“Past performance is not indicative of future results.” This phrase is often repeated in finance, but one future event is inevitable: at some point, we will all pass on, and our assets will transfer to the next generation. Estate planning is critical to ensuring that this transfer is seamless and preserves the legacy you’ve worked so hard to build.
For South Africans, the principles of estate planning might be best understood through the lens of our national sport – rugby.
In particular, Coach Rassie Erasmus’s strategic brilliance offers valuable lessons. Just as Erasmus prepares the Springboks to continue their winning legacy beyond the current roster, estate planning ensures that your wealth transitions smoothly to the next generation.
Estate Planning: Beyond a Robust Will or Trust
Traditionally, estate planning has focused on creating a robust will or trust to control how assets are distributed. However, this old-school approach often needs to be revised.
Studies reveal that 70% of wealth is lost by the second generation.
The rigid structure of a will or trust cannot account for the unique variables within each family – these are influenced by behaviours, financial literacy, and the relationships between heirs.
The first step in effective estate planning is establishing a solid foundation, such as a trust. Trusts are powerful tools that offer control, protection, and flexibility, ensuring your assets are managed according to your wishes. But the structure itself is not enough. True estate planning is as much about education and family unity as financial instruments.
The Springbok Strategy: Continuity and Preparation
Rassie Erasmus’s success with the Springboks lies in his ability to think beyond the current season. He integrates future stars into the team early on, ensuring no disruption in the Springboks’ legacy when veterans retire. Similarly, a well-crafted estate plan involves heirs early, preparing them to manage the legacy they will inherit. This approach isn’t just about wealth transfer; it’s about continuity and the seamless transition of responsibility.
Open communication and financial education within the family are essential.
Just as the Springboks are not just a group of individual players but a cohesive unit, your heirs should be seen as stewards of a shared legacy. Engaging them in early discussions about their roles and responsibilities can prevent wealth erosion and ensure they are prepared to carry the torch forward.
Family Governance: A Unified Approach to Wealth
One of the critical components of modern estate planning is family governance. This involves setting up decision-making structures that include all family members, ensuring that everyone is aligned with the long-term goals of the family wealth. Such governance structures can adapt to the changing needs of the family and the external economic environment, much like how a coach adapts strategies depending on the opponent and conditions.
Governance isn’t just about control; it’s about fostering a sense of shared responsibility and unity, which is crucial for sustaining wealth across generations.
The Role of Trusts in Estate Planning
Trusts are often at the centre of estate planning strategies. They offer a means of protecting wealth, managing tax liabilities, and ensuring that your assets are distributed according to your wishes. A well-structured trust can also provide for family members while controlling how and when assets are distributed.
However, trusts must be complemented by an understanding of tax laws, the choice of jurisdiction, and the family’s specific needs.
For South Africans, considering global diversification and the potential relocation of heirs is also essential. Trusts can be tailored to address these issues, ensuring that your legacy is not only protected but also accessible to heirs, regardless of where they may reside.
Conclusion: A Winning Legacy
Much like coaching a rugby team, estate planning is about more than just setting up a structure—it’s about strategy, preparation, and adaptability. Just as Rassie Erasmus ensures the Springboks’ legacy endures by integrating new talent and maintaining a unified team, your estate plan should ensure that your wealth is preserved and your legacy carried forward seamlessly.
By focusing on education, open communication, and strong governance, you can protect your wealth from the erosion that claims 70% of legacies by the second generation.
As you prepare for your future, remember that estate planning is not just about passing on assets but values, knowledge, and a unified vision for future generations. In this way, like the Springboks, your legacy can continue to thrive, generation after generation.
If you’d like to talk to us about this, please setup an online meeting or contact us directly.