. Here are some risks to consider.
FAiLURE To UnDERsTAnD WHy pRoFEssionAL HELp
LEGAL REQUiREmEnTs TAX LAWs AnD CoUnTs
mATTER impLiCATions South Africa has signed double taxation
For a will to be valid, the testator (who Estate planning is, of course, about more agreements with various countries,
the will belongs to) must be over the age than the will itself and is becoming including the uK and the uS. These are
of 16 years. The will must be in writing more complex, with many clients complex treaties and understanding
(typed or handwritten) with each page, externalising assets due to our volatile the practical tax administration
including the last page, signed by the economic and political environment, practices can be daunting.
testator and two competent witnesses making DIY estate planning even riskier.
who are 14 years of age or older. It is also It is often believed that having a
important to note that any person who When you undertake estate planning, single worldwide will is sufficient to
signs a will as a witness (and the spouse you should consider who your deal with South African and offshore
of any witness) will be disqualified beneficiaries are and what their needs assets, but this is not always true,
from inheriting under that will. may be, as well as the overall liquidity depending on the type and location,
of your estate. Assets held in foreign as well as the value of these assets.
AmBiGUiTy LEADs jurisdictions can have tax and other cost
To UninTEnDED implications, which differ from South Given the various risks involved in DIY
ConsEQUEnCEs African assets that need to be catered estate planning and the potentially
The importance of having a valid, for. If you, for example, hold assets in the tragic impact it can have on the
executable will cannot be over- uK or the uS, these assets are subject people you love, it is best to consult a
emphasised. We have all heard stories to inheritance tax and/or Federal Estate professional to ensure peace of mind
of people who have drafted their own Tax (FET) under the legal concept of and a proper estate plan to match.

20 Waterfall Issue 8 2021