Estate planning is a topic often overlooked or misunderstood in South Africa, yet it is one of the most crucial aspects of financial planning. We spoke to Keorapetse Mothosola, a Financial Planner with a degree in Politics, Economics, and Philosophy from UNISA and extensive experience in financial advisory, to demystify estate planning and share actionable advice. His insights will inspire you to take charge of your financial legacy, no matter the size of your estate.
Keorapetse’s Journey to Becoming a Financial Planner
Born and raised in Soweto, Keorapetse Mothosola’s career as a Financial Planner stems from a deep desire to change lives through financial education. “What inspired me to become a Financial Planner is the ability to change lives through finances,” he shares. A memorable example of his impact is helping a close friend plan for retirement, ensuring his future financial security. This passion for empowering others drives his work, especially when tackling sensitive and complex topics like estate planning.
Breaking Down Estate Planning
Keorapetse explains, “Estate planning involves putting provisions in place to manage your assets in the event of your death. It’s about deciding how you want your estate to be handled and ensuring that your legacy is left to the people you choose.” Without an estate plan, assets may fall into the wrong hands, leaving your loved ones financially vulnerable.
Key Components of Estate Planning
Estate planning includes several critical elements, such as:
1. Wills – Legal documents outlining how assets should be distributed.
2. Trusts – Structures to manage assets for specific beneficiaries.
3. Tax Planning – Addressing taxes like Capital Gains Tax and Estate Duty.
4. Estate Costs – Considering executor fees, transfer costs, and administrative expenses.
Keorapetse emphasizes the importance of consulting a financial planner to navigate these complexities and ensure your wishes are honored.
Common Misconceptions in South Africa
“Many people believe estate planning is a trap used by lawyers or financial planners to seize estates,” Keorapetse notes. Another misconception is that assets will automatically pass to dependents after death. Unfortunately, more than 70% of South Africans die without a valid will, leading to complications.
Keorapetse recalls a personal experience: “My cousin, a soldier with assets, passed away without a will. His estate was distributed according to intestate succession laws, leaving his children without the inheritance he intended for them. This could have been avoided with proper estate planning.”
The Role of Life Insurance and Tax Planning
Estate planning is not just about distributing assets—it’s about preserving their value. South Africa’s inheritance tax, or estate duty, can significantly impact your estate’s net value. “One effective tool is a life cover policy, which helps cover estate costs, including estate duty,” Keorapetse advises.
Life insurance also provides liquidity, ensuring the executor has funds to distribute the estate efficiently. This can cover debts, administrative costs, and the financial needs of your beneficiaries.
Tailored Solutions for Different Situations
Estate planning isn’t one-size-fits-all. Keorapetse shares tailored advice for two scenarios:
1. For Single Parents
“A single parent with minor children must nominate a guardian and draft a will to ensure their children are financially secure. Life insurance is crucial for creating liquidity and covering debts or estate taxes.”
2. For Young Professionals
“Even if you have no dependents, you own assets—your car, furniture, and personal belongings. Estate planning ensures these go to the people you care about, no matter the size of your estate.”
Intestate Succession: The Cost of No Will
When someone dies without a will, their estate is distributed according to South Africa’s intestate succession laws. This process can be lengthy and may not align with the deceased’s wishes. “Having a valid will ensures your estate is distributed as you intended, preventing unnecessary delays and conflicts,” Keorapetse advises.
Keeping Your Estate Plan Updated
Life events such as marriage, the birth of a child, buying property, or starting a business should prompt you to review and update your estate plan. “Estate planning is not a once-off activity,” Keorapetse emphasizes. Regular updates ensure your plan reflects your current circumstances and wishes.
Estate planning is an essential step in securing your financial legacy and protecting your loved ones. As Keorapetse Mothosola aptly puts it, “Estate planning ensures that your wishes are respected, no matter the size of your estate.” By understanding the key components, addressing common misconceptions, and seeking professional advice, you can take control of your financial future today.
About the Expert
Keorapetse Mothosola is a Financial Planner with a B.A. in Politics, Economics, and Philosophy from the University of South Africa (UNISA), specializing in Economics. He holds a Regulatory Examination 5 (RE5) qualification from Moonstone Business School and is currently pursuing a Postgraduate Diploma in Risk Management.
Based in Soweto, Keorapetse is passionate about empowering individuals through financial education and helping clients secure their financial legacies.
Cell:
062 477 5048
Email:
k.mothosola@sanlam4u.co.za
