Be sure you have enough cash in your estate to meet the demands of your will.
This was the warning given by Nigel Scott of BDO Financial Services at the SaturdayPaper/NBS Investors Club this week.
Scott said life assurance was often the solution to providing the cash needed to meet claims against an estate but care was needed.
"To quantify exactly what the correct amount is takes a lot more than a few notes on the back of a cigarette box."
Buying life cover to meet the needs of a will without using sophisticated computer models was like "selecting a used car by kicking its tyres."
Life cover served two primary purposes: the payment of claims against the estate (including mortgage bonds, HP, trade accounts, estate duty and executors fees) and the provision of income for dependants.
Care needed to be taken against over-insurance.
Now was the ideal time to attend to estate planning with the anticipated introduction of capital transfer tax in the 1997 Budget to replace existing estate duty and donations tax.
Scott said that, apart from tax, estate planning entailed other important elements. These included:
* A will needed to be tested for its financial consequences as it was the instrument that held an estate plan together.
* Everything should be kept as simple as possible enabling everyone to remain in touch with the planning and keeping down costs.
* The benefits passed on to beneficiaries, both in terms of the will and inter vivos trust, must be structured to limit income tax.
"Sloppy wording in these clauses can have disastrous consequences. There are many techniques that can effectively freeze the size of a growing estate."
* Planning should be flexible. While "one should not look to rule from the grave, you should not find yourself forced into a corner during your lifetime as a result of the structures and planning".
Scott stressed that estate planning was an extremely complex financial discipline to be handled by an expert.
"The most important thing to remember is how the person you are dealing (the advisor) with is being remunerated. There are no free breakfasts in this world."