Will your family avoid a cash-flow crisis on death?

Your bank accounts will be frozen when you die, which could create financial difficulties for your dependants. reports on what you can do.

When you die, your bank accounts are frozen and, if you are married in community of property, your spouse’s may be too. You need to ensure that your loved ones have enough funds to live on immediately after your death. If you have not made provision for this, they need to know what to do to avoid being cash-strapped.

The law and its practitioners are not as inhumane in this regard as you may have been led to believe. In fact, those involved in the administration of a deceased estate, including the Master of the High Court, the executor of the will, law firms and banks, are not prevented from making funds available to cover the funeral and the living expenses of dependants. The Administration of Estates Act specifically makes provision for these expenses.

When a person dies, his or her assets must be frozen so that the executor or administrator of the estate can correctly assess the value of the estate and, once all claims on the estate have been settled, distribute the remaining assets to beneficiaries in terms of the will. What cannot be allowed to happen is that someone with access to those assets transfers them in any sizeable quantity out of the reach of the executor without the executor’s knowledge.

WINDING-UP PROCESS

A recent blog by Bellville law firm VisagieVos Attorneys outlines the process for winding up 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] must be sent to the Master’s office.

• “The Master will then formally appoint the executor by sending him or her an executor’s letter and allocating a unique estate number to the estate. 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 should open a new bank account in the name of ‘Estate Late XYZ’ according to the stipulations of the Administration of Estates Act. All monies belonging to the deceased (and his or her spouse in the case of a marriage in community of property) in any other bank accounts will be transferred to the new bank account in the name of the estate.

• “All estate funds will then be administered in the estate’s bank account by the executor until the liquidation account (statement of assets and liabilities) is approved by the Master and has been open for inspection and remains unchallenged. The executor will then be in a position to distribute estate assets and finalise the administration of the estate,” VisagieVos says.

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

However, VisagieVos notes, it can take from three weeks to three months, or even longer, for the executor to be formally appointed by the Master. The banks, on the other hand, will freeze accounts immediately on being notified of the death, which is the responsibility not of the executor but of your immediate next-of-kin.

It is this interim period, between the banks freezing accounts and the executor being appointed, that may present a cash-flow problem for your dependants.

SOLUTIONS

Ideally, you should prepare for this, just as you need to make other preparations in the event of your death, such as drawing up a will. The options are:

• Put aside or save up an appropriate amount – for example, to cover the funeral and four months’ living expenses for your dependants – in an account in a spouse’s or dependant’s name to which your dependants will have access.

• Take out a life policy or funeral policy, even for a relatively small amount (say, R150 000), to cover the funeral and four months’ living expenses for your dependants. Providing there are no hitches, such as an assurer questioning the validity of a claim, such a policy will normally pay out relatively quickly after your death.

Your spouse has the following options open to him or her in the face of being cash-strapped:

• If your death is not sudden – for example, you are afflicted by a terminal illness – and your spouse is the only beneficiary, Werner Greeff, a partner at VisagieVos Attorneys, says your spouse should withdraw enough money for the funeral and four months’ living expenses before you die.

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

Your spouse must 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 maintenance expenses.

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

martin.hesse@inl.co.za