Can you prepare for such a significant loss in your life?
In my career as a lawyer and head of Chartered’s Legacy & Trust in-house service, I have seen how the loss of a partner or spouse can strike people to their core, and paralyse their ability to make rational decisions or take confident action.
This is no surprise, if we consider the Kubler-Ross Grief Cycle’s five stages of grief: denial, anger, bargaining, depression and finally, acceptance.
When at the first state, denial, we wonder how we will go on, even if we can go on. One emotion often associated with this stage is fear; perhaps it is the fear of being alone, or the fear of how to meet our immediate and long-term financial obligations.
While it is almost impossible fully to prepare ourselves emotionally for the death of a loved one, we can certainly make financial preparations. Our ongoing experience with the winding up of estates has provided us with valuable insight into how best to prepare financially for this transition. We have also added to our service offerings to assist our clients in this process.
The issuing of the Letters of Executorship to be issued in an estate can take up to six weeks (often longer!). Very little can be done on an estate until the Executor has been appointed. Even thereafter, it takes some time to open the estate late bank account and for assets to be realised to provide the estate with liquidity. All the while, expenses continue to run. Depending on what stage of life you are in, there may be bond repayments looming, school fees to be paid and maintenance obligations in terms of a divorce order. Is there a way to plan for this?
When a person passes away, their bank account should not be accessed. There are no joint bank accounts in South Africa, so even if you have signing powers on your partner’s account, you will not have access to these funds once he or she has passed away. This often leads to worrying about where funds will come from. It is paramount for each person to have a bank account in their own name with sufficient funds in it to be able to carry the immediate expenses until the estate is liquid. If the surviving partner has their own liquid assets in their name which they can access in the short term, this is an enormous help.
A simple estate can take as long as a year to wind up. While funds can be accessed in an estate during this time, there are some assets that do not form part of an estate and which are readily available. We refer to these as “deemed assets”. These assets are dealt with outside the estate and are usually beneficiary nominated. They can be accessed within weeks of a person passing away. Examples of these assets include life policies, living annuities and retirement annuities. It is important, however, to distinguish which are retirements funds among these assets. Although retirement funds fall outside the estate and are beneficiary nominated, they are subject to the discretion of the Trustees of the fund. There will always be an investigation by the Trustees as to who was dependent on the deceased and they will award the funds accordingly … and this may not always be in line with the beneficiary nomination. This can cause lengthy delays in payment of the funds.
At Chartered Legacy & Trust, we offer our clients an Estate Plan which helps to prepare you financially for the impact death will have on your estate and what taxes will become payable. The plan will highlight whether there is a liquidity shortfall in your estate to meet the financial obligations and, if so, which assets will need to be sold. This is an important exercise and one which we encourage all our clients to undertake. As part of our Wills offering, we are now also assisting clients with the preparation of a Legacy Folder. The purpose of folder is that all the documents your Executor will need when winding up your estate are kept together and are up-to-date. This will save your partner a huge amount of stress at a very emotional time. Having an up-to-date Legacy Folder will assist when negotiating your Executor’s fee.
Our aim at Chartered is to relieve you of any financial fears or concerns you may have after losing your spouse or partner. By planning and having a good understanding of the estate process, you can alleviate worry for your loved ones left behind. We are here to assist so life can continue with as little financial disruption as possible.
The oldest and strongest emotion of mankind is fear, and the oldest and strongest kind of fear is fear of the unknown. H P Lovecraft
Kerryn Franck is the Director of Chartered Legacy & Trust. She and her team work to create peace of mind for their clients by creating Estate Plans that accurately reflect their clients’ wishes.