The Cost of Passing Away - Planning Ahead

The Cost of Passing Away - Planning Ahead

The Cost of Passing Away – Planning Ahead

A Will and consequently the process of winding up your estate is not a topic often found at the top of one’s priorities list. However, it is quite important and not as much for you, but more so for the people you leave behind in a difficult period when you are no longer there. A well-planned estate not only smoothes the process of winding up but ensures that it is done as economically as possible.

So what are the costs generally involved?

Firstly there are the normal outstanding debts owing by you at the time of your death to banks and other creditors. Often, but not always, these are covered by credit life insurance which will settle the outstanding debt at once.

Secondly, there are administration costs payable in all estates in which the total value of assets exceeds R250 000. For smaller estates, a simpler and less expensive process applies. Administration costs include compulsory advertisement costs, fees payable to the Master of the High Court, valuation fees in certain cases and other smaller odds & ends.

Thirdly there will be fees payable for professional services rendered. These include executor’s fees, transfer fees in the case of fixed property to be transferred to the heirs and fees payable on income after the date of death. There will also be bank charges to cover.

Lastly, we have to keep in mind taxes in various forms. V.A.T, of course, may be payable on executors’ fees, transfer costs and on advertisements etc. In larger estates, estate duty will have to be paid which currently stands at 20% for estates with a gross value of up to R30m and 25% for estates over this limit. There might also be other taxes depending on the nature of the estate assets such as capital
gains tax.

Therefore the costs can be quite substantial and may well result in a cash-shortfall in your estate – i.e. the estate is not insolvent, but there is simply not enough cash to pay all the costs. In cases like these, the executor may have to sell some estate assets, for example, fixed property, to generate sufficient cash or the heirs will be required to “pay in” the shortfall to prevent the sale of assets.

So, where does estate planning come in? A real-time estate cash analysis will show you where your estate stands on the cash issue and it will enable you to make provision in time for enough cash in your estate to cover costs.

Plan while you can.

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