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Defying Gravity: Estate Planning Strategies in Challenging Economic Times

Gravity is the force that keeps us grounded and ensures that what goes up must come down. In Zimbabwe, however,
inflation seems immune to the laws of gravity and does not seem to ever come down. While market volatility, rising
inflation and economic uncertainty can be deeply unsettling, a carefully structured estate plan not only hedges against
these uncertainties, but can also present some potentially useful opportunities.

Inflation directly impacts prices. Throughout history, prices have generally increased worldwide, but economic and political
events in Zimbabwe have caused unpredictable spikes, pushing the economy to unprecedented levels. Higher prices
decrease purchasing power and savings, and they reduce the return on investments. Consequently, inflation can
significantly alter the value of your estate over time, making it a crucial consideration when developing your estate plan.

Although we know the value of our assets today, we can't necessarily predict their value tomorrow. Generally, we simply
hope our assets will increase in value over time so that we have more wealth to leave to our loved ones. A good estate plan
must therefore not only include provisions for personal and financial circumstances that are subject to change, but also
include strategies that deal with fluctuations in inflation.

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Benefits of Having an Estate Plan

For many people providing for their loved ones is an your privacy and potentially avoid the probate
important aspect of life. This is why one of the key benefits process. By using trusts and other estate planning
of estate planning is the peace of mind it offers in knowing tools, your estate can be handled privately, and
that your affairs are in order and that your loved ones will your assets can be distributed directly to your
be taken care of according to your wishes. This can no beneficiaries without the delays and costs
doubt relieve a significant amount of stress. Other benefits associated with the probate process, such as
include: dealing with the Master of the High Court and
ü enabling you to protect and preserve your wealth other statutory or intestate procedures;
for future generations. Through strategies such as ü providing better protection for beneficiaries who
trusts, you can minimise the impact of inheritance are vulnerable, such as minors, individuals with
tax and transfer costs on your estate, ensuring that disabilities. For example, establishing a trust can
more of your assets pass on to your heirs rather help protect and manage the vulnerable heir's
than being lost to taxes and other third-parties; inheritance until they are able to handle their
ü you retain some control over how your assets are finances responsibly; and
distributed by specifying who should receive your ü in the case of a family businesses, estate planning
property, when they should receive it, and under helps facilitate a smooth transition of business
what conditions. When a person dies without a ownership to your chosen successor, ensuring
valid will, they are referred to as having died continuity of the business. There are various
intestate. This means that their estate is distributed strategies that can be used to minimise the
according to the rules of intestacy, which might not amount of taxes that are paid on the transfer of
align with their wishes; the business to the next generation.
ü a well-structured estate plan can help maintain

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Diversity and Liquidity as Hedges Against Inflation

The less diversified your estate plan, the less flexibility convertible to cash vehicles like savings accounts and
you have. The adage of not putting all your eggs in one bonds. This gives you easy access to cash when you need
basket is particularly true for estate planning. Spreading it, allowing the rest of your investments to remain in long-
your investments across stocks, bonds, real estate, and term growth vehicles.
other vehicles like insurance can generally protect your
assets, ensure growth, and increase liquidity. Stocks, Life insurance is another vehicle that allows you to
harness its cash value. Traditionally, life insurance policies
while more volatile, generally offer larger returns when
provide liquidity to your beneficiaries at the time of your
they increase. Bonds are less volatile, making them a
death, but some life insurance policies have a cash
good choice for conservative investors.
surrender value. This means your policy allows you to
access cash while you're still alive. While an insurance
Investing in real estate is another way to diversify your policy itself doesn't hedge against inflation, if it pays a
assets. If, however, you don't want the responsibilities of dividend, that can act as a hedge.
ownership, real estate investment trusts (REITs) can
provide exposure to real estate and enable you to retain
liquidity without requiring you to actually buy or sell
property.

Liquidity, or having cash readily available, is vital during

economic downturns. A liquidity strategy involves
keeping a percentage of your investments in easily

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Taxation

One of the key challenges posed by unpredictable price reaping the benefits of it as well.
increases is that it makes your tax burden difficult to
predict. Without discussing all the tax breaks and Inflation can seriously impact your estate plan and the
exemptions, suffice it for now to note that there is security of your assets. Our experienced estate
generally a 5% tax on the value of estates exceeding planning team at FLP is dedicated to helping you
US$100,000 at the time of the estate distribution. By way protect what is most important to you. We have the
expertise to create an estate plan that strategically
of example, if you buy a home valued at US$300,000, and
uses finance, tax, and law to shield you and your loved
inflation increases its value to US$400,000 then at the
ones from inflation's impact.
time of distribution of your estate, the tax will be levied on
US$400,000. This means that you need to assess the Additionally, if inflation threatens your existing estate
value of your property in relation to potential tax plan, our team can help you evaluate and make
thresholds and implement structures to manage the necessary changes to protect your assets. Our
higher tax burden. commitment to providing timely and effective services
ensures that investments are appropriately allocated
In our experience at FLP, some ways to reduce such tax and safeguarded in any changing financial landscape.
liability include considering vehicle like irrevocable trusts,
which allow assets to pass directly to your beneficiaries
upon your death, meaning that the assets are not
included in your estate. Using carefully drafted trusts can
keep your estate intact while reducing your tax liability.
Inflation's bite is bad enough without the government

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