Creating a positive legacy involves making provision for the following things you don’t want to leave as a surprise to your family upon your passing.
On your passing you may have incurred substantial medical bills for hospital admission and attending doctors and these might not be completely covered by your medical aid (if you have one). Although these debts do not become the responsibility of the family to pay directly, they do become a claim on your estate and reduce the value which will be passed on to your beneficiaries. If you have limited liquid assets to form your estate, medical bills can take a huge chunk or necessitate the sale of other estate assets to cover the expenses.
Your family will want you to have a fitting memorial, but the expenses of this are significant. Even the most basic of funeral provisions cost tens of thousands of rands. If you have not made provision for funeral expenses these costs will have to be paid by your family, and can add a strenuous financial burden at an already difficult time.
After passing on, you will likely have left behind some outstanding debt. This could just be small short-term debts like a credit card but may also be more substantial debt such as car finance or a bond on a house. If not provided for, these debts will need to be settled by your deceased estate. If the estate cannot settle the debt, the asset will be repossessed or sold to cover the debt. Losing the family home or car due to a lack of provision for outstanding debts would be a horrible surprise for your family.
You may have done a great job of saving and investing and have assets which can provide for your loved ones for years after your passing. However, these assets will be part of an estate process which begins once you have passed, and may take several months (or even years) to complete before any distributions can be made. Legal processes define which claims on the estate take preference, and the nominated beneficiaries in your will receive only the residual after all taxes, debts, and other valid claims have been paid. The time taken to wind up your estate may subject those who depend on you to severe financial distress.
Apart from any outstanding debts and expenses which are present at the time of your passing, there are other expenses and taxes which are incurred by your estate. These include death duties and executor fees which require liquidity (or available cash) to settle. If your estate does not have available liquidity, then assets must be sold to cover these costs. Again, this might result in the unfortunate disposal of important family assets – adding uncertainty and instability at a time of grief.
You want the best education for your children. In the tragic event of your passing while you are still responsible for the costs of your children’s education, they could find themselves in a situation where a lack of funds affects their education. This could mean they are unable to attend their preferred school or to continue with college or university. Not providing for these education costs can severely harm the future you want for your children.
If you have dependents who rely on you for their living costs, on your passing they may well find themselves struggling to make ends meet if no provisions are made to support them. These situations can quickly become desperate for the people involved, and not a position you want your loved ones to be placed in.
To ensure you leave a positive legacy to your family it is important to plan appropriately. With the appropriate life insurances you can account for all of the financial responsibilities which exist beyond your passing, and ensure your family and dependants will be taken care of as you would if you were present. So, don’t leave any bad surprises for your loved ones to face in your absence. Leave them with the comfort of knowing that, even though you may not be around, you are still looking after them.
Posted in Insurance 101 on 24 Sep, 2023