YOUR MONEY: Providing for family while estate is wound up

It takes a long time to wind up a deceased estate. How do I ensure that my family is provided for during that period? Are there specific investment products I need in my portfolio for this process? And is there anything I can do to make the process faster/easier?

— Taylor S

As Benjamin Franklin said: “Nothing is certain except for death and taxes.”

It’s never easy speaking about death, but it’s absolutely necessary and should be planned for to ensure your loved ones are taken care of.

A few things are recommended as you build your portfolio to ensure your estate implications are planned for. Try to keep the estate as small as possible by ensuring assets and investments are structured correctly. This not only assists with continuity at the time of a loved one passing, but also decreases estate duty payable (20%-25%, depending on the size of the estate). Keep in mind that certain investment vehicles do not go to your estate (all retirement products, for example, a retirement annuity, pension/provident fund, preservation funds as well as a post-retirement life/living annuity) — so these are great products to be optimised for estate planning.

Life cover is also used to ensure your family is taken care of. First, ensure all debt is settled to not burden the ones left behind. After that we start replacing our incomes. Needs also change throughout your lifetime, depending on your financial dependants. You would typically need more cover when there are minor children, for example.

Unfortunately, the winding up of an estate takes a really long time in South Africa as a result of delays in the master’s office. If all goes well it takes a couple of months. Should there be any form of discrepancy, it can take years.

I would recommend a few things:

• Ensure you have an updated (and signed) will — ensuring you also update this should anything in your life change. The executor and team here will play a crucial role in the process.
• Try not to overcomplicate wishes or rule from the grave. Dependants disagreeing about the outcome of the estate can lead to delays in some cases.
• Ensure you have beneficiaries listed on all retirement products, endowment/sinking fund vehicles and life cover products. It is important, especially with your benefits at work, to ensure a beneficiary is listed with HR/payroll, as this is sometimes not documented.
• Do a comprehensive estate planning analysis with your wealth adviser and auditor. Ensure you are optimising the contents of the estate, and that there is enough cash/life cover for the taxation requirements as well as for dependants left behind.
• Ensure there is cash/accessible investments readily available in the first fortnight or so. Even products with a beneficiary nomination will not transfer until a death certificate is available and certain documents are signed. This can take a week or two.
• Keep an updated “life file” on hand in your family, stating where everything is located, or at least contact details of your wealth manager for your family to reach out to.

A comprehensive estate analysis is recommended for any individual, together with wealth and investment planning, to ensure you optimise your planning as you build your portfolio. In some cases it can be costly and not very tax efficient to make fundamental changes to structures (for example, if you want to change ownership of investments or properties in future by using companies or trusts). When building new wealth or acquiring new assets, try to choose the optimal vehicle from the start. If planned for at an early stage, this will be done right from the start and you and your loved ones can have peace of mind as well as a clear image of the steps required should the inevitable happen.

Elke Brink is a wealth adviser at R21 Wealth Management, Stellenbosch

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