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Newsletter 76 (Aug/Sep 2023)
Newsletter 76 (Aug/Sep 2023)
Dear Colleague
 
“A kind word is like a spring day.”
– Russian proverb

“That is one good thing about this world….
There are always sure to be more Springs.”

– LM Montgomery

“An optimist is the human personification of spring.”
– Susan J. Bissonette
 
Spring! Such an exciting time of the year as we start to see some trees already blossoming and we can feel the expectation of change in the air. It is once again an apt reminder that change can bring renewed hope, growth, and joy. In the words of LM Montgomery: “Nothing ever seems impossible in Spring, you know”.
 
FAREWELL TO MAGRIET MOSTERT
Magriet Mostert, one of Legatus’ dedicated administrators, has retired after many years of service. Magriet was a valued colleague with a great deal of expertise – she will be missed by us all. The Legatus team wishes to extend our appreciation for her loyal service and the contribution that she has made to our success.
 
We wish you all the best for the future, Magriet!
 
Happy Heritage Day!
 
We are celebrating Heritage Day on 24 September. This day is in remembrance of our unique heritage and that which we have inherited from the past, to value and enjoy in the present, and to preserve and pass on to future generations.
 
This year, Heritage Day falls on a Sunday. Therefore, Monday, 25 September 2023, will be a public holiday.
 
South Africa is famously known as the rainbow nation, describing out country’s diverse people, each group with their own unique heritage. We wish you a joyful day to celebrate the heritage that is unique and precious to your culture!
 
IN THE PROCESS OF BUYING A PROPERTY, THEN THE SELLER DIES. WHAT NOW?
 Read more about this in the next edition
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LIQUIDITY, SOLVENCY, AND CASH SHORTFALLS IN AN ESTATE
 
Dealing with the death of a loved one is an emotional experience and makes it difficult to focus on other important matters like an estate. That is why estate planning is so important and why it should not be underestimated.
 
Estate planning is a challenging task and even a well-planned estate plan can become undone should there not be enough liquidity in an estate to cover unavoidable administrative costs and liabilities due in the event of death. The issue of liquidity tends to be overlooked by many and could result in unnecessary negative consequences at an already difficult time.
 
It is, therefore, important to understand the difference between solvency, liquidity, and a cash shortfall in an estate. People frequently incorrectly think that solvency and liquidity are the same thing. This inevitably leads to cash shortfalls and the misconception regarding the difference between these two concepts is most likely the reason why cash shortfalls have become more frequent in recent times. So, what do these terms mean?
 
  • Solvency: Solvency is when the total assets in an estate exceed the total liabilities. In other words, when all the assets in an estate are sold, there is enough money left to allow the executor to pay all the bills. Once all the debts have been paid, the executor will be able to distribute the remaining assets as inheritances.
  • Insolvency: Insolvency, on the other hand, can be explained as not having enough money in an estate to pay all the costs and debts of the estate. Consequently, it also means that there will be nothing left for the heirs to inherit.
  • Liquidity: Liquidity refers to the level of cash available, or assets that can be easily converted to cash in an estate, to cover the administration costs. These costs include Master and executor fees, as well as any outstanding liabilities from debts raised by the deceased, without the need to sell non-liquid assets, such as houses or other properties to raise the money.
  • Cash shortfall: A cash shortfall occurs when there are only non-cash assets in an estate and no money, or too little money, to pay all costs and liabilities. There will always be standard, compulsory costs involved in the administration of an estate and debts accumulated by the deceased. The executor cannot transfer any assets, or pay out inheritances, unless all liabilities have been taken care of.
Based on the above, it is thus not enough to only have a solvent estate: If an estate lacks enough cash (liquidity) to cover all the costs and debts, it will create negative consequences for the administration and winding up of the estate. If there is a lack of cash in an estate, the executor may request that the beneficiaries settle the cash shortfall themselves, or they may be forced to sell non-liquid assets, such as houses or properties, to raise the money to cover the cash shortfall.
 
Generally, a house, a car, and furniture are the only significant assets in an average estate. Tragically, if the executor is forced to sell some of these assets, it could leave the surviving spouse and/or children without a car, or even without their family home.
 
This, once again, emphasises the importance and value of proper estate planning. Even if your clients think that they do not have significant value in their estates, it is still crucial to complete an estate or financial plan with them to ensure that their loved ones will be taken care of and that they will receive all the assets that the deceased intended for them to have, without having to sacrifice their home, means of transport, or future income sources to cover estate liabilities.
 
It is never a good idea to bequeath all life policies to beneficiaries, which will be paid out outside of the estate. Some provisions should be made via life policies, funeral cover, or other cash sources to ensure liquidity in an estate.
 
Source: Innov8ions and FAnews
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TAKING A VEHICLE TO THE GRAVE
 
Most people wish to bequeath the things they cherish in life to those they love, for them to enjoy after the deceased’s passing. Some people, however, are fixated on their earthly possessions. One of those cherished possessions is often a vehicle. Here are a few examples of people who took their favourite wheels to their graves: 
  • Rose Martin from Tiverton in the United Kingdom: She passed away in 1998, at the age of 84, and was buried in her 1962 Chevrolet Corvair. The vehicle had to be modified so that her coffin could fit inside. Four burial plots were needed to house this unusual coffin. 
  • George Swanson from Pennsylvania: George passed away on 25 May 1994, aged 71. His white 1984 Corvette was buried with his ashes in the driver’s seat. 
  • Sandra Ilene West from Beverly Hills: Sandra, aged 38, was buried in 1977 in her blue 1964 Ferrari 250GT. Her body was placed in the front seat, dressed in a lacy nightgown. The vehicle with its unusual cargo was placed in a huge box. After being placed in the ground, the box was covered with concrete. Sandra’s grave is next to that of her late husband, Ike West, who was a Texas oil millionaire. 
  • Billy Standley from Ohio: In 2014, Billy passed away at the age of 82. His body was embalmed and placed atop his 1967 Harley Davidson motorcycle. Both Billly and the motorcycle were encased in a giant plexiglass casket. An extra-large burial site was required to accommodate this unusual coffin. 
It is truly amazing what can be taken to the grave. Unfortunately, that is where it will stay, unless the grave robbers can lay their hands on it first!
 
Until next time!
“The Legatus Times” Team


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