Last Updated on 08/01/2025 by Carl-Peter Lehmann
Estate Planning 101: Your 2025 Blueprint to Securing Your Legacy
Estate planning in South Africa is more than just drafting a will – it’s about creating a comprehensive strategy to protect your legacy, provide for your loved ones, and ensure your assets are managed according to your wishes. In this blueprint, we’ll walk you through the essentials, from the basics of crafting a will to advanced strategies like leveraging trusts, navigating marital property regimes, managing international assets, and understanding the impact of donations. Plus, we’ll demystify the critical tax considerations that shape an effective estate plan. While estate planning often takes a back seat to other areas of financial planning, it remains a cornerstone of financial security. Planning for life’s eventualities can feel overwhelming, but taking proactive steps today ensures your loved ones are cared for tomorrow. Without a solid plan, your assets could be misallocated, and your family left in financial uncertainty.
Table of Contents
The Estate Planning Process: Your Blueprint for Peace of Mind
Your estate is the sum of everything you’ve built over a lifetime – your assets, liabilities, and the legacy you leave behind. Estate planning is a dynamic and comprehensive process that goes beyond just dividing your wealth. It takes into account your financial goals, personal values, and economic realities to ensure your wishes are honored both during your life and after you’re gone. At its core, estate planning is about creating clarity and security. It ensures your assets are distributed effectively, exactly as you intend, while protecting your loved ones from unnecessary financial or legal challenges. Importantly, estate planning isn’t a one-and-done task … it evolves as your circumstances, assets, and priorities shift over time. Whether it’s adjusting for major life events, expanding your investments, or refining your wishes, your estate plan should grow with you.
Estate Planning 101 Basics: Laying the Foundation for Your Legacy
Starting your estate planning journey begins with understanding what you own and owe – cataloging your assets and liabilities is the foundation. From there, the next step is setting clear objectives for how you want your estate distributed. This means making deliberate decisions about who inherits what, when, and how. Whether your plan is as simple as leaving everything to your spouse or as complex as managing a multi-generational transfer of wealth, clarity is key.
The complexity of your estate often dictates the time and detail required to craft an effective plan. Unfortunately, larger estates can sometimes lead to disputes among heirs, highlighting the importance of precise and thoughtful planning to minimize conflict.
It’s important to remember that every financial decision you make today impacts your estate plan tomorrow. From keeping your will up to date (when was the last time you reviewed yours?) to managing investments, paying down debt, updating policy beneficiaries, or planning for international assets—everything is interconnected.
Estate planning isn’t just about documents and legalities; it’s about securing peace of mind. By starting early and staying proactive, you ensure that your loved ones are protected and your legacy is managed according to your wishes, no matter what the future holds.
Further Reading: The Intergenerational Wealth Transfer Process and How to Manage that Effectively
Estate and Financial Planning: Two Sides of a Unified Strategy
Estate and financial planning are deeply interconnected, working together to ensure your financial goals and legacy are secured. A common misconception is that estate planning is reserved for the wealthy or older generations. In truth, estate planning becomes relevant the moment you start accumulating assets – or liabilities – regardless of your age or financial standing.
For many, the journey begins with simple steps, like appointing a beneficiary or drafting a will. But as life progresses – through significant milestones like marriage, children, or other life events – estate planning evolves and requires more tailored strategies to meet your needs.
Your estate planning support network also expands over time. Early on, your financial planner might assist with basic tasks such as drafting a will or assessing liquidity needs. As your financial situation becomes more complex, this network often grows to include lawyers, tax specialists, and other professionals to ensure your plan is both comprehensive and legally sound.
Like financial planning, estate planning is not a “set it and forget it” process. It’s an evolving aspect of your financial well-being that requires regular reviews and adjustments to stay aligned with your changing circumstances and long-term goals. By treating estate planning as an integral part of your broader financial strategy, you can ensure both stability and peace of mind for the future.
