This article is written by Martin Spring editor of Personal Finance Newsletter

MANY people are ignorant about estate planning, and therefore slip up in some vital areas. Here are some of the most common mistakes made, and some steps to avoid them.

Failing to make a will:

Many neglect this fundamental necessity because they don’t want to think about the inevitability of death; this selfishly ignores the interests of the living who will (or should) inherit.

Others can’t be bothered because they don’t think they will leave much of value; yet many have “hidden” assets such as pension rights. Everyone should have a will, even if it leaves all to a spouse or child. It costs nothing if you go to a bank or trust company.

Failing to realise the limitations of a will:

Contrary to popular belief, you cannot always use a will to dispose of all your property. For example, your spouse or even an ex-spouse may have rights to part of it, depending on how you are married, the terms of a divorce, and so on.

A will is not an appropriate document to guide administrators of any trust you create, as to how they should manage its capital and distribute its benefits. A letter of wishes – which, unlike a will, is not a public document – is more suitable.

Leaving everything to your spouse to save taxes:

What you leave your married partner is fully exempt from estate duty; but it will be taxed fully on his or her death, if the estate is valued at more than the exemption limit (currently R1-million).

It makes more sense to bequeath your first million, which will enjoy the basic exemption, to others, such as children, preferably through a trust, and the balance to her or him. That way the family enjoys a double exemption.

Believing life insurance is enough:

Your chances of becoming disabled before reaching the age of 65 are much greater than those of dying. Make sure your policy incorporates disability cover. Investigate income protection insurance, the only kind where the premiums are tax-deductible from non-business income.

Not keeping your will up to date:

Estate planning doesn’t end the moment you sign your will. Your financial situation will almost certainly change and tax laws may change. Births, marriages or deaths may alter the dispositions you wish to make.

Should you marry or get divorced, or have a child, that will certainly require some radical changes. So review your will at least once every three years, and whenever there’s a substantial change in your finances or family situation.

Changing your will by codicil:

Since each amendment to a will must be executed with the same formalities as the will itself – witnesses, signatures and so on – it doubles the chances of a mistake or misinterpretation. It’s much better instead to have a new will drawn up, based on your old one. Costs, if any, should be minimal.

Failing to plan to shelter life insurance proceeds:

Even if you don’t have significant assets, a big life policy payout could magnify the size of your estate to the point where it becomes subject to substantial estate duty. Some people don’t realise that in most cases life insurance proceeds are added to an estate for tax purposes.

If the amounts could be more than R2-million, it may pay to establish an inter vivos trust and transfer ownership of the policy to the trust. The trust can provide your spouse with an income for life and support minor children and other dependants. The capital can then (under existing law) pass to your heirs free of tax when such income is no longer required.

Not asking yourself “what if” when planning your estate:

Posing hypothetical questions can help you make estate plans that will deal with even the most unlikely scenarios. For example, supposing you’ve set up a trust for your grandchildren’s benefit, naming their father (who is your son-in-law) as a trustee. What happens if the marriage falls apart? It should be a condition for setting up the trust he can no longer serve as a trustee if separated or divorced from your daughter.

Keeping your will at home:

As with other important documents, wills can be lost, stolen, damaged or destroyed. Leave the original with a lawyer, bank or trust company. If you would like a record easily accessible, just keep a copy at home.