The topic of death is not one that is often discussed in the startup industry. But as a business owner, it’s important to make proper plans regarding your personal estate for when you are no longer around.
As anyone has had to wrap up an estate will know, lack of proper succession planning can intensify the feelings of grief and the loss, and can sometimes mean months, if not years of legal tangling for those left behind.
Judy Snyman is a fiduciary specialist at AlphaWealth, a South African investment and wealth planning services firm. She says it’s critical for business owners to know which documents and plans to have in place.
Below, are Snyman’s 5 ways to ensure that your succession plan is mistake-proof.
1. Know assets and liabilities. Snyman says in preparing a estate plan, you and your advisor should annually prepare a list of your assets and liabilities. “You have to decide which assets go to which beneficiary and the debts or credit cards that need to be paid and how to repay them,” she says.
2. Review life insurance and other policies. If you have dependents that rely on your income, it is important to have sufficient life cover to provide for them, says Snyman. “Insurance policies are also a way to ensure that there are available funds in the estate to pay expenses,” she adds.
3. Determine who your beneficiaries, and what their maintenance requirements are. Snyman says this is especially important where there may have been significant changes in your life, such as marriage or divorce.
4. List of passwords, accounts and investments. “Make sure that your family can access all your accounts (including online banking, email etc.) and that they are able to locate all of your banking and investment accounts,” she says.
Snyman adds lack of proper planning in this regard can create difficulties for your family and your executor if they are not able to locate all of your investment assets. “You can keep the list of assets yourself or with a trusted advisor,” she says.
5. Provide for death expenses e.g. funeral costs, taxes, administration costs, and others. Snyman says you have to make sure that your estate can cover these expenses.
6. Draw up a will. “Ensure you have a valid will. It allows you to plan how your assets are distributed to your heirs on your death in a tax efficient way,”she says. Snyman says it’s important to get professional advice as the standard documents which are available in stationery stores may not suitable for all estates and often cause significant problems for heirs.
If you die without a will, your heirs will inherit intestate according to the Intestate Succession Act. This means that the assets will be divided amongst your spouse and descendants in specific shares.
7. Consider your executor. Snyman says people often appoint their surviving spouse or someone close to them whom they trust.
“Appointing a spouse as the executor does not mean he or she has to wind up the estate, [but] the spouse can appoint an agent to do so,” Synman says.