Further Reading: Your Comprehensive Financial Planning Blueprint For Achieving Your Goals
Estate Planning Purpose and Goals: Preserving Your Wealth and Legacy
Estate planning serves multiple purposes and objectives, all aimed at protecting and maximizing your wealth during your lifetime and ensuring its seamless transfer after your passing. At its core, estate planning is about enabling you to fully enjoy the use and benefit of your assets while you’re alive, with the assurance that your loved ones will continue to benefit from your accumulated wealth when you’re gone – exactly as you intended.
1. Ensure your estate is wound up efficiently and effectively
The administration of a deceased estate is often a lengthy and complex process. Without proper planning, delays and unexpected costs can arise, leaving heirs and dependents to face unnecessary emotional and financial burdens.
2. Make sure your wishes are fulfilled in terms of heirs and legatees you want to inherit
Without a valid last will and testament, you die “intestate,” meaning your wishes may not be honored. In such cases, the Intestate Succession Act determines how your estate is distributed, following a fixed formula that divides assets among your spouse, children, siblings, and parents.
A key purpose of estate planning is ensuring that your last will and testament is valid, up to date, and reflects your current wishes. This includes verifying that beneficiary nominations on policies and other accounts are accurate, so your estate is distributed according to your intentions.
3. Provide for dependents and protect minor beneficiaries
Taking care of and protecting loved ones – both during your lifetime and after your passing – is one of the primary goals of estate planning. Special attention must also be given to minor beneficiaries, such as young children, to ensure their needs are met.
This includes planning for custody and guardianship, specifying who will care for your children if you pass away (whether you are a single parent, have sole custody, or both parents pass away simultaneously). Establishing testamentary trusts can be an effective way to manage inheritances for minors, ensuring funds are protected and accessible without being held by the Guardians Fund until they reach the age of majority.
4. Minimise taxes and costs payable by an estate
From estate duty to capital gains tax, income tax, and transfer duty, several taxes may become payable upon death. A key objective of estate planning is to use legal and compliant tools to mitigate or reduce these tax liabilities. Additionally, costs like executor’s fees can be significant and should not be overlooked.
For larger estates, more sophisticated tools such as trusts may be worth considering. However, it’s essential to weigh the costs, flexibility, and practicality of these mechanisms to ensure they align with your specific needs and objectives.
5. Provide for sufficient liquidity in the estate
One of the most critical objectives of estate planning is ensuring there is sufficient liquidity to cover all costs, debts, and taxes payable upon your death. Executor’s fees, capital gains tax (CGT), estate duty, and outstanding debts must all be accounted for. Without adequate liquidity, your estate may be forced to sell assets to generate the necessary cash – potentially leaving your dependents in a precarious financial situation and undermining your intentions.
Imagine your family home, where your spouse and children are living, being sold to settle these costs. This kind of forced sale could cause significant emotional and financial strain, something careful estate planning aims to avoid.
In addition, it’s vital to have cash readily available for your family’s immediate living expenses, as accounts are typically frozen after your death once the authorities and banks are notified. This is particularly important if you are married in community of property (COP), where everything forms part of the joint estate. Until the Master’s Office issues Letters of Executorship and the executor gains access to the estate’s funds, your dependents may face financial challenges.
By planning ahead and incorporating liquidity solutions, such as life insurance or accessible savings, you can ensure your loved ones are not left vulnerable and that your estate can be settled efficiently without undue stress.
6. International Assets: Adding Complexity to Estate Planning
Owning assets internationally introduces additional considerations to your estate planning. You must account for the laws of succession and inheritance in the jurisdiction where your assets are located, including potential Situs taxes (inheritance or estate taxes applicable in that jurisdiction).
Key questions to address include:
1. Do you need a foreign will?
2. How does probate work in that jurisdiction?
3. What are the tax implications, and how do they impact your local estate?
These factors add another layer of complexity to your estate plan and often require specialized advice to navigate effectively. Proper planning ensures that your international assets are managed in alignment with your broader estate goals, minimizing complications for your heirs.
7. Planning for Business Interests in Estate Planning
Business owners and shareholders must carefully consider and plan for the future of their business interests in the event of their passing. For family-owned businesses, this often involves open and honest conversations with heirs and potential successors to ensure a smooth and seamless transition. Proactive planning helps to safeguard the continuity of the business and reduce potential conflicts or uncertainties among family members.
