The winding up of estates can drag on for years, leaving families without access to funds when they need them most. Without planning for liquidity, experts warn, loved ones risk severe financial strain while assets remain tied up in red tape.
At the recent Ninety One Women and Investing Seminar, hosted in partnership with Moneyweb, wealth adviser Elke Brink of PSG Wealth R21 said South Africa’s estate administration system was “not a very efficient process”. She noted that delays at the Master’s Office or with executors could leave families waiting anywhere from one to seven years.
Brink said estate planning should go beyond asset distribution to ensure dependants are cared for.
“Essentially, what estate planning comes down to is what happens if you pass away, or if your partner passes away. How do you take care of each other? And how do you take care of your children?”
She added that structuring wealth outside the estate, through products such as trusts, companies, and retirement funds, can help to reduce delays. Liquidity, she said, was key not only for estate duties but also for immediate family needs.
Incorrectly structured assets, such as large share portfolios, often trip up families.
“If you’re in a situation where you are dependent on the funds and you have to wait for a year or more, this becomes a problem. It’s important to ensure that the liquidity is there… So, you think your family is fine, but they actually [are] not, in terms of the first year or so,” Brink warned.
She emphasised that communication is just as important as planning.
“It’s important to have that discussion and ensure that the family is all on the same page in terms of what happens next.”
A will is just the starting point
Nonhlanhla Nxele, CERTIFIED FINANCIAL PLANNER® and award-winning financial educator, echoed Brink’s concerns. Many people, she said, think that having a will is enough.
“A will is just a starting point, and everything else has to do with you doing a proper liquidity analysis,” Nxele said.
She pointed out that costs on death – including estate duty and taxes – are often underestimated.
“Unfortunately, the sad part, but we have to say it, because there’s also a possibility of you paying tax upon your death. If you don’t know where you’re sitting at right now, based on your gross estate and situation, then how are you going to make sure that you’ve got enough liquidity?”
According to Nxele, this is where financial planners play a critical role: identifying shortfalls and structuring solutions to ensure families are financially secure.
“The aim should always be to align the plan with your wishes, for the sake of your loved ones,” she said.
Offshore investments – watch the tax trap
Brink said offshore investing was “a must for any individual” looking to diversify but warned that poor structuring could undo the benefits.
“If not done correctly and structured correctly, you might be defeating what you’re trying to achieve.”
She explained that without the right vehicles, offshore funds often end up being repatriated on death – defeating the purpose of diversification. Each jurisdiction has its own rules, and assets registered in the United Kingdom or the United States, for example, may be subject to inheritance tax of up to 40%. Combined with local taxes, families could lose as much as 60% of the portfolio.
This, Brink said, can be avoided through structures such as offshore wrappers, which ensure compliance with foreign estate laws while optimising tax outcomes. She added that investors with offshore holdings also need a separate will to cover those assets.
“Your South African will might not always be applicable to this. It becomes very important to receive advice once you’re moving into the offshore space.”
Mind the gap – have open conversations
Estate planning gaps often surface only once it is too late. Nxele knows this first-hand: she recently lost her partner and discovered that some of the policies she had believed were in place had lapsed without her knowledge.
Suddenly faced with unexpected responsibilities, Nxele was grateful she had built up her own reserves. Running a business while grieving, she needed space and stability, which her financial cushion provided.
Her key lesson was the importance of maintaining an emergency fund. Savings provided immediate liquidity, while investments paid out within days, a balance she described as essential during financial shocks.
Nxele said the experience reinforced the need for women to have frank conversations with their partners about finances, even if cultural dynamics make this difficult. She also urged people to contact their banks and providers proactively when circumstances change, noting that these institutions often have solutions that can ease pressure in the short term.
