Have you planned for the unexpected?

The passing away of a loved one is emotionally devastating and traumatic enough without unexpected expenses putting additional strain on those left behind.

While having a funeral plan and life insurance in place can mean that your dependents are looked after in terms of covering funeral and future living expenses, there are other considerations that should be included in your financial plan to ensure that your loved ones do not have to sacrifice their home or means of transport to cover your liabilities in the event of your death.

Immediate access to funds

Your bank accounts could be frozen when you die, leaving your dependents without access to cash until your estate has been settled. It is therefore important to ensure that your loved ones have access to sufficient funds in the days and weeks following your passing.

Ongoing living expenses

Estates can take a long time to finalise and this could mean that money to cover ongoing monthly expenses is not available when it is needed. Sufficient provision needs to be made to ensure that obligations such as water and electricity payments, rent, insurance premiums and medical aid payments can be met until such time as your estate has been wrapped up. Ensuring that you have a valid Will can go a long way in shortening the time it takes to finalise your affairs.

Executor fees

The winding up of an estate is a cumbersome administrative process that is often better left to a professional to handle. This can however be an expensive exercise as an Executor can charge up to 3.5% plus VAT of the value of your estate to perform this duty. Should there be insufficient funds to cover this expense, the Executor can auction of assets from your estate to cover this fee.

Additional administrative expenses

A death notice needs to be included in a local newspaper as well as the Government Gazette in order to alert potential creditors to the passing of the deceased. These costs vary according to the newspaper selected but could range from R1,000 to R1,500. The fees associated with corresponding with the Master of the High Court as well as the fee of the Master of the High Court for its role in the process also need to be settled.

Property related fees

Selling a property or transferring it to a beneficiary results in fees that need to be paid to a Conveyancing Attorney. These fees could be substantial and is based on the value of the property transferred. Additional expenses relating to the sale or transfer of a property include cost associated with clearance certificates such as, among others depending on where you live, an electrical compliance certificate. A rates and water clearance certificate also needs to be obtained from the local municipality and will only be issued if the account is paid for a prescribed number of months in advance.

The administrative and property related fees on an estate with a gross asset value of R1 million could add up to a minimum of R60 000.

Taxation

Any taxes due by you will need to be settled before your estate can be wrapped up. If your assets are not left to the longest surviving spouse, Capital Gains Tax as well as inheritance taxes come into play. Any Estate Duty applicable will also need to be settled. Estate duty is a tax imposed on the dutiable estate of the deceased and is levied at a rate of 20% on the first R30 million and 25% on any amount exceeding R30 million. However, it’s worth noting that the first R3.5 million of your estate’s value is not subject to estate duty. In cases where the deceased was married at the time of death, the R3.5 million abatement can be transferred to the surviving spouse, granting them a R7 million estate duty abatement upon their own passing.

Not planning for the above could mean that your loved ones are having to deal with settling costs and expenses in a time when they are grieving and dealing with loss. There are several cover options available to ensure that all eventualities are taken care off in the event of your passing. A valid Will forms an essential part of any estate plan. The best of way ensuring that your loved ones are cared for, and receive the assets you intend them to have upon your death, is the complete an estate plan with your financial adviser.

The information contained in this article is of a general nature and intended for information purposes only. It is neither to be construed as financial advice nor to be regarded as a definitive analysis of any financial, legal or other issue. Individuals must not rely on this information to make a financial or investment decision. Before making any decision, we recommend you consult your financial planner/adviser to take into account your particular investment objectives, financial situation and individual needs.