Legal Matters - Estate freezing ... the chilling facts.
The harsh reality is that at some point in the future we will all eventually die, at what point in the future, is the only uncertainty. This uncertainty should invariably steer us into planning for this inevitable event. The failure to plan can result in some unfortunate consequences for the loved ones that you leave behind.
There are many and varied horror stories that can be recounted as a result of poor or no estate planning at all. We will however focus on the often overlooked hardships that result on the “freezing” of an estate.
In the event of the death of an individual their estate is frozen and an executor is appointed to administer the estate by collecting all amounts due to the estate, settling all debts due, payment of taxes, duties and the cost of winding up the estate. If there is a surplus it is then distributed in terms of the will. The latter process seems simple but can take anything from a few months or a year or two. In the case of a complex estate, winding up the estate could possibly take even longer. If an individual has not attested to a last will and testament their estate will be wound up in terms of the Intestate Succession Act which will take even longer than usual.
It is the intervening period from when the estate is in the process of being wound up to when the assets and cash are actually transferred to beneficiaries that result in possible hardship due to the fact that heirs, dependents, children or a spouse will not have any access to any funds until the estate is wound up and finalised.
If there are minors involved the situation is worsened as minors can not directly inherit. This means that any benefits accruing to a minor could very well be held in the guardians fund and only pass to them when they reach the age of majority. So not only do minors have to wait through the lengthy winding up process they will also be subjected to a further inordinate wait until they reach the age of majority.
Estate freezing is thus tantamount to leaving dependents, children or a spouse without access to cash or assets or even a roof over their head for a year, two or possibly even longer. It is inconceivable that one can get through a few days or at a stretch a few weeks with out access to cash. Imagine subjecting loved ones to this plight for a period as long as a couple of years or even more. Who will they turn to for food, clothing, education, medical, travelling, housing and entertainment expenses, as well as general day to day maintenance costs.
In this day and age there are still many people who get married in community of property, the effect is that the married couple have a joint estate. On the death of one of the spouses the joint estate is frozen. This will result in the surviving spouse not having access to their own assets! This includes properties and business interests!!
The solution to these untenable scenarios specified above is a very simple one. The individual must establish a Trust and transfer all the individual’s assets, investments and cash into the Trust. In our law, a Trust can continue in perpetuity and the death of an individual will have no effect on the assets held by the Trust as the Trust is a separate entity from the individual and the individual’s deceased estate. This will ensure immediate access to cash and the use of the assets of the Trust according to the discretion of the Trustees and the terms of the Trust Deed. This is not to mention the other benefits of trust such as asset protection, estate planning and tax advantages
Businesses should also correctly be structured to ensure the continuity of the business so as to ensure that the profits of the business continue to flow and are readily accessible by the survivors.
Be prepared, plan ahead and ensure that your spouse, children and dependents have immediate access to cash, assets and the property they live in, in the event of your untimely death and that their assets are properly protected going forward.
Courtesy: Anthony Whatmore