Understanding the intersection between estate planning and family legacy
Protecting and passing on assets for high-net-worth families are only part of the solution. What's truly needed is a comprehensive estate or legacy plan, one that includes not only the financial aspects, but also prioritises family values, decision-making and long-term purpose. This requires more than a once-off estate plan; it demands ongoing planning, governance, and active heir involvement.
It all starts with specialist
In South Africa, discretionary trusts hold a variety of assets, including business interests, immovable properties, and investable assets. Trusts can be structured to ensure heirs' financial needs are met with access to capital when they are able to manage wealth, thereby supporting future generations as intended. A well-structured trust can also protect assets from external risks, such as creditors or divorce settlements, while maintaining long-term alignment with family goals.
However, even with robust trust structures, wealth transfers can still fail due to lack of family clarity and cohesion. Family governance helps prevent this. Though often seen as a corporate tool, family governance is key for family wealth as it defines roles, decisions, and expectations. Family governance usually comes in the form of a charter or constitution. It outlines how decisions are made, who's involved, and what values guide the strategy. It may also include formal succession policies or protocols for conflict resolution. Crucially, family governance encourages open, regular communication. Structured meetings and informal check-ins keep everyone informed and able to raise concerns early. This sense of transparency and shared responsibility builds trust and reduces the risk of misunderstandings or resentment.
A critical component of well-considered estate planning is a valid and executable will. This should be done once all wealth structures are in place to deal with any remaining personally owned wealth. Wealth transfers often fail because the will is not executable. Ensuring the executability of a will requires a full review of all the costs of dying (estate duty, executor fees, capital gain tax, etc.) to ensure sufficient liquidity to cover these costs without the need to sell or liquidate assets intended as bequests to heirs.
Another major reason wealth transfers fail is unprepared heirs, leading to poor choices, conflict, or disengagement. Preparing the next generation goes beyond financial literacy. It means helping them understand the family's history and purpose, and the responsibility of family wealth. Ideally, this education should start early, through frank conversations and exposure to business or philanthropic initiatives, gradually increasing the responsibility of young members. Families might involve younger members in investment decisions or charitable efforts to build their confidence and reinforce stewardship.
A philanthropic strategy, whether through a foundation, donor fund, or giving programme, enables families to define their shared values through action, strengthening family bonds and building a lasting legacy. Larger or more complex estates may benefit from a family office or dedicated adviser to coordinate legal, tax, investment, and governance needs, making it easier to align planning with long-term goals.
Today, this structured approach is more important than ever. Blended families and families spread geographically are becoming the norm. Environmental, social and governance (ESG) investing is becoming more popular, particularly among younger generations who want portfolios to reflect social or environmental values. Meanwhile, digital assets like cryptocurrencies, online content, and intellectual property are creating new complexities for estate planning, especially in terms of access and regulation.
In this evolving landscape, a clearly written family wealth charter can help avoid confusion and guide decision-making, even as the family structure or nature of its wealth changes over time.
While it may seem complex, it doesn't have to be. With the support of a trusted wealth adviser, families can ensure their estate plans are clear, technically sound, legally compliant, and sensitive to family dynamics. With the right support, families can move beyond mere wealth preservation and transfer wealth to build legacies grounded in clarity and shared purpose.
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