For the average person, there are two essential tools in estate planning. The first being a Last Will and Testament and other, a life insurance policy. It is advisable that every person executes a Will, which makes provision for how their estate will be dealt with after death. Having a Will in place makes the possibility of disputes arising among your beneficiaries and family members less likely to occur.  

Life insurance, on the other hand, serves as a source of support, education expense coverage and liquidity to pay off taxes on deceased estates, to pay ordinary household expenses, to fund business buy-sell agreements and sometimes to fund retirement plans.  

The average household in South Africa accumulates debts like motor car expenses, mortgage bond payments, overdraft or personal loans. This begs the question: What will happen to these debts after your death? The motor car can be repossessed if there is any default in payment towards the monthly installment; or your family can lose the family home. You may ask how you can protect your family from such misfortune. The answer is that by taking out a life insurance policy or policies at a reputable company like Sanlam, Old Mutual, Momentum, Liberty Life etc., the likelihood of financial problems emerging after death can be prevented.

The life insurance policy should be for an amount larger than the total outstanding debts, as indicated above. Under normal circumstances, the policy could pay out within a week or two, and the debts can be discharged, or your family members and the Executor can prove to your creditors that there is enough money in your estate to pay all the outstanding debts.    

A second life policy can be taken out. As an example, the wife can take out a policy on the life of her husband and vice versa, although the wife is the owner of the policy by virtue of her making payment towards the premiums thereof. The benefit of such a policy is that it will pay out directly to the owner of the policy, and it will not form part of the deceased estate. Consequently, the family will have immediate access to money for the subsistence of their daily needs, as well as to make provision for the ordinary household expenses.  

The alternative to the option above is that the husband can nominate his wife as a beneficiary of one of his existing life policies, or cede or transfer the said policy to his wife. In the case of a transfer of the insurance policy, only the rights in respect of the policy can be transferred, and not the responsibility for payment of the insurance premiums. She will immediately become the owner of such a policy, and the policy, when payable, will be paid directly to the wife, with the above mentioned benefits.  

The policies mentioned above will have different effects on the estate of the deceased as far as Estate Duty (tax payable from the deceased estate) is concerned.  

There can be no better way to assure your family and other beneficiaries that you care for them.