Have enough cash to protect your estate

You've spent your life accumulating assets such as your home, car, jewellery, silverware, a plot of land, insurance policies and other valuable items.

You've spent your life accumulating assets such as your home, car, jewellery, silverware, a plot of land, insurance policies and other valuable items.

To protect your estate you have to plan to have enough available cash. It is a fact that if you do not have liquidity in your estate the executor might on your death be compelled to:

lSell off some of your prized assets to provide the cash required to settle your estate; or

lBorrow from a financial institution that might be expensive owing to current high interest rates.

With the institution of the National Credit Act (NCA) the ability of the individual to borrow money has also diminished.

The fact remains that your executor has no option but to first settle all the claims against your estate in cash before he can distribute the balance in terms of what you specified in your will.

The best and most effective means of providing liquidity in your estate is with life insurance, which is normally paid to either your estate or to an individual with little or no delay.

The executor is not the only person who will have to be paid while your estate is being sorted out. There are others:

lYour spouse. If married in community of property, half share of the community estate;

lThe state - estate duty;

lYour executor. Administration costs, usually 3,5percent plus VAT;

lYour creditors - any outstanding debts such as your housing bond, hire purchase, hospital fees, overdrafts, personal debts and funeral expenses;

lYour heirs - beneficiaries listed under life assurance policies.

The above only proves the point that it would be very unwise to underestimate the demand for cash in your estate.

I feel strongly about the matter. It is imperative that you make an effort and determine whether or not your estate has a liquidity problem. If you haven't already done so, you should immediately complete an in-depth audit of your assets and liabilities, and see what the result tells you.

Don't wait until it's time for your executor before you start working on it.

Think about it, what option does your executor have? He could sell some of your assets, but how likely is it that one will have time to realise their true value - or something even close to it?

Similarly, he could borrow, but there is no guarantee that the application will be successful. There might be a credit squeeze at the time, or other factors mightprove inhibiting. You might have created a cash reserve, but was it managed properly over the years? Will there really be enough cash?

I hope my words of caution raises an alarm, but the matter of your estate need not be a problem as long as you act timeously.

The process to protect any estate is relatively simple, but I do suggest that you employ a professional financial planner to help you draw up an estate plan designed to take care of, and protect, all of your specific requirements.

To identify the value of your estate and to employ the instruments and methods available to you today should prove to be a pleasure.