Question

I am concerned that my family will have cash flow problems should I pass away as I heard that it is taking a long time to get an executor appointed. Is it possible to have a bank deposit where a beneficiary can be named?

Answer

A bit of planning ahead of time can make a massive difference to financial wellness of your loved ones that you leave behind. You can remove a lot of stress by ensuring that there is sufficient cash for them to live on while the estate gets finalised.  Remember, that once you pass away, your various accounts like your home insurance and rates will still have to be paid until such times that your estate has been finalized.

Unfortunately, you cannot attach a beneficiary to a bank deposit.  This is also the case for investments like unit trusts or retail bonds. 

A beneficiary may only be attached to investments underwritten by a life insurance company. These would be endowment policies, sinking funds or retirement annuities.  You may also attach beneficiaries to living and life annuities.

There are a couple of options that are open to you though.

You could open an additional bank account in the name of your spouse where you can keep enough cash to look after the family for a couple of months.

New generation endowment policies are also a good option.  Here you can invest in pretty much any type of portfolio, ranging from bank like deposits to aggressive offshore investments.  Should you pass away, the funds will be paid to your nominated beneficiary within weeks, rather than years.

If you are over 55 and have money in a retirement annuity, you could consider moving these funds into a living annuity if speed of inheritance is a factor.  The advantage here is that the transfer to your beneficiary will be made immediately. In the case of a retirement annuity, the trustees of the retirement annuity fund will have to conform with the Pension Fund Act and check that there are no additional beneficiaries who may be entitled to that benefit. This can delay matters. There are, however, a number of tax issues that would need to be considered when making this decision so please speak to your adviser.

One of the biggest differences you can make when it comes to speeding up the finalization of your estate is to ensure that your executor has access to all the important documents needed. These would include birth and marriage certificates as well as any divorce orders and ante-nuptial contracts. In addition to these, the executor would need information on all your investments, Natis certificates for your cars and any contracts like gym memberships that you have entered into. 

Knowing where to find these documents will certainly help your loved ones. I created a template that lists the various documents that you will need to finalise an estate.  You can use it to help your family know where to look for these documents.  Another option is that you can file all the documents in a folder with this template. I shared the template with Daily Maverick 168 readers a couple of years ago and would be happy to do so again.  Just drop me an email and I will gladly forward a copy of the Life File to you.