It sounds unreal, like something from the movies. A sad movie, a tragic movie. But it happened for real. It happened to a friend of mine’s family. My friend’s brother had his will drawn up a month before his death but never got round to his executor to sign it before he suddenly died of a heart attack.
His ex, who was still the sole inheritor of his previous will, inherited all but his pension money: His house, his assets, his investments. She and her husband immediately retired five years early and bought two properties at the coast.
He had an amicable relationship with his ex, but that doesn’t mean he wanted her to walk away with all he had saved up if she hadn’t been part of his life for the previous 20 years. I feel for his family, because it is something that can happen so easily.
I hate admin. I hate the time it takes; the time it steals from more pleasurable things. But this episode reminded me how important it is to get your ducks in a row. Especially because I have children that are still dependent on me. Homework is inevitable.
Our retirement money is mostly managed by a board of trustees. According to law, when we die, they will consider who we nominated as beneficiaries. If we left out someone who may be financially more dependent on us, they would consider that person in the payout of the proceeds, too. Examples are down-and-out parents or a child with special needs. But mostly, they are guided by who we indicate as beneficiaries.
My financial adviser always cautions me to have enough cash in my estate so that my loved ones won’t have to sell substantial assets such as a property to be able to afford administration costs. We must have enough cash for estate taxes, the bond on your property, vehicle finance contracts, taxes and the administration fees of the estate.
At least the first R3,5 million of the estate is exempt from estate taxes. But administration fees include Master’s fees, advertising fees, banking costs and executor’s fees. Transfer fees for properties, short-term insurance, maintenance or cancellation of the bond are all possible extra costs. The cost of the funeral and any outstanding medical bills can also add up.
It seems just the administration costs of an estate of R3,5 million can add up to almost R200 000. Make sure to cover this with something like an endowment or another policy that can cover credit or provide cash.
Just remember that we cannot make a trust or any legal entity the beneficiary of retirement money – it must be a natural person. This money usually stays out of an estate to give the loved ones access as soon as possible – but the process could drag if there are complications.
I don’t like telling negative stories, but I just had to share this one as a stark reminder, also to myself. Any major life-changing event must remind us to get our wishes on paper, to the insurance company or bank, with updated details. Now.
