A very real problem with an “ubuntu” solution
Got an email from a client whose domestic worker has ±R50k saved in a unit trust fund and who wants to know if her (minor) kids would be able to get the funds if she dies.
The short answer is no, but this is not helpful. Not only would the kids (nor anyone else for that matter) not be able to repurchase the funds (they cant sign on her account) but they would also not be able to receive the proceeds of her estate as they are still minors. This raised a few issues for me:
- She needs to draft a will that provides for the establishment of a testamentary trust for her minor children and
- She needs to address the issue of “available funds” at her death for things like funeral expenses as well as funds for the ongoing maintenance of her children.
Typically this has been done by way of funeral policies. However, there is no underwriting (good and bad) and there is generally a one-size-fits-all approach so no matter how healthy or sick you are you tend to all pay the same premium. Funeral policies are VERY big business in SA with many different options but typically one could get ±R50k funeral cover for ±R100pm. There are many variations on this theme (extended family benefits can be included) and they all pay out within 24-48 hours of a claim.
Consider the following scenario though: the domestic worker in the example above is young (40), healthy and has a matric qualification. Based on this information she should be able to get the following benefits through a properly underwritten life policy:
- R400k life cover – this includes R20k funeral cover for the life insured and spouse as well as R10k for each child (there are some t’s and c’s that apply).
- R200k impairment cover – similar to disability but without the subjectivity of a disability claim.
- R200k severe illness cover.
- And all for ±R160 pm
Assuming she took out the cover and then later died – there would be R20k available immediately for funeral expenses and the remaining R380k would then be paid into her estate late account for transfer to the testamentary trust (along with her unit trusts). This would then be able to provide her minor children with a reasonable income that should see them through their school years.
I know that not everyone has matric*, nor are they necessarily healthy, but for those that do have a qualification and who are healthy, surely this has to be a better option than traditional funeral cover?
May I also go as far as to suggest that perhaps employers should take a more active interest in their domestic workers and their dependents. This could start by ensuring that they have a valid will and that they have some kind of life cover in place so that in the event of death there would at least be something for the dependents. Now this would be in the spirit of “Ubuntu”.
Note:*even without matric, you may well be able to source a reasonable amount of life cover – certainly much more than the average funeral policy would offer.