Going once, going twice and Sold!
Heinrich Coomans CA(SA),CFP? - Wealth specialist
Personal Wealth Specialist
This could be the dreaded words of an auctioneer that sells your assets if you did not make sufficient liquidity provision for your estate, leaving your family without some or all the assets that you have accumulated over your life.
Liquidity is often overlooked in estate planning as the focus tends to typically be on reducing estate duty. The potential danger that your family could face should you not have sufficient liquidity in your estate at death however is undoubtedly evident.
Liabilities that your estate could potentially be liable for at your death include the following:
- Liabilities – any debt that is still owing to creditors (home loans, vehicles loans, etc.)
- Estate duty – is payable on the estate of every person who dies and whose nett estate is in excess of R3.5 million. It is charged at the rate of 20% and 25% for estates of more than R30 million.
- Capital Gains Tax (CGT) – upon death, a CGT event is triggered and therefore you may be liable for CGT on certain assets, e.g. rental property.
- Executor’s fees – an amount that your elected executor will receive for their role in assisting in winding up your estate. Usually calculated at 4.02% (3.5% + VAT) of your gross estate.
- Cash bequests – any specific cash bequests to heirs as stated in your Last Will and Testament.
- Income Tax – an income tax liability based on your last return.
- Accrual claim – an accrual claim may arise if one is married out of community of property (ANC).
- Funeral expenses – ranging from R 20 000 to R 50 000
- Master’s fees – the fee charged by the Master of the High Court, approximately R600.00.
Life cover is one of the most efficient and cost-effective ways to make provision for liquidity. We do however often see individuals with life cover amounts that haven’t been justified at all. It is therefore critical that a detailed calculation is done to determine your liquidity needs for your unique situation. As this can be very complicated you should get a suitably qualified professional to help you.
Heinrich Coomans | CA(SA) | CFP ? is a director at Affluence Group and spesialises in Investments, Personal and Business Insurance. For any questions please contact him at [email protected] or 084 586 9509