Death and taxes are certainties, but often, we don’t plan for them. We spend years saving and growing our wealth but ignore the necessary planning to effectively transfer that wealth to our dependents when we pass.
Implementing a few simple steps will make a huge difference to how your assets are handled on death and will provide a smooth transition to your family. Please click here to read further.
Ensure your wishes are clearly recorded
Unclear wishes or the absence of a will can cause the largest delays to one’s deceased estate being wound up after death. Consequently, your loved ones could have a long wait (sometimes years) to receive what is rightfully theirs.
Make sure that you record your wishes in your will, trust deed and through your beneficiary nominations on your investment accounts. This will ensure that your assets and investments will be paid out as per your wishes as efficiently as possible, with limited or no delay.
Understand how your assets will be distributed and the time it will take
Different investment assets have varying waiting periods to pay out to dependents or nominated beneficiaries. For example, a bank account will be frozen on your death and will only be distributed by the executor of your estate once the estate has been wound up.
A retirement fund, such as a pension fund or retirement annuity, can take up to 12 months to be paid out, as the trustees of the fund must determine the dependents of the investor. On the other hand, a living annuity or endowment policy will normally pay out in just a few weeks, if you have nominated beneficiaries.
Ensure your loved ones have immediate access to money
The biggest mistake we see is investors who assume that their spouse or partner will have access to their money after their death. In most cases, investments and bank accounts are frozen while the executor waits for authorisation from the Master of the High Court to begin winding up the estate.
This can leave a surviving spouse without access to enough money or income to live on, while they wait for executors. These issues can often take as long as 1 to 2 years to be resolved.
There are simple things that can be done to ensure that your spouse has immediate access to money or income upon your passing.
Plan for estate costs – estate duty, executor’s fees and capital gains tax
Estate costs such as estate duty (up to 25%), executor’s fees (up to 4%) and capital gains tax (up to 18%) are often not planned for, however these costs need to be paid out of the liquidation and distribution account of the estate. This could mean that an executor (or your family member/s) could be forced to sell assets you did not intend for them to sell, in order to pay for these costs.
Keep a “death file”
A “death file” is a folder you can keep at home or somewhere safe which records the less formal information that is important for your spouse/partner and family to know.
A comprehensive death file should include:
- Contact details of your financial planner, lawyer, accountant and any other important person.
- A copy of your Will or where your Will is held.
- Your title deed or where it is held.
- Your marriage contract.
- A schedule of your life insurance and investments.
- A list of home accounts: insurance, security, DSTV, etc.
- Access codes for your: cell phone, computer, tablet, security system, safes, post box.
- Social media profiles and passwords.
- Funeral wishes, such as being buried or cremated.
Planning for one’s death can seem daunting, but it is often a simple exercise to ensure certain principles are followed to avoid the worst-case scenario – such as your loved ones not getting what they expect or having to change their lifestyle upon your death.
At Investonline, we can assist you with planning for these issues as part of our comprehensive financial planning process. Please contact one of our Client Portfolio Managers to begin your financial plan.