I get numerous questions from people whose parents or spouses have died and they are not sure what is going on. Often, the estate takes too long to be wound up or properties are sold and there is conflict and confusion about what is going on. To give just one example; when their mother died, they thought they were going to be financially secure but it was not going to be so. The mother had 3 properties and had left a property for each one of her 3 children in her Will. The mother also had life cover and had named her 3 kids as beneficiaries of the life cover policy so they each got their portion. So what happened?
The Master of the High Court issued the letter of executorship to appoint the Executor stipulated in the Will. The first task of the Executor is to pay off debts before the assets can be distributed to the beneficiaries. Their mother had debts and since creditors must be paid first, the Executor had to sell the properties to pay the creditors as they were not willing to use the proceeds of the life covers to pay their mom’s debts. Creditors have up to 3 years to make a claim against the deceased estate thereafter, prescription sets in.
How to ensure that your spouse or children inherit your assets and NOT debt?
- Make sure that your death benefit in your life cover is sufficient to pay off ALL your debts
- Make provision for the executors fees which are about 4% of your gross estate
- Also make provision for Estate duty and Capital gains tax, this is particularly important for those people who own property
- If you are married in community of property, you might end up inheriting the debts of your late husband or wife if you don’t have sufficient life cover so you must ensure that your spouse has sufficient life cover
- It is advisable to apportion a percentage of your life cover to the estate so that estate costs and taxes are provided for without delay
At ThuthukaSA, we can help you to take sufficient life cover that will ensure liquidity for all of the above and draft a Will for you as outlined above. This would ensure that your estate is wound up quickly and with less stress for your beneficiaries. Read Chapter 9 of the book From Debt to Riches to get more details on Wills