Plan for the death of a spouse ahead of time

When the breadwinner of a family dies, all too often the surviving spouse will find herself (or himself) in a situation where, although the estate may have ample assets, there is little or no ready cash available for day to day expenses or because the deceased estate is frozen until the Master of the High Court has approved the allocation of the funds in terms of the will – and if they are married in community of property this means that the entire wealth of the family will for a time be inaccessible.

“This is a problem that many people who have not taken legal or financial advice earlier find themselves having to face,” said Strandvik.

Their predicament, he said, becomes particularly difficult when they are faced with the executors bill.

“The executor, be he a lawyer, a family friend or the bank, is by law entitled to a 3,5% commission on the total assets of the estate and this is often payable along with transfer fees on winding up of the estate. However, our experience is that many people are not aware of these payments being obligatory and find themselves in a tight spot when they are called for.”

In these cases, if provision has not been made for the payment of the estate costs, the beneficiary can find himself or herself in a precarious position and will have either to sell or rebond the property – or raise a personal loan to meet the outstanding costs – “not an ideal situation”.

What can be done to alleviate the situation?

The bank, said Strandvik, may be able to arrange a loan on condition that they are paid as soon as the estate is wound up – but, he says, the best solution is for the husband and wife to take out life insurance policies on themselves in favour of the surviving spouse. These will usually be paid within a few weeks of the insurance company certifying the death and can provide the bridging finance so desperately needed at this time.

Strandvik said that it can take six months to two years – or even longer – to wind up an estate and the administrative burden on the executor can be heavy – so his fee is often well deserved. It is possible, said Strandvik, to appoint a close friend or relative as an executor. Such a person, however, may lack the necessary financial and legal expertise and will usually end up employing a professional to assist them.

“The serious problem of leaving the surviving spouse destitute should, however, be avoided by planning now – well ahead of the donor’s death. Not to do so is irresponsible and can cause endless difficulties at a time when these are least needed,” said Strandvik.

Article by: Strandvik