During the past year and a half, most South Africans have been touched by the sad reality of death, with many having to confront it directly. With excess deaths now standing at around 265,000, everyone most likely knows someone who has been impacted by the loss of a loved one since the start of the Covid-19 pandemic – a fact that puts a spotlight on the importance of having an up-to-date Will.
Excess deaths refer to the number of deaths for a specific period above the expected number based on historical data for the previous same periods. Over the Covid-19 pandemic period, this has pushed the number of deaths considerably higher than the official Covid-19 death rate of almost 89,000.
With this number in the background, Wills Week was recently observed in South Africa – two things that surely must have placed the importance of having an updated last Will top of mind for most. Unfortunately, even if having a Will is significantly better than not having one, it is not enough. The reality is, however, that many people feel comfortable once their Will has been signed without knowing the pitfalls that may be experienced when the Will is executed, and the estate administered.
When a person passes away, the Will prescribes who the executor of the estate will be. This person then must go through administrative formalities to formally be appointed by the Master of the High Court. Only when the Master issues the Letter of Executorship may he/she start winding up the estate. The process is therefore dependent on the Master’s Office being able to process and issue this letter. There are several Master’s Offices in South Africa. When a person passes away, his/her estate has to be reported in the area where he/she resided.
Efficiency and capacity in these offices have always been a concern, but with the advent of Covid-19 this has significantly been exacerbated. Lockdowns forced by Covid-19 also applied to these offices. Unfortunately, the legal fraternity in South Africa is still predominantly paper based which means when staff is not at work, nothing gets done. This, combined with the fact that all these offices are now on a system that often goes offline, has resulted in a further backlog.
How does this impact the winding up of an estate? Well, things will now take significantly longer than in the past. With every IT problem or Covid case in the Master’s Office, the process stops. During that time transactions accumulate, and a further backlog develops. These delays are out of the hands of the fiduciary consultants dealing with the estate and the only way to protect potential beneficiaries is to plan beforehand. Things to consider should be the following:
- Do my beneficiaries have enough capital available for immediate capital expenses triggered by my death?
- Do my beneficiaries have enough income available to cover monthly expenses for between 12 and 24 months after my death?
- Does my business have a succession plan and enough working capital to continue the going concern after my death?
- Can my farming operations continue after my death?
To merely provide enough in one’s estate through a Will, is therefore not sufficient anymore as the process might take longer than usual which could result in losses. Fortunately, there are several ways to protect yourself, your business or your farm against this interim risk. Some of these include:
- An estate protection life insurance policy that pays an income to a beneficiary while the estate is winded up.
- A life insurance policy directly bequeathed to a beneficiary to provide enough capital or income during the time that the estate is wound up.
- Appointing an additional director in your business that will provide continuity after your death and until an executor can be appointed
- Farming operations often have specific things that needs to happen at specific times. It is therefore important that someone knows what needs to be done and that there is enough capital available to cover these expenses while the estate is being wound up.
- Structuring of your estate using trusts to provide continuity.
The best advisors to assist with this type of planning will be those that have a proven track record and sound knowledge in respect of Financial Planning, Estate Planning, Business Assurance, Wills and Trusts. To avoid valuable assets losing value after your death, rather spend the time and money now to protect these assets for your loved ones.
- Theoniel Mc Donald CFP® is Managing Director of Wealth Associates Central, Strategic Marketing Director of Wealth Associates South Africa, and is Vice President of the Financial Intermediary Association (FIA).