8.The Role of a Living Will in Estate Planning
A living will provides clear instructions for your healthcare if you become incapacitated, are on life support, or are unable to communicate your wishes. It outlines your preferences for medical care and end-of-life decisions, offering guidance to your family and healthcare professionals during emotionally challenging times. By having a living will in place, you ensure that your wishes are respected and reduce the burden of decision-making on your loved ones.
9. The Importance of Compliance and Flexibility in Estate Planning
Pushing the boundaries of what is acceptable or legal to minimize taxes has long been a common practice. However, in today’s interconnected world, global tax authorities have significantly improved their ability to share information and detect both tax avoidance and tax evasion. What was once considered acceptable may no longer be, as the definition of “acceptable” tax practices continues to evolve.
It’s essential to steer clear of anything that crosses the grey line. Adhering to legal and compliant strategies not only safeguards your estate but also ensures peace of mind for you and your loved ones.
Flexibility is equally important in estate planning. A well-structured plan should adapt to your changing needs, circumstances, and the evolving regulatory landscape. By remaining practical and open to adjustments, you can ensure your estate plan stays effective and aligned with your goals.
Navigating Estate Planning Tools: Coordination is Key
Estate planning often requires the use of multiple tools, especially when managing complex estates. Understanding and effectively coordinating these tools is essential to ensure that your plan works seamlessly. In estates involving various professionals – like financial planners, tax consultants, and attorneys – it’s critical to have someone overseeing the process to ensure all components align with your overall objectives.
At Henceforward, we act as the ‘conductor’ or ‘helicopter’ planner, skillfully orchestrating these moving parts. This approach is especially valuable for Family Office clients, where the complexity of estate planning demands a comprehensive, well-coordinated strategy.
Further Reading: How We Help Family Office Clients Conduct Their Financial and Estate Planning Needs
The Foundation of Estate Planning: Your Last Will and Testament
Your last will and testament serve as the cornerstone of your estate plan, ensuring that your wishes are honored and preventing the default application of intestate succession laws. This crucial document lays the groundwork for how your assets will be distributed, who will manage your estate, and how your loved ones are cared for.
Appointing a qualified executor is essential for managing your estate efficiently. However, it’s worth noting that executor’s fees can be significant, so understanding the associated costs upfront is vital. For minor beneficiaries, setting up a testamentary trust is a smart move to safeguard and manage their inheritance, avoiding complications like the Guardians Fund. Additionally, nominating a guardian for your minor children, where necessary, ensures their welfare is in trusted hands.
Most wills also include provisions to shield inheritances from becoming entangled with the spouses’ estates of heirs or legatees. However, it’s important to keep in mind the implications of the Maintenance of Surviving Spouses Act, which allows a surviving spouse to claim against the estate if adequate provision has not been made.
Harnessing Trusts in Estate Planning
Trusts remain one of the most powerful tools for estate and intergenerational wealth planning when structured correctly and in full compliance with current regulations. While historical loopholes have been closed and anti-avoidance measures tightened, discretionary or ‘family’ trusts continue to offer significant benefits, including asset protection, tax efficiency, and flexibility in managing wealth across generations.
By placing assets in a trust, you can ensure their preservation and controlled distribution according to your wishes, even long after your passing. Trusts can also safeguard wealth from risks such as creditors, marital claims, or poor financial decisions by beneficiaries.
However, setting up and managing a trust requires careful planning and ongoing compliance with evolving laws. A properly structured trust is not just a tax-saving vehicle but a sophisticated instrument for securing your legacy and ensuring financial security for your loved ones.
Further Reading: Utilising Trusts As An Advanced Estate Planning Tool
Donations
Donating assets during your lifetime can be an effective way to reduce the value of your estate and potentially lower estate duty liabilities. However, understanding the tax implications and leveraging available exemptions is key to ensuring this strategy works in your favor.
Currently, individuals benefit from an annual donations tax exemption of R100,000. Additionally, spousal donations and contributions to qualifying public benefit organizations are typically exempt from donations tax, providing opportunities for tax-efficient giving.
