There are only 4 ways to pay for the above-mentioned Death Bed Expenses. What is imperative is to take into account the cost of each solution and then you need to decide on which solution best suits your requirements.
1. Win the Lottery. The chances of winning the are so remote that we cannot rely on this option (I am trying to be serious).
2. Sell Assets: What is the cost of selling an Asset? The cost are 100% of the Asset. You are taking a fully paid asset out of your Estate to pay for the Death Bed Expenses. You also lose all the future growth of the asset making this option very expensive and one I would not recommend. The cost of selling an asset worth R1 000 000 e.g. a Property generating R10 000 per month rent with Capital Growth of 10% would be R2 210 000 over 5 years and over 10 years R4 406 000
3. Borrow Money: Firstly when you borrow money to pay for Estate Duty and Capital Gains Tax it is paid out of After Tax Income. You also have to pay interest on the money borrowed. Thus if you borrowed R 1 000 000 at 10% interest it would cost you R1 998 000 over 5 years and R2 465 000 over 10 years.
This is also far too an expensive an option, for one needs to take into account the cost of lost opportunities. How much property could you buy if after receiving rent you still have a shortfall of R20 540 per month?
4. Life Assurance: When it comes to creating cash where there was no cash before to pay for your Death Bed Expenses, there is no product in the world which is as good as Life Assurance. Yes, I understand that people do not like Life assurance for the following reasons:
1. It is generally sold and people do not like to be sold something they cannot see or feel. You are buying something you will never benefit from other than the peace of mind of knowing that your family will be financially better off on your death with this product.
2. You are talking about your own mortality
3. There has never been any good press as far as Life Insurance is concerned. The press do not write stories of how a widow received R30 000 000 within 2 weeks of the death of their spouse.
4. Large amounts of commission could become payable depending on the size of the policy sold.
And yet, when it comes paying the above Death Bed Expenses it is without a doubt the most economical way of creating the cash to pay for these expenses. This is the product I recommend and, yes, I do earn commission on the policies I sell but I am solving the problem of paying these expenses in the most economical way
Life Assurance is Age, Sex, Income, Education and Smoker or Non-Smoker dependent and one would need expert advice on what Life Cover to take for different circumstances.
Example: R 1 000 000 Life Cover. A male, non smoker, with Matric earning R50 000 per month.
NB: The amounts below are for illistrative purposes only. One would need to have a personal quote done for them as as Age, Sex, Education, Earnings and Smoking Status are taken into account. A Smoker can expect to pay between 40% and 55% more for the same cover.
|Age Next||Premium||% of Sum Insured|
|30||R158 pm||.19% pa|
|40||R197 pm||.23% pa|
|50||R362 pm||.43% pa|
|60||R708 pm||.84% pa|
|70||R1 830 pm||2.1% pa|
|79||R4 308 pm||5.1% pa|