Here is a scenario we see far too often. A parent dies, leaving a paid-off family home and a clear will that says the children inherit everything. And yet, within a year, the family is forced to sell that home. How? The answer is a concept most people have never heard of until it’s too late: estate liquidity.
A will decides who inherits, not whether they can keep it
Your will is a set of instructions about who receives what. What it doesn’t do is pay the costs that fall due when you die. And those costs are due in cash, often before your heirs receive a cent. If the estate is rich in property but poor in cash, something has to be sold to cover the bill.
The costs that drain an estate
When an estate is wound up, several costs land more or less at once:
- Executor’s fee: up to 3.5% plus VAT of the gross value of the estate. On a R4 million estate, that’s over R160,000.
- Estate duty: levied at 20% on the dutiable value above the R3.5 million abatement (and 25% above R30 million).
- Capital gains tax: death is treated as a “disposal” of certain assets, which can trigger CGT.
- Conveyancing, Master’s Office fees and outstanding debts: bonds, accounts and the cost of transferring property.
Add these together and a family with a R4 to R5 million estate can face several hundred thousand Rand in costs, all payable in cash, all before the inheritance is distributed.
Why the house gets sold
If most of the estate’s value is locked up in a home, a business or an investment property, there simply isn’t enough cash to pay the executor, SARS and the creditors. The executor is legally obliged to settle these debts, so the most valuable asset gets sold, frequently in a hurry and at a disappointing price. The very thing you wanted to leave your family becomes the thing they lose.
How to plan around it
The fix is refreshingly straightforward: make sure the estate has enough liquidity, accessible cash, to cover its own costs. The most common and cost-effective tool is a life policy, structured correctly, that pays out cash into (or alongside) the estate to settle these bills. That way the executor is paid, the duty is settled, and the house stays in the family.
Getting the structure right matters: a policy that names a beneficiary directly pays out fast and avoids executor fees on that amount, while a policy payable to the estate provides liquidity inside it. The right mix depends on your assets, your debts and who you want to protect.
A one-page calculation can save the house
Most people have never added up what their estate would actually owe. It takes us about an hour to do that calculation with you: the likely executor fee, the estate duty and the debts, and to show you whether there’s enough liquidity to cover it. If there isn’t, we’ll show you the affordable way to close the gap, so your family inherits your home rather than a “For Sale” board.