That said, the complexities of Section 7C – particularly regarding interest-free loans to trusts – must be carefully navigated to remain compliant and avoid unintended tax consequences. Proper planning ensures that donations not only reduce your estate effectively but also align with your broader financial and estate planning objectives.
With the right advice, donations can be a powerful tool for reducing your estate’s size over time while supporting loved ones or causes close to your heart.
Incorporating Marital Property Regimes into Estate Planning
Marital property regimes play a pivotal role in estate planning, as they directly influence asset ownership, control, and distribution. Understanding the nuances of each regime is essential to ensure your estate plan aligns with your wishes and legal obligations.
Community of Property (50/50)
Under this regime, all assets and liabilities are jointly owned and shared equally between spouses, regardless of who acquired them. While simple in its structure, it limits individual control over assets, requiring both parties to plan collaboratively. This arrangement often necessitates careful financial planning to manage joint household expenses and ensure an equitable estate distribution.
Marriage out of Community of Property (ANC)
With an anti-nuptial contract (ANC), each spouse retains separate ownership and control of their assets throughout the marriage. To ensure assets acquired after marriage remain separate, the accrual system must be specifically excluded in the ANC. This regime allows each spouse to maintain individual estates and provides the freedom to distribute assets independently in their estate plans. However, provisions must be made for the joint expenses of maintaining a household.
ANC with Accrual
When the accrual system is included, the spouse with lesser estate growth during the marriage has a claim to half the difference in growth between the two estates upon dissolution of the marriage. Certain assets, like inheritances or specifically excluded items, are exempt from the accrual calculation. This regime is designed to ensure fairness, particularly for spouses contributing in non-financial ways, such as managing the household or raising children.
Cohabitation and Spousal Definition
Cohabitation, where two individuals live together in a committed, monogamous relationship without formal marriage, adds complexity to estate planning. Legal recognition of a cohabiting partner as a “spouse” varies, affecting rights to inheritance, maintenance, or other claims. This applies to both heterosexual and same-sex unions. Failing to address cohabitation in your estate plan can lead to unintended consequences in the event of separation or death.
Life Insurance and Retirement Planning in Estate Management
Life Assurance: A Critical Estate Planning Tool
Life insurance is a cornerstone of estate planning, providing essential financial protection for your loved ones. It serves multiple purposes, such as settling outstanding debts, covering estate-related expenses like capital gains tax (CGT), estate duty, and executor fees, and ensuring financial stability for dependents.
A thorough needs analysis conducted by a financial planner can help determine the appropriate level of coverage, addressing common liquidity challenges that estates often face. Proper structuring of your life insurance policy is equally important. Whether your goal is to provide liquidity for estate expenses or financial security for your dependents, you can tailor the policy through measures like beneficiary nominations or using a trust arrangement for minor beneficiaries.
Retirement Provision: A Strategic Asset in Estate Planning
Assets held in approved retirement funds are generally excluded from your estate, making them a tax-efficient vehicle for wealth accumulation. This exclusion reduces your estate’s tax liability while safeguarding assets from creditors, offering a dual benefit of wealth preservation and tax efficiency.
However, it’s important to note that contributions exceeding tax-deductible limits may still attract estate duty. Retirement provisions not only form the backbone of your retirement savings strategy but also play a pivotal role in estate planning by helping to optimize tax efficiency and ensure long-term financial security.
Futher Reading: Your Retirement Planning Essentials That Includes Using Retirement Funds as an Estate Planning Tool
Global Estate Planning: Navigating International Complexities
Owning assets internationally introduces a unique set of challenges to estate planning. As a South African tax resident with a global estate, you’ll need to address the complexities of Double Tax Agreements (DTAs), foreign succession laws, and probate requirements, all of which influence the settlement of foreign assets and the taxes and costs associated with them.
For assets in jurisdictions such as the UK or US, Situs Tax becomes a critical consideration. These taxes can significantly impact your estate, especially for assets like real estate or shares in major corporations. Understanding the inheritance and estate tax thresholds in these countries is essential, as these can vary greatly and often result in steep tax liabilities. While DTAs can help mitigate double taxation, they do not eliminate the high tax rates imposed by certain jurisdictions.
