Will mis takes can be c ostly

Get good ad­vice when writ­ing your will

Weekend Witness - - Opinion - Take a closer look at in vest­ment port­fo­lios when choos­ing

MOST in­vestors con­sider only two cri­te­ria when se­lect­ing in­vest­ment port­fo­lios: his­tor­i­cal re­turns and in vest­ment man­age­ment f ees. T hat makes sense.

But what if you were told that it could also make sense to con­sider the slightly more ex­pen­sive port­fo­lio that has un­der­per­formed? Would y ou be­lie ve that ? Frank Richards, head of in­vest­ments: FI­NAN­CIAL plan­ning is not onl y about c over­ing y our as sets and grow­ing your wealth, it is also about man­ag­ing your af­fairs in the e vent of death.

Su­raj Lallc­hand, head of Stan­dard Trust Limited, has pro­vided a list of mis­takes peo­ple oft en mak e w hen draft­ing a will. • For­get­ting to re­view your will ev­ery year Life cir cum­stances chang e, so up­date y our will r egu­larly. T his in­cludes g et­ting mar­ried, di vorced, mov­ing to a dif­fer­ent lo­ca­tion, hav­ing a child, sell­ing an as set or even los­ing or g ain­ing a bu­sine ss.

It is a good idea to choose a spe­cific dat e e very y ear t o r eview the will. • For­get­ting to in­clude a “Fide­icom­mis­sum resid­uary” (leftovers) clause The resid­uary clause can ei­ther cover the “leftovers” of your es­tate (if you want to be very ex­plicit in your will about who will get what prop­erty), or it can be the main clause you use if y ou jus t want to tr eat most, or all, of your es­tate as one big pool to be di­vided up among your main ben­e­fi­cia­ries.

Should you for­get to in­clude a resid­uary clause to cover prop­erty you don’t men­tion else where in y our will, you will die p ar­tially in­tes­tate, mean­ing only some of your prop­erty is c overed b y y our v alid will.

In this case, the la w will dict ate how any prop­erty that you have not oth­er­wise men­tioned will be dis ­ trib­uted, and t o whom. • For­get­ting con­tin­gen­cies If, for ex­am­ple, you named four ben­e­fi­cia­ries and one dies be­fore you do, you need t o name a b ack­up.

You also need to name a con­tin­gent per sonal r ep­re­sen­ta­tive if the per­son who you’ve des­ig­nated is un­able t o carry out the acti vi­ties.

The per son or or gan­i­sa­tion y ou have nom­i­nated as an ex­ecu­tor must also be r evised.

Work with y our b ank, fi­nan­cial plan­ner or at tor­ney on “w hat if ” sce­nar­ios. (What if your ap­pointed ex­ecu­tor bec omes in­sol vent? Or Fund­sAtWork at Mo­men­tum Em­ployee B en­e­fits, said that although it is a good start to look at the his tor­i­cal re­turns and in­vest­ment man­age­ment fees when se­lect­ing portf olios, it is some ­ what con­cern­ing that lit­tle at­ten­tion is given to the make­up of the port­fo­lios and that the int el­lec­tual prop­erty em­bed­ded in the port­fo­lio con­struc­tion is over­looked.

Your will is inv alid if the sig­natur es and witne sses ar e no t in or der. what if the value of your stock port­fo­lio falls?) • Get­ting too de­tailed If you state spe­cific rand amounts, you risk hav­ing your es­tate be­ing dis­trib­uted in a way you may not have in­tended.

Use per cen­t­ages w her­ever pos sible, par­tic­u­larly for the larger shares of your es­tate among y our ben­e­fi­cia­rie s.

Let’s as­sume your es­tate is val­ued at R1,8 mil­lion w hen you dr aft your will and you de­cide t o lea ve most of it t o your onl y daught er, e xcept f or R180 000, which you want to go to your sis­ter.

You ma y think that y our daught er will g et mor e if the e state gr ows in value.

But this may not be the case. W hat if for some rea­son the value of your es­tate de­creases due to a fall in prop­erty prices or a t ax li­a­bilit y?

With­out ad­vo­cat­ing a short­term fo­cus, it is im­port ant t o c on­sider ho w much of the cap­i­tal in a par­tic­u­lar port­fo­lio is at risk, how this port­fo­lio is likely to beha ve in a de­clin­ing mar ket and what the pos sible dr aw do wns ar e.

“Should w e not spend a bit mor e time t alk­ing about the t ar­geted out ­ come, given the time frame and the ‘risk bud­get’?

When you die, your es­tate could have dwin­dled to R185 000. By us­ing r and amount s ins tead of per ­ cen­t­ages y our sis ter will s till g et R180 000, but y our daught er will get v ery lit tle. • Keep­ing se­crets from your ad­viser or lawyer Tell your ad­viser or at­tor­ney ev­ery­thing you can think of, even per­sonal, p ain­ful or emb ar­rass­ing secr ets that may aff ect the claim. Do y ou have a stash of cash in a shoe­box in your g arage? • Make sure your will is prop­erly signed This is per haps the mos t common mis­take. The will is in­valid if the sig­na­tures and wit­nesses are not in or­der. It is ad­vis­able to seek guid­ance for this.

— Business E ditor.

“The risk bud­get is dif­fer­ent for risk pro­filed port­fo­lios that are dif­fer­ent. It is an in­di­ca­tion of the risk ap­petite and how cap­i­tal can most ef­fec­tively be de­ployed t o achie ve the r equired out ­ come,” said Richar ds.

He said w ell c on­structed portf olios can eas­ily un­der­per­form sub­op­ti­mally con­structed portf olios.

This oft en hap­pens — in r ecent times, lo­cal and global eq­ui­ties were the top perf orm­ers w hile “other” as set classes, which pro­vide valu­able di­ver­si­fi­ca­tion ben­e­fit s, un­der­perf ormed.

Not enough at tention is be­ing p aid to the port­fo­lio’s con­struc­tion and how it is likely to be­have in dif­fer­ent mar­ket cy­cles, he said.

— Business Ed­i­tor.

PHOTO: SUP­PLIED

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