How to Reduce Estate Costs

A death is often a traumatic enough event, without the added burden of dealing with estate matters. Unfortunately, many people underestimate the costs related to death, especially the smaller fees that quickly add up. Consequently, loved ones sometimes find themselves in situations where they have to sell valuable assets in order to settle the outstanding debts of the deceased.

In an article recently published on Moneyweb, the chairperson of FISA, Ronel Williams, offers advice on how you can ensure that everything goes as smoothly as possible in the event of your passing. This article breaks down the costs incurred after death, and takes a brief look at how to reduce them.

She explains that “the costs involved in an estate can broadly be classified as administration costs and claims against the estate… Claims against the estate are those the deceased was liable for at the time of death, the notable exception being tax.”

The most significant administration costs are generally the executor’s and conveyancing fees. Fortunately, with a bit of planning, you can reduce some of the costs involved by negotiating the executor’s fee with your appointed executor when you draft your will. You should then stipulate this fee in the will or ask the executor to confirm the agreed fee in writing.

Williams elaborates that, “depending on who the executor is and what the composition of your estate is, you can probably negotiate up to a 50% discount.”

However, the discount can vary depending on factors such as whether a surviving spouse is the sole heir or whether you have additional business and offshore interests. She also highlights that “costs of security can also be avoided completely by exempting the nominated executor from lodging the bond of security in the will.”

As Williams is quick to emphasise, “death can be an expensive and cumbersome affair, particularly if estate planning was neglected.”

It is, therefore, important to do proper planning to ensure you have taken the most effective measures to reduce the costs. It is also important to take out life and/or bond insurance so that sufficient cash is available for your heirs to settle any claims against the estate and to pay for all the smaller administration costs that have little scope for negotiation.

Posted in Blog, financial-planning.