Inevitably, there will come a time in your life when you stop scrambling, when you can finally take a breath from just keeping your head above water, children fed, housed, educated and off your hands, paying down debt, a retirement planned for, and maybe you want to start thinking about the inevitable – what am I going to leave behind.
Legacy is the total impact of your life that continues after you are gone: the money and assets you leave, the values and stories you pass on, the relationships you shape, and the opportunities you create for others. In other words, legacy is not just what people inherit; it is what they remember, what they have learned from you, and what in their lives is better because you were here. This series (which I will be turning into an eBook as I did with my Planning series – still available free on request) explores brainstorming and planning for a legacy – and how to start implementing it decades in advance.
My father had a very clear idea of what a financial legacy meant, which he communicated to us kids early on (something I highly recommend). He told us that he would fund as much education as we wanted – that was his legacy, and we knew that it might come at a cost to our potential inheritance, and if we didn’t ‘use it’, we’d ‘lose it’. His goal was to have financially independent and well-qualified children – irrespective of gender (not always a given for someone from the Silent Generation). My grandmother (my father’s mother) had a very similar philosophy, and all her children (one boy, 3 girls) had tertiary education – quite unusual in the 1940s and 1950s, but she was an extraordinary person with ‘feminist’ values which were not common, nor popular, at the time. This is a testament to the power of a clearly communicated and executed legacy that can survive generations.
This was not really a financial legacy, and getting a financial legacy to continue to subsequent generations is much more difficult (I will be going into this in subsequent posts – if you don’t want to miss any of my posts, let me know and I will put you on my database).
Your Will and estate are probably the first part of your financial legacy, so a good place to start. Your financial planner has probably done at least the semblance of one, even if it’s just to make sure you leave your dependents in good standing.
Your Will is very important. This is the tool that will shape your financial legacy after you’re gone, and a good place to start thinking about the direction you want to take. Without it, you’re leaving the decisions around your estate to the ‘intestate laws of succession’. The principles of that have been around since 450 BCE and have evolved through ‘Roman’ law to ‘Dutch Law’ and beyond. I could write a whole post on the nuances of this law (and bore you all to death), but let me put in black and white the one clause that normally causes the most problems. If a married person (ANC no accrual) with children dies without a Will, then his or her spouse will get R250k, or a child’s share, whichever is the greater. In smaller estates, this can leave a spouse almost destitute unless the children voluntarily ‘repudiate’ their share in favour of the spouse. I have actually seen this happen – in that case, only one of the children repudiated their spare, the other said that her mother could ask for money when she needed it. Her mother and father had been barely scraping by as it was, and this led to a permanent family rift.
In my next post, I will be going through ‘getting your affairs in order’, the first step in understanding your estate and legacy, but before all of that, everyone – from the minute you have an asset in your name – needs a Will. If you already have one, I have a free checklist that covers some of the important points below. Just drop me an email, and I will send it. Checking the Will is one of the first things I do for my clients, and the first thing I fix if there are some glaring errors or wording that could cost the beneficiaries (literally) tens of thousands of rands.
In South Africa, Wills do not have to be ‘lodged’, ‘certified’ or ‘notarised’, but this is not necessarily true of your offshore assets. In the Channel Isles, for example, (a big favourite of RSA LISPs), you have to have a separate Will for that location and appoint a probate officer (at additional expense). Don’t be sucked in by the sales hook of ‘estate duty free’, it still forms part of your RSA estate. Trusts, quasi-trusts and so-called offshore pensions that are a firm favourite in these locations are expensive, inflexible and usually don’t free you from RSA estate duty anyway. Make sure that your advisor is disclosing all the math and small print. At Rexsolom, we prefer to invest our clients out of Switzerland in simple investments which avoid these high fees but protect clients from Situs tax (an onerous tax on non-resident investors and asset owners, especially out of the UK and USA, but also elsewhere). There is no quick fix, and beware of being sucked in by ‘sins of omission’ (not telling you the small print, hidden fees, delays, etc.) rather than ‘sins of commission’ (outright lies which can be prosecuted).
The worry about the cost of drawing up a Will often leads South Africans to go for a bank or other institution’s ‘free’ Will – or even worse, download a template from the internet. You know that there’s never a ‘free lunch’, right? Those financial institutions have a very important caveat for doing that ‘Free Will’ – they insist on being the Executor. Those internet templates? If you go through my checklist (and follow this blog and podcast series) you’ll see exactly what those pitfalls are.
If you really can’t spare the R1000 odd to get a properly structured Will where an institution is not the executor, guess where you can get a decent template, change the executor and make the previous Will null and void? (Remember to cancel the bank’s ‘safekeeping’ fee too). You didn’t hear it from me.
This is not going to make me popular… One other little hustle going on out there that I am not a fan of is a financial institution not only giving you a ‘free’ Will, making themselves the executor, but to add insult to injury, persuading you to take out a life policy to pay their executors’ fees, and estate duty too.
It’s easy to put the fear of the almighty into someone for not having a Will. I’m sure that I have already prompted you to do or check yours already, but using that fear to sell you a life policy to pay tens of thousands for their executor’s fees is not very nice. There’s no such thing as a free lunch, and when it comes to insurance, you’re usually paying for it. The irony is that this policy too is estate-dutiable.
In part 2 of this Legacy Series, I will discuss Wills in more depth and help you start building your estate plan.
Articles and Blogs:
Holiday checklist NEW
Next year – Action Plan NEW
Next year – Vision, Mission etc. NEW
Medical Risk Mitigation
Next Year – Consolidation
Abdication or diversification?
Carbo-loading your retirement
Spoiled for choice
Who needs a plan anyway
8 questions you need to ask about retirement
What to do when interest rates drop
How to survive volatility in your investments
What to do when interest rates drop
Difficult Financial Conversations
Financial Implications of Longevity
Kick Start Your Own Retirement Plan
You matter more than your kids in retirement
To catch a falling knife
Income at retirement
2025 Budget
Apportioning blame for your financial state
Tempering fear and greed
New Year’s resolutions over? Try a Wealth Bingo Card instead.
Wills and Estate Planning (comprehensive 3 in one post)
Pre-retirement – The make-or-break moments
Some unconventional thoughts on wealth and risk management
Wealth creation is a balancing act over time
Wealth traps waiting for unsuspecting entrepreneurs
Two Pot pension system demystified
Cobie Legrange and Dawn Ridler,
Rexsolom Invest, Licensed FSP 45521.
Email: cobie@rexsolom.co.za, dawn@rexsolom.co.za
Website: rexsolom.co.za, wealthecology.co.za