PLANNING POINTS
By Palesa Dube
Jeanne Louise Calment was a French supercentenarian and, although now disputed, is considered the oldest human to have ever lived ‒ her age was documented as 122 years and 164 days at her passing in 1997. She touts a famous picture on the occasion of her 117th birthday where she treated herself to a cigarette and her regular glass of port.
The story goes that she lived in a grand apartment above her family’s general store. When she turned 96, her notary bought her apartment from her, under the French en viager system. In this type of arrangement, the buyer essentially agrees to make payments for a property in which the seller continues to live, with the buyer only taking occupation at the seller's passing. Well, this turned out to be an epically bad investment for the notary. When he died in 1995, he had paid over 200 000 dollars for the property ‒ more than double its value ‒ and didn’t live long enough to take occupation!
Scientists tell us that there will be more of Madame Calment’s ilk, now estimating a life expectancy of up to 150 years. More research is now going into not only increasing life expectancy but keeping disease at bay too. The question they are trying to solve is whether life can be extended without also extending the proportion of time that people go through a frail state. It makes the case, therefore, that we need to make more detailed arrangements not only to remain financially independent well into our retirement years, but to also make adequate estate planning arrangements.
The estate planning exercise
When embarking on arranging your financial affairs, a good starting point is addressing your legacy and estate planning, which, at this stage of your life, take on a more significant meaning.
Legacy planning, on the one hand, is a more encompassing process where you consider what you leave behind to your heirs and loved ones, taking into consideration your possessions and ‒ of greatest importance to most people ‒ the values and life lessons you wish to impart to them to help them navigate their lives.
Estate planning, one may say, is a more objective process that fiduciary expert David Meyerowitz aptly describes as considering “the arrangement, management, securement and disposition” of each asset to ensure that these assets are fully enjoyed during and after the life of the asset owner and those they love. It is a process where we consider the tax implications of having sizable wealth and assess the liquidity requirements of distributing those assets as you would wish.
Both these exercises culminate in your wishes being documented in a Last Will and Testament as well as other structures, to ensure they are carried out most practically.
More than the above, now is the time to start thinking about additional and more practical aspects of your estate planning. Let’s explore a few issues.
Have your affairs in order
This includes ensuring that your beneficiary nominations on your retirement and life policies and your Last Will and Testament are up to date. A healthcare declaration or living will may also be a valuable addition to assist family members with difficult decisions. Coupled with these should be a system to ensure that your family has access to your records and other information required to wind up your estate. Your estate plan should be revised with your financial planner at least once a year.
Diminishing capacity
We often pay too little attention to the fact that as you age, your ability to take care of all aspects of your life as you were previously able will diminish. This can be exacerbated if you have to deal with conditions such as dementia and Alzheimer’s, as the onset of these conditions is often first noticed when an elderly person no longer pays their bills on time or fails to attend to other obligations in a manner they were previously able to. While there is little medical intervention to avert this, it is necessary to have a conversation with your children and responsible family members and make your wishes known to them. These may include the type of living arrangements you wish to have, whether you want to be taken to a nursing home or prefer staying in your own home and employing staff to assist in your care. Both options have financial implications that need to be incorporated into your retirement and estate planning.
Limitations of a power of attorney
A further consideration is who steps in your shoes to handle your affairs when you are no longer able, bearing in mind that in South Africa, a power of attorney endures for only as long as the principal has full mental capacity and thus still has the contractual capacity to give an agent the authority to act on their behalf. Should the principal’s mental capacity deteriorate, other avenues need to be sought, such as bringing his or her estate under administration or curatorship. Again, forward planning can allow your family to manage your affairs through effective structures such as special-purpose trusts.
Palesa Dube, CFP, is a director and wealth manager at Wealth Creed. She is a practising member of the Financial Planning Institute of Southern Africa and the Financial Planner of the Year 2022. Her column is not intended as financial advice but for information purposes only.