Will your family avoid a cash flow crisis when you die?

When a person dies, their assets must be frozen so that the executor or administrator of the estate can properly assess the value of the estate and, once all claims on the estate have been settled, distribute the remaining assets to the beneficiaries by terms of will. What cannot happen is that a person with access to these assets transfers them in significant quantities beyond the reach of the executor without his knowledge.

A recent blog from the law firm Bellville VisagieVos Attorneys describes the process of liquidating an estate:

• “The death must be reported to the Master of the High Court, and the will [which, if correctly drawn up, must name the executor, who could be an individual or a company such as a law firm] should be sent to Master’s office.

• “The Master will then officially name the executor by sending him a letter of executor and by assigning a unique succession number to the succession. This estate number will be used in all future correspondence with the Master’s office.

• “As soon as the executor has been appointed, he or she must open a new bank account in the name of ‘Estate Late XYZ’ in accordance with the provisions of the Law on Administration of Estates. All the sums belonging to the deceased (and to his spouse in the event of marriage in community of property) on any other bank account will be transferred to the new bank account in the name of the estate.

• “All the funds of the estate will then be administered to the bank account of the estate by the executor until the liquidation account (statement of assets and liabilities) is approved by the Master and has been opened for inspection and remains undisputed. The executor will then be able to distribute the assets of the estate and finalize the administration of the estate, ”explains VisagieVos.

Once the executor has been appointed by the Master, he or she is able to grant the surviving spouse a cash advance to cover living expenses.

However, notes VisagieVos, it can take anywhere from three weeks to three months, or even more, for the executor to be officially appointed by the master. The banks, for their part, will freeze the accounts as soon as the death is announced, which is not the responsibility of the executor but of your relatives.

It is this intermediate period, between the freezing of bank accounts and the appointment of the executor, that can present a cash flow problem for your dependents.

Ideally, you should be prepared for it, just as you need to make other preparations in the event of death, such as writing a will. The options are:

• Set aside or save an appropriate amount – for example, to cover funeral expenses and four months of support for your dependents – in an account in the name of the spouse or dependent to which your dependents will have access. .

• Take out a life insurance policy or funeral insurance policy, even for a relatively small amount (say R 150,000), to cover funeral costs and four months of support for your dependents. Provided there are no snags, such as an insurer questioning the validity of a claim, such a policy will normally be paid fairly quickly after your death.

Your spouse has the following options available to them when faced with a lack of money:

• If your death is not sudden – for example, you have a terminal illness – and your spouse is the sole beneficiary, Werner Greeff, partner at VisagieVos Attorneys, says your spouse should withdraw enough money. money for funerals and four months of living expenses before dying.

• If you die suddenly, says Greeff, your spouse can make a withdrawal before notifying the bank of your death.

Your spouse should keep records for the executor of the withdrawal and what it was used for, so that the executor can include it in the liquidation account as a maintenance expense.

• Take out a personal loan from a bank (see “Standard banking”, under “What banks do”, below).

WHAT BANKS DO

Theoretically, all accounts belonging to a married couple in community of property should be frozen on the death of one of the spouses, because the property is part of a common patrimony. In practice, however, banks will freeze your accounts if you die, even if your spouse has signing authority, but they generally will not freeze accounts that are in the name of your only surviving spouse.

Personal Finance asked the big five banks to define their policies, in particular in the case of married couples in community of property. Their responses are as follows:

Absa

Riaan Botha, National Director of Absa Wills, Estates and Trust Services, said: “Prior to the appointment of the executor, the Estates Administration Act allows access to communal estate funds to organize proper funeral. for the deceased or for the subsistence of his family.

“Once appointed, the executor is legally bound to freeze the accounts of the joint possession. However, in practice, the spouse is allowed to continue to carry out transactions on his personal accounts. It is the position of Absa Trust to support the spouse and ensure continuity in the management of his living expenses.

Capitec

Capitec’s legal team says Capitec does not freeze the surviving spouse’s savings account. “If the surviving spouse needs funds from the deceased spouse’s account for funeral expenses, they can apply to the Master of the Court, who will issue a letter asking us to release a stipulated amount for the deceased’s funeral expenses. If we receive this letter, signed and stamped by the designated manager, we help transfer the funds to the designated party, ”Capitec said.

First National Bank (ETF)

Vijay Morarjee, Managing Director of FNB Fiduciaire, said: “It is not our practice to freeze the surviving spouse’s separate account, unless instructed to do so by the community of property executor.

“Many surviving dependents of the deceased (or the surviving spouse in a joint estate) are not always aware of the provisions and concessions contained in the Administration of Estates Act regarding provisional distributions of the deceased’s accounts for appropriate funeral expenses, for example upkeep of his family and the preservation or maintenance of any part of his property.

“There are various alternatives that can be exploited to provide liquidity. Some of the common approaches include the use of trusts, funeral insurance policies, and life coverage. “

Nedbank

Trish Brown, Nedbank’s senior legal advisor for retail and investment banking, says: as much as we can. The surviving spouse must make the necessary arrangements for the appointment of an executor as soon as possible. We will take instructions from the duly appointed executor, who is empowered by law to provide for the funeral and living expenses of the surviving spouse.

“To the extent permitted by law and in certain exceptional circumstances, and against the provision of relevant documents, we may consider allowing the surviving spouse to use funds to pay for funeral and living expenses prior to the appointment of the executor. testamentary.”

Standard Bank

“Legally, the bank is not allowed to allow a surviving spouse to have access to the bank account of a deceased. The surviving spouse can however apply to the bank for access to a credit facility in his personal name in order to pay funeral or living expenses before the executor takes over the estate. These requests are subject to normal credit assessment rules, ”Standard Bank spokesperson Ross Lindstrom said.

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