When a family member passes away, it can have serious ramifications, both psychological
as well as financial, for the deceased’s family. While death is a topic no one likes to think
about, it is nonetheless something that needs to be planned for.
Although a Last Will and Testament is a fundamental step in preparing for the inevitability of
death, it is but one tool that needs to be considered. And while there are several aspects, it
is important to focus on the liquidity aspect and the shortfalls of failing to consider it.
Even though it is desirable to leave your beneficiaries with as many assets as possible, it is
critical to consider your estate’s liquidity. Although an estate may be solvent and rich in
assets, it also needs liquidity. Should there be insufficient liquidity in the estate, then it may
force the executor to realise certain assets in order to pay the expenses and / or debts of the
estate.
While not every estate will inherit debts from while the Deceased was alive, every estate
(that is not a section 18(3) estate) will have to incur certain expenses such as advertising
costs, Master’s fees up to a maximum of R7 000, executor’s fees at 3.5% of the gross assets
of the estate, and to the extent that there is immovable property that needs to be transferred,
there will also be transfer costs. In addition, there may also be outstanding tax returns owing
to SARS and depending on the net value of the estate, there may be a hefty Estate Duty bill
as well.
As such, even though a person may believe that all of their debts have been taken care of
while they are alive and that their family will reap the benefits of their estate, failure to plan
adequately and consider the expenses involved may result in placing one’s family in a less
than desirable position.
Jennifer Fung
Daniel Hirschowitz
