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Busting common myths about having a Will.

Your Will forms an important cornerstone of your Estate Plan, but your Will is not your Estate Plan. Your Will is your final instructions on how your assets should be divided when you pass. There are, however, some common myths around Wills.

The first myth, what happens if you die without a Will?

When you die without a Will, your assets will not go to the state. They will be distributed in terms of your family bloodlines in accordance with the Intestate Succession Act. If you are married and have children, they are the first to inherit. Where you do not have a spouse or children, your parents are then considered, and if they are no longer alive, it follows to your brothers and sisters etc. People who were financially dependent on you also have a right against your estate. It is complicated and may cause fighting amongst your family, but the worst part is that an Executor, who is appointed by the government, will administer and divide your assets.

The second myth – You need to have more than a certain amount of assets to have a Will.

This is simply not true as our legislation allows everyone, even if you just own your clothes, to have a Will. Your Will must however comply with certain minimum standards as set out in the Wills Act.
This includes that your Will must be in writing and every page must be signed by you. Your Will also needs to be dated and witnessed by two competent witnesses. A competent witness is anyone over the age of 14 who is of sound mind and who does not inherit in terms of your Will. Please bear in mind that should your Will be disputed, the witnesses may be called to testify in a court of law.

The third myth – The executor decides what happens to your assets. 

The Executor’s role is to ensure that your assets are distributed according to your wishes. The Executor must report to the Master of the High Court. When you pass away, the executor will be appointed by the Master. A letter of Authority will be issued, and the Executor will take control of your assets for the purpose of distributing them in terms of your Will. Once all your assets have been distributed, the Executor needs to submit a liquidation and distribution account to the Master.

It is important that you keep an originally signed Will in a secure place and more importantly let your family know where it is kept. Make sure your Will is current. You can change your Will as often as you want – you do however need to make sure that is properly signed and dated.

If you need advice on drafting your Will, or you require assistance with your estate plan, use the Contact Us button to speak to us for more information.

The right asset class for your investment term.

The right asset class for your investment term.

Since 2008, the financial world has been in turmoil and this led to distrust in the financial world. The various asset classes have produced returns greater than expected, however most consumers still avoid risks, and it is hurting their financial planning and wealth creation.

Financial Planning has various asset classes that serves different roles in a financial plan. We will consider the short-, medium- and long-term asset classes and why they are the best for your various financial planning goals.

The short term.

Most of your short-term goals, are for a period of one to three years. These goals will require a higher level of commitment so ensure that you achieve this goal, because your only have a short period to rectify any of your deviations from the plan. For this reason, you should therefore consider less riskier investments. For this you would typically consider a bank deposit with a notice period. Banks often offer higher interest rates for accounts that requires notice, as they have a longer, more certain timeframe in which they can use the money for their other operations. You could also, should your goal have a time horizon of longer than a year, consider a money market unit trust fund. They usually have a steady growth rate and regular income distributions. They invest in asset classes like bonds, to help them generate the returns.

Reviewing your short-term portfolio should be done at least every six months so that you can track the progress and make the required changes when you need to, sooner rather than later.

The medium term

In the medium term, typically three to five years, you would need to consider some risk in your portfolio. With these goals you have a bit more time to achieve your goals, and you have the time to correct any deviations from the plan to achieve your goal. You have probably head of diversification, or do not invest all your eggs in one basket. For your medium-term investments, you need to do just that. You need to expose some part of your portfolio to higher risk asset classes, such as listed property and equity, but majority of your funds will still be invested in money markets and bonds. The equity component of a medium-term portfolio will be an equity fund with a lower level of volatility.

Reviewing your medium-term portfolio should be done at once every year, so that you can make changes to ensure that you stay on track to achieve your goal when needed.

The long term.

Your long-term goals usually longer than five years, will need your money to work for you. This means that you need to take some risks, to achieve your goals. The problem is that we are emotional when it comes to our money, and we want to see it grow. With equity exposure to your portfolio, you might experience short term losses and long-term gains, also known as volatility. The key with long term investment having most of your investment exposed to equities, is to remain invested. In 2020, we have seen a significant slump in the market when the initial hard lockdown was announced, however, by the end of 2020, most investments recovered especially where the investors remained invested.

With your long term investments, you should definitely have a professional to assist you and manage your behaviour and ensure that you do not react to the short term losses that will help you provide the long term gains that you require to achieve your goals.

In summary

For short term investments, you should have little risk in your investment portfolio and review at least every six months.

For your medium-term investments, you should have some risk in your investment portfolio, and review at least once a year.

For your longer-term investments, you should have more risk in your investment portfolio, and have a professional to help you manage your emotions and guide you along the way.