The real cost of grief without proper estate planning
Jeffrey Wiseman, CEO of Momentum Trust
Why estate planning is so critical when it comes to leaving a proper and pain-free legacy behind.
You love your family and never want to see them in pain. But there is an inevitability in this life that we have to come to terms with – we are all going to die. The question is, will your death leave your family able to grieve, without any unnecessary financial burden?
Did you know that as many as 35% of wills are rendered ineffective due to insufficient liquidity to provide for estate administration expenses, liabilities and taxes, let alone provide an inheritance to grieving loved ones? Jeffrey Wiseman, CEO of Momentum Trust, says these are only the numbers from Momentum Trust’s experience.
Leaving behind a stable financial future for your loved ones is up to you. “Any financial adviser worth their salt will agree that an estate plan that makes provision for the costs of winding up your estate together with a well drafted will is a critical component of any comprehensive financial plan and is the emotional cushion that a family needs in a great time of sadness.”
Without sufficient provision, the cost of losing a loved one can be financially devasting for those left behind. Not only do they have to deal with the costs of burial, but there are also pre-existing debts, administrative costs for lawyers, and valuation costs of assets for estate duty purposes. Not to mention the Master’s fee payable to the Master of the High Court, property transfer costs, and rates and taxes payable to the city council… the list goes on.
“Any lack of clarity or financial provision can lead to arguments and in many instances, family feuds.” says Wiseman.
So, what do you need to know when it comes to winding up your estate?
Make sure the executor you appoint knows their stuff
Wiseman says an executor of an estate is an individual appointed to administer your estate and should be impartial as a loved one may not understand the nuances and challenges that come with the responsibility.
“Winding up an estate is a difficult, time-consuming and expensive process,” says Wiseman. “If you don’t provide for this, it can put a financial strain on your loved ones. By consulting a trusted financial adviser, you will be able to plan for the unforeseeable future and make informed decisions by providing adequately for enough liquidity to cover the costs associated with estate administration.”
Why is it important to have an executable will?
There are a few challenges that one may face when trying to wrap up an estate without the help of a professional, compounding what is already an emotional time for those you leave behind.
If, for some reason, your will cannot be found, is not signed or witnessed correctly it can cause a great deal of confusion and added stress for your loved ones. An incorrectly signed or witnessed will can be declared invalid and your estate might be divided according to the provisions of a prior will or the laws of intestate succession.
If your estate is too low in value, i.e. less than R250 000, your family will have to administer the estate themselves as it will be too expensive to appoint a professional executor.
If you failed to provide for sufficient liquidity to settle estate administration fees and debt before you died, your loved ones will have to shoulder the burden of these costs.
In the case of an insolvent estate with no provision made for settling debts upon your death, all your assets like your house and car will have to be sold to repay your debts before your loved ones can inherit anything.
No one can know when he or she will die and if not planned for properly, this can leave loved ones financially exposed. “Take the time to make sure that your will is drawn up correctly and that you have sufficient funds available to ensure a smooth estate administration process and provision for your family – not only once the estate is wound up but also during the estate administration process.
“With the aid of your financial adviser, you have the opportunity to leave your loved ones and those you cared for with fond memories and a legacy of financial provision. The choice is yours and sadly there are no second chances when death comes knocking,” concludes Wiseman.