To ensure the seamless management of global assets, consider appointing informed executors familiar with the laws of each jurisdiction. In some cases, having separate wills tailored to the legal requirements of specific countries can streamline the probate process and reduce complications.
Specialized advice is indispensable for navigating the intricacies of global estate planning. An experienced financial planner or cross-border legal expert can help align your international assets with your overall estate plan, ensuring compliance and maximizing efficiency.
Highly Recommend: Watch Our Global Estate Planning Webinar With An Industy Expert
Strategizing Business Succession in Estate Planning
Planning for the future of your business interests is a critical element of estate planning. It requires thoughtful consideration of key questions: Who will succeed you? What will happen to your shares? How will the income generated by the business be distributed? Addressing these aspects early ensures the smooth transition of ownership and minimizes potential conflicts.
Shareholders’ Agreements and Ownership Protocols
A well-drafted shareholders’ agreement forms the foundation for managing future ownership transitions. It should clearly outline protocols, such as whether existing shareholders will have the first option to purchase your shares or if your heirs will be required to sell the shares they inherit. These agreements not only protect the business but also provide clarity for your family and business partners.
The Role of Buy-Sell Agreements
A buy-sell agreement is a popular tool for business succession. Activated upon a shareholder’s passing, it allows surviving partners to purchase the deceased’s shares, ensuring continuity in business operations. These agreements are often funded by life insurance policies taken out on each partner, structured to exclude the payout from estate duty. This strategy ensures liquidity for the transaction while safeguarding the business’s financial stability.
Regular Business Valuations
Keeping your business valuation up to date is essential for effective succession planning. Conducting valuations annually, ideally after finalizing financial statements, ensures the fair value of the business is accurately reflected. This valuation should account for key factors, such as goodwill, fixed assets, and intellectual property, to provide a comprehensive picture of the business’s worth.
Family-Owned Businesses: Unique Challenges
For family-owned businesses, succession planning is often more complex. Balancing family dynamics with the operational needs of the business requires careful navigation, particularly when managing intergenerational wealth transfers. Ensuring equitable and sustainable outcomes for both the business and family members often requires specialized advice and detailed planning.
Strategizing business succession as part of your estate plan not only protects your business interests but also ensures that your legacy is preserved for future generations. With the right tools and expert guidance, you can navigate this critical aspect of estate planning with confidence.
Estate Planning 101: Navigating Taxes and Duties
Understanding and addressing the tax implications of estate duty and other taxes is a cornerstone of effective estate planning. In South Africa, estate duty is levied at 20% on the first R30 million of your worldwide estate, increasing to 25% for amounts exceeding R30 million. This duty applies to property and certain insurance policies, but it can be reduced through allowable deductions for costs, debts, taxes, and assets bequeathed to a surviving spouse.
To further ease the tax burden, the R3.5 million abatement, which is transferable to a surviving spouse, ensures that estates below this threshold are exempt from estate duty. However, even estates exempt from estate duty may still face other significant tax liabilities.
Capital Gains Tax (CGT) at Death
Death triggers a “deemed disposal” for CGT purposes, meaning all your assets are treated as though they were sold on the date of your passing. While there are exclusions that can reduce the CGT liability – such as the R300,000 annual exclusion at death (compared to the standard R40,000) and a R2 million exclusion for a primary residence – careful planning is required to manage the potential impact of this tax.
Strategic Tax Planning
Minimizing estate duty and CGT requires a proactive approach. Strategies such as making donations, using spousal rollovers, or leveraging trust structures can help reduce tax liabilities and preserve more of your estate for your heirs. Each strategy must be tailored to your unique financial and personal circumstances to ensure compliance and efficiency.
Building a Comprehensive Plan
Crafting a tax-efficient estate plan goes beyond simple calculations; it involves aligning your financial goals, personal wishes, and legal obligations. By considering all potential taxes and duties, you can ensure that your estate is managed and transferred according to your intentions, with minimal financial strain on your beneficiaries.
Proper estate planning isn’t just about protecting your wealth—it’s about ensuring the legacy you leave behind is preserved and passed on efficiently. With expert guidance, you can navigate the complexities of taxes and duties and create a plan that brings peace of mind for you and your loved ones.
