Newsletter 81 (Aug/Sep 2023)
This is such an exciting time of the year because we can feel
the expectation of change in the air as we start to see some trees already blossoming! In the words of LM Montgomery: “Nothing ever seems impossible in Spring, you know”. What an apt reminder that change can bring renewed hope, growth, and joy!
“That is one good thing about this world….
IN LOVING MEMORY OF MARIETJIE VAN ZYL
There are always sure to be more Springs.”
– LM Montgomery
We are deeply saddened by the passing of Marietjie van Zyl, someone who was an indispensable part of the Efficient Wealth team. Marietjie was loved and respected, and always gave her best to her loved ones, her friends, her colleagues, and to Efficient. She will be sorely missed by us all. EFBOE wishes to extend our sincerest condolences to Marietjie’s family, friends, and colleagues.
FAREWELL TO MAGRIET MOSTERT
Magriet Mostert, one of EFBOE’s 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 EFBOE 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!
FINAL EFBOE COMPETITION UPDATE
As unbelievable as it may seem, this is the final interim update on the EFBOE competitions’ front runners!
With only two months left in the competition, we can report that there was no change in the current competition front runners. Thus, in no particular order, we still have Christo van Zyl (Pretoria), Arend de Waal (Cape Town), Luciano Benadè (Pretoria), and Anton Redelinghuys (Cape Town) as our current competition front runners.
Well done, gentlemen!
That being said, a lot can still happen in two months! Remember to keep on submitting new Wills and power of attorney estates to keep on earning points to stay in the running for the prizes that will be won at the end of October 2023. The prizes will be awarded at the year-end function in November. You may just be able to unseat one of the current front runners if you put your nose to the grindstone – good luck!
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!
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 liquidity and solvency are the same thing. This inevitably leads to cash shortfalls and the misconception regarding the difference between these two concepts most likely is 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, emphasizes 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.Base
A SERIES ON LEADERS WHO LEFT THE BIGGEST LEGACIES – PART 5
We end off our series on selfless legacies that benefitted mankind with Marie Curie.
Marie Curie (1867-1934)
Marie Curie was a Polish physicist and chemist. She became famous for her pioneering research on radioactivity. She discovered two new chemicals, radium and polonium, and used her knowledge to conduct the first research into treating tumours with radiation. Curie was the first woman to win a Nobel Prize, the only woman to win it twice and the first person to win a Nobel Prize in two separate sciences.
She literally gave her life to benefit mankind as she died of a deceased called aplastic pernicious anaemia, a condition which the developed after years of exposure to radiation during her research.
All the individuals that we have discussed in the last few editions of our newsletter have made their mark on the world. This serves as a reminder that it is never too late for anyone to make a difference and to contribute to the benefit of all mankind!
Until next time!
The Let’s Talk EFBOE Team