Preparing your loved ones for when you are no longer there

Pretoria East October Newsletter 2021

Would your loved ones be plunged into chaos and uncertainty and have to deal with this on top of the trauma of your passing? In order to protect your loved ones from this harsh reality, you might want to apply the following practical guidelines while you’re still alive.

It is essential to ensure that all your affairs are in order, to avoid your spouse and family or your next of kin having to scurry around in the event of your death. You should also let them know where you keep your important documents, as well as how to access them.

• Put together a “life file” that contains all your important documents and information, along with a full list of, for example, your assets and liabilities, credit insurance, policies, usernames and passwords, as well as your executor and financial adviser’s contact details. Make sure you update the file at least once a year with the latest information.
• Ensure that you have a valid will in place. Update it regularly and make certain that it reflects your wishes and provides clear instructions to your executor of what should happen to your assets.
• Should you not wish to be kept alive artificially where there is no reasonable prospect of your recovering from physical illness, or if you have a condition that is expected to deteriorate to the point where you have very little quality of life or are no longer rational, you might also consider having a living will drawn up. A living will is an instruction to medical practitioners and your next of kin regarding your wishes if the difficult decision to turn off the machines that are keeping you alive must be taken. If you are a registered organ donor, you can also put this fact on record in your living will.
• While it’s a difficult thing to do, it is important that you talk to your spouse and loved ones about death and about the steps they should take if you die. They need to be aware of your wishes regarding cremation or burial, the details of any funeral cover you may have, and whom to contact when the inevitable happens. If you don’t have funeral cover, you must ensure that your next of kin have sufficient funds to pay the costs in the interim – they can claim these expenses back later when sufficient funds are available in the estate bank account.
• The suggestions that follow might sound trivial, but make sure your spouse and family know how everything works in and around the house. This includes matters such as where the water supply cut-off valve is and how to turn it off, if necessary, as well as how to set the alarm and hot water system, how your solar power system works and how to control it, how to use the generator, how long the borehole should run, how to work the pool pump, as well as how the electronic devices and DSTv decoder work. Show your spouse how to access your municipal accounts and how to make payments on them. One tends to take trifles such as these for granted, but when the person usually responsible for them suddenly dies, not knowing the details can cause a great deal of uncertainty and tension.
• Be certain that your spouse has access to sufficient funds to cover all expenses for at least six to eight months. Most of us are aware of the challenges facing the Master’s offices nationwide, both in the wake of the Covid-19 pandemic and due to the ongoing problems with their information and communication technology system. A consequence of these issues is that it takes a lot longer than it should for an executor to obtain the appointment letter that is necessary to handle estate assets and liabilities. Meanwhile, interest on outstanding accounts keeps adding up and the institutions concerned expect monthly installment to be maintained until the debt can be repaid or taken over. Short-term insurance and utility bills must also be paid. In this regard, credit life insurance is a good option and can ensure that your debts are repaid, thus alleviating additional financial pressure on your spouse.
• Your spouse will have to have started building up their own credit record in your lifetime to be able to qualify for, for example, a cellphone contract, a mortgage or a hire purchase agreement after your death, should there not be sufficient liquidity to settle outstanding debts.
• Check that beneficiaries have been nominated for all your life policies, where necessary and that nomination forms have been completed in respect of annuities and group insurance you may have.
• Explain to your spouse what financial products (e.g., investments, policies) you have and how they work, or ask your financial adviser to do so on your behalf. It is a good idea for your spouse to meet with your financial adviser and start building a relationship of trust between them so that the adviser can provide professional advice on your spouse's future once you are longer there.
• If you have a business or other enterprise, make sure that your next of kin are aware of the risks involved and that you have continuity plans in place. For example, if you are the only person with signing power on the company account, problems will arise after your death.
• Make sure that your estate will be sufficiently liquid to pay all the administration costs, liabilities and taxes (income tax and estate duty) that will become due.
  Using the above basic guidelines, you can make your loved ones aware of what to expect after your death, and doing so while you are still alive will make the transition to life without you easier for all concerned.

Some guidelines for the surviving spouse to manage financial expectations:

• Adequate funds are unlikely to be a major problem for your surviving spouse if you have managed your affairs well during your lifetime. This includes having made provision for life insurance so that there will be sufficient income to cover the expenses, as well as having set up a network of competent and reliable people to provide your spouse with professional advice.
• If the surviving spouse finds him or herself in the unfortunate position of having insufficient funds, careful planning must be done to provide for the basic expenses such as rent or a mortgage, as well as utility bills, food and insurance premiums.
• It is important for your spouse to receive advice from a financial adviser – one with whom a good relationship has already been established – on investments, cash flow and how a basic budget (income and expenses) work. The financial adviser will assist here with a new plan to secure your spouse’s future.
• Don’t be in a rush to make major financial decisions straight away. Something that sounds like a good idea right now will not necessarily seem so wise in six months or a year.
• The life insurance cover you have in place might sound like a lot of money now, but when a financial adviser does a cash flow projection of how long that money will meet income needs you might be faced with a much bleaker picture. People are living longer and there must be provision made for the available funds to generate an adequate income.
• It is very important for your spouse to draw up a new will after your passing and to make sure that guardians have been appointed for any minor children (children under the age of 18). The matter of what options will best protect the children's interests should also be discussed with your fiduciary adviser so that an informed decision can be taken.

Many people make poor financial decisions during the mourning process and therefore it is important to obtain reliable professional advice ahead of time in order to help you make well-informed choices, both for your benefit and for your family's future.

The opinions expressed in this document are the opinions of the writer and not necessarily those of PSG and do not constitute advice. Although the utmost care has been taken in the research and preparation of this document, no responsibility can be taken for actions taken on information in this newsletter.

PSG Wealth Financial Planning (Pty) Ltd is an authorised financial services provider. FSP 728.