When assets are frozen after death, how do the dependants survive?
In the time between the bank freezing accounts and an executor being appointed, a cash flow problem may arise for dependants
People often ask how their family will survive after your death when your assets are frozen for the executor/agent of the estate to correctly assess the value and determine the solvency of your estate.
In SA, when you die your estate must be reported to the office of the Master of the High Court in the regional jurisdiction where you've lived. It can take anything from three weeks to three months or even longer for an executor to be appointed by the Master of the High Court.
However, the banks will freeze your accounts immediately after they have been notified of your death. This is required by law and helps prevent fraud.
It is during this time, between the bank freezing your accounts and an executor being appointed, that a cash flow problem may arise for your dependants.
So how could you prepare for the eventuality of cash flow constraints?
Life assurance policies
Take out a life assurance policy and nominate a beneficiary as then the funds are payable to that beneficiary and will not form part of the estate. Providing there are no problems such as the death being unnatural and requiring a post-mortem or inquest reports, such a policy will normally pay out relatively quickly after your death.
Spousal access to bank withdrawals
If your spouse is the only beneficiary in terms of your will and you have provided access to your bank accounts, he/she may make a withdrawal before notifying the bank of your death. Your spouse must keep records of the withdrawal and for what the funds were used, so the executor can include it in the liquidation and distribution account as maintenance and funeral expenses.
What if preparations weren’t made and you were the sole provider? The challenge for your family left behind is that they cannot access your funds, especially where you were the sole provider.
All is not lost, however, as the law makes provision for such occurrences.
The Administration of Estates Act makes provision for the bank or the Master of the High Court to release funds from a deceased person’s bank account for the maintenance of their dependants and for funeral expenses.
The dependants should approach the Master of the High Court for a letter confirming that the bank can release funds if there are any in the account to ensure that they do not endure hardship.
What if you are married in community of property? A joint account is usually frozen by the banks upon being notified of your or your spouse’s death until the executor is appointed to administer the account.
Theoretically, all accounts belonging to a couple married in community of property should be frozen on the death of one spouse, because the assets form part of a joint estate. In practice, the banks will freeze your accounts if you die, even if your spouse has signing powers, but they will not usually freeze accounts that are in the name of your surviving spouse alone.
All of the major banks have different policies but they will try to assist the surviving spouse in line with their policies, particularly in the cases of spouses married in community of property.
Advances against inheritance
Once the executor has been appointed by the Master of the High Court and has begun the estate administration process, he/she will also then be in a position to consider interim advances against inheritance subject to there being sufficient funds in the estate to pay for all estate liabilities.
The law affects everything in our lives and so, too, in death. Just as you need to prepare for death as an eventuality by, for example, drawing up a will, ideally you should also prepare for potential cash flow constraints your family may experience.
• O’Shea is an administrator for Maitland’s Estates and Will Administration