The broken chain

The loss of a spouse is a difficult and painful adjustment for anyone to make. There is the sense of loss, the uncertainty of the future and the emotional ties that took time to forge that now seem to mean so little. As difficult as this is to consider, it is nevertheless something all married couples should plan for as these details will be the last thing a surviving spouse will have the energy for if the worst were to come about. Use this guide to plan and give you peace of mind that you have done the best for your other half.

A married couple’s financial planning should factor in the possibility of the death of one partner, and look to address the adverse financial implications for the survivor, and any children.
Cover against the loss of the “stay-at- home” spouse
Usually where only one spouse earns an income (or earns the bulk of the family income) while the other takes greater responsibility for the raising of children, couples will easily understand the benefit of insuring the primary income-earner against death, disability or dread disease. However, the loss of the spouse who is raising the children will also have an adverse financial impact on the surviving spouse and minor children. The loss of a stay-at-home spouse (whether through death, disability or dread disease) could result in the other spouse having to either cut back substantially on his or her working hours, could possibly require a career change, or the hiring of a full-time childminder. In any of these scenarios, life assurance cover on the “stay-at-home” spouse is a prudent if not vital aspect of the family’s financial planning.
Liquidity for settlement of bonds and other debts
Banks often request the primary income-earning spouse to provide life cover on his or her life for the family’s mortgage bond. However, it would be prudent to also have cover in place on the life of the other spouse in order to ensure the earliest possible settlement of this debt. Cover should also be taken out to ensure adequate funds are available to settle any overdrafts, credit cards balances and accounts in the name of the spouse.
Liquidity for costs of winding up a spouse’s estate
Many married couples leave their respective estates to one another on death and thus ensure that no estate duty (or capital gains tax) is payable on death of the first- dying spouse. However, the need for liquidity to cater for other costs of winding up the first-dying spouse’s estate is often over-looked, especially in the case of the potential death of a spouse who is not the principal income-earner. These costs include executor’s fees (calculated at 3.5% plus VAT on the gross value of the assets in the deceased estate), funeral expenses, and Master’s fees. Add the legal (conveyancing) fees required to transfer an immovable property into the survivor’s name and a substantial amount of money may be needed despite the fact that the deceased’s estate has “simply” been left to a spouse.
The deceased spouse’s estate might not have cash readily available to meet these expenses, requiring the survivor to make an immediate cash contribution or face the enforced sale of the family home or liquidation of investments or other assets!
Bequests for children
Married couples, in their testamentary planning, often simply leave their estates to one another in the event of either of their deaths. For couples with children, this strategy has certain potential short-comings in that the surviving spouse may remarry and on his or her subsequent death leave the family’s assets to a new spouse, or otherwise lose the inherited estate to ill-fortune or poor business dealings. To protect against this eventuality, a married person, while leaving the bulk of his or her estate to a surviving spouse, may wish to consider at the same time leaving cash bequests to minor (or adult) children using a life policy to fund these bequests. The use of testamentary trusts to protect minor children’s bequests should be considered or else an executor may be required to pay these over to the Guardian’s Fund administered by the Master of the High Court.

Provision for maintenance of extended family members
Many people find themselves marrying for a second time, having had children from a previous marriage. This not uncommon situation often requires some careful financial planning. Take the case where a wife has remarried and her children from her previous marriage live together with her and her new husband. The planning for her potential death (or disability or contracting a dread disease), in terms of deciding with whom her children will stay in such event, and the provision for their financial future, requires thought. Even where she is not the primary income-earner, a life policy on her life structured to provide funds for her children would be a wise investment.
The case of aged parents should also be considered. Often retired parents live with their adult children, and one could find that after the death of a spouse, one “inherits” the in-laws (or is faced with the unpleasant task of extricating oneself from the responsibility of providing for them). Things can be particularly complicated if the parents have provided their child with funds used to build a “granny flat” on the child’s property. A life policy on a spouse’s life aimed at providing funds for dependent parents could ensure that this difficult and emotionally charged situation does not materialise.