Matters with Raziah Ahmed
is a Persian story, about a man who sat in his house and prayed
to his lord for food for several days, and no food came, but
he continued to pray. One day, a bull came crashing through
his front door and he slaughtered the animal and fed himself.
He was hauled before the town jurists, and fined!
The jurists found that the animal, although present in his
house, was not his to use, and in fact the animal had escaped
from a nearby field, belonged to the neighbour, and had not
been provided by the lord for him.
In estate planning, the ownership title of property is very
important. Commonly, we mistake our ownership rights, or else
we encumber property with titles that are difficult to understand.
In my experience, actual wills have been drawn up bequeathing
property to persons, when the testator (person making the
will) did not have ownership of the property, and thus did
not have the right to give the property to anyone.
Let us examine the ownership rights in a simple arrangement
such as a bank account. The person or persons in whose name
the account exists, has/have ownership of the account. What
happens when the account holders die? It is important to recognise
the meaning of the conjunctions in joint accounts, that is
either, or, and. Different
institutions can attribute varying meanings to these titles.
The onus is upon the consumer to understand exactly whether
there are survivor rights or whether the account will be frozen
upon death of an individual.
There are distinct benefits if you title property in such
a way that it passes outside of a will. One obvious benefit
is that it escapes probate fees and costs. If money in the
account passes automatically to the survivor, financial hardship
can be avoided as well.
There are also advantages to ownership of a motor vehicle
in the name of two parties, rather than the typical case of
a single owner. An immediate problem that presents itself,
and one which is often overlooked, is the problem of insurance
for the motor vehicle, and the ability to sell off the vehicle,
if the survivor, is not an owner.
Many of us enjoy what are called no-claim discounts
that knock off up to 60 per cent of the cost of insurance.
Imagine the predicament of a wife, who has never owned a vehicle,
seeking insurance on the vehicle, which her husband leaves,
when he dies! Typically insurers will insure the vehicle in
the estate of the deceased. When the wife becomes
the owner of the vehicle, after legal proceedings, she will
be seeking motor insurance as a first-time owner, with no
discount. The premium is likely to be four to five times what
it may have been previously.
This could be avoided. In the case that the vehicle is not
being used, because the wife has another, without ownership
title, the wife is unable to sell the idle vehicle. Of course
the executor may make an application to the courts to sell
off property of the estate of the deceased. But that could
be avoided if the vehicle is jointly owned.
Other types of property allow beneficiary designations. For
example insurance contracts, pension plans and certain mutual
funds. This is an important option to utilise, if it exists.
To designate estate as a beneficiary is to engage
the courts, in order to gain ownership of the property. And
that is a time consuming affair, and neither praying for days,
nor fasting, can expedite the process of the law, as it obtains
in our courts.
Raziah Ahmed is a registered financial consultant