There are two vital elements of a financial plan when you have children – a valid will and adequate insurance cover.
If you pass away without a will, your estate will be distributed. This means your closest relatives will inherit from you, but they may not necessarily be the people you intended to leave your assets to.
Deon Nel, head of financial consulting at Standard Bank, shares steps to ensure that your children are protected.
Buy life insurance
Ensure that the funds are in place to allow your children to have a good education and support their basic needs, such as medical cover, food and clothing. The ideal scenario is to have a policy that will pay out about 7 to 10 times that of your annual salary. For example, if you earn R20 000 per month, you would need a policy that pays out R2.4 million. It is important to also make provision for debt settlement, so you should add the total amount of your debt to the policy. Your financial planner may suggest that you add an investment plan, which may make the policy less affordable. Do not let this put you off; take the pure life cover and you can take out a separate investment policy later. Life cover on its own is relatively inexpensive, especially when you consider the peace of mind it will give you.
Draw up a will
Even if you feel you do not have many assets, a will can ensure that whatever you have is distributed according to your desires. Your bank will be able to assist you with this process and can also act as your estate’s executor. If you draw up your own will, it is advisable that you get it checked by a professional as small mistakes, such as not putting your initials on all pages, can render it invalid.
Select a guardian for your children
This can be a close friend or relative, but make sure this person is willing to take on the responsibility of raising your child. A guardian can be anyone – a person with or without other children, man or woman, single or married. Make sure you update this element of your will as circumstances and relationships change.
Select a trustee
A trustee is a person or persons you would entrust with the task of managing the financial elements of the will. You should not make the trustee of the will the guardian of the children as well, as it must be ensured that everyone is acting in the children’s best interest. Trustees can be family friends, relatives, family lawyer, an accountant or financial advisor.
Discuss your plan with your children
If your children are old enough, explain to them your plans in the event of your passing. Find out if they are comfortable with the people that you have chosen as their guardians. Let them know that they will be taken care of financially and have nothing to worry about.
Discuss your estate planning with adult children
Dying without a will can cause enormous problems for family members who need to conclude your estate. Make sure you have an up-to-date file where your children can easily find information in order to do this. The passing of a loved one is traumatic for any child, whether an adult or still legally underage. A will and an insurance plan will ensure that your children are well taken care of when you are no longer around – offering them much comfort, stability and security in an emotional time.