Estate Planning Calculation Example
Scenario Details
- Gross Estate Value: R35,000,000
– Includes property, investments, and life insurance policies. - Liabilities: R3,000,000 (outstanding debts and loans).
- Funeral and Administration Costs: R200,000.
- Bequest to Surviving Spouse: R5,000,000.
- Primary Residence Value: R4,000,000.
- Capital Gains on Primary Residence: R2,000,000.
- Other Gains Subject to CGT: R1,500,000.
- Executor’s Fees: 3.5% (plus 15% VAT).
Step-by-Step Calculation
1. Dutiable Estate Calculation: Gross Estate: R35,000,000
Liabilities: (R3,000,000)
Funeral and Administration Costs: (R200,000)
Bequest to Surviving Spouse (deductible): (R5,000,000)
Dutiable Estate: R26,800,000
2. Estate Duty Calculation
Estate Duty Threshold: R30,000,000 (20%)
Since the dutiable estate is below R30,000,000, estate duty is levied at 20%.
Estate Duty Payable: R26,800,000 × 20% = R5,360,000
3. Capital Gains Tax (CGT) at Death
Primary Residence CGT:
Gain: R2,000,000
Less Primary Residence Exclusion: (R2,000,000)
Taxable Gain: R0 (fully excluded).
Other Gains Subject to CGT:
Gain: R1,500,000
Less Annual Exclusion (at death): (R300,000)
Taxable Gain: R1,200,000
CGT Inclusion Rate for Individuals: 40%
Taxable Portion: R1,200,000 × 40% = R480,000
Apply Marginal Tax Rate (e.g., 45%): R480,000 × 45% = R216,000
4. Executor’s Fees
Gross Estate: R35,000,000
Executor’s Fees: R35,000,000 × 3.5% = R1,225,000
VAT on Fees (15%): R1,225,000 × 15% = R183,750
Total Executor’s Fees: R1,408,750
5. Total Taxes and Costs Payable
Estate Duty: R5,360,000
Capital Gains Tax (CGT): R216,000
Executor’s Fees (incl. VAT): R1,408,750
Funeral and Administration Costs: R200,000
Total Taxes and Costs: R7,184,750
6. Net Estate Distributed to Beneficiaries
Gross Estate: R35,000,000
Less: Total Taxes and Costs: (R7,184,750)
Net Estate to Beneficiaries: R27,815,250
Key Insights from the Calculation
The R3.5 million abatement was not applied here, assuming it had already been transferred to the surviving spouse.
The bequest to the spouse (R5,000,000) was deducted because spousal transfers are estate duty-free.
Effective use of the primary residence exclusion helped minimize CGT.
This example illustrates how planning for liabilities, exemptions, and taxes can significantly impact the net estate available to beneficiaries. Through strategic planning, costs like estate duty and CGT can be managed more effectively.
Conclusion: Securing Your Legacy with Thoughtful Estate Planning
Estate planning is far more than just drafting a will – it’s about creating a comprehensive roadmap to protect your wealth, minimize taxes, and ensure your loved ones are cared for according to your wishes. From understanding marital regimes and leveraging life assurance to navigating global complexities and planning for business succession, every aspect plays a role in shaping your legacy.
Effective estate planning requires a proactive and informed approach. It’s about balancing financial strategies, legal structures, and tax efficiencies to align with your personal goals and family dynamics. By addressing critical elements like liquidity, tax implications, and asset distribution, you can avoid unnecessary complications and provide peace of mind for those you leave behind.
The journey of estate planning evolves as your life, finances, and goals change. With expert guidance, regular reviews, and a well-structured plan, you can ensure that your legacy is not only preserved but also maximized for the benefit of future generations.
Now is the time to take action. Whether you’re starting from scratch or refining an existing plan, partnering with a trusted financial planner or estate planning expert can help you navigate the complexities and secure a meaningful legacy for your loved ones.
Carl-Peter Lehmann
Carl-Peter, with more than 20 years experience, is a Certified Financial Planner® and Director at Henceforward, a Cape Town-based wealth management firm. Specializing in estate planning and investment strategies, he is dedicated to helping clients protect and grow their wealth.
