Question posted in the Insurance Law category relating to Gauteng
My estate will be sequestrated soon. (Issues around that are not at question now).
I have some life insurance policies where my wife is the owner and some where she is the beneficiary.
If I die before the sequestration date, will the proceeds of the policies form part of my insolvent estate or not as the proceeds are paid directly to her.
Same question, should I die after the sequestration date, will the proceeds be included, or excluded from my inslovent estate?
We are married out of community of property.
The issue is the date of my death so that the proceeds will still benefit my family. I must state that I am not suicidal, I have severe life threatening health issues, so my death is imminent. I just want to make sure whether or not it is worthwhile to keep on paying the insurance premiums as my sequestration and death are both imminent in the next few months.
Information Requested by Lawyer
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Answer to the Question
In relation to the life insurance policies where your wife is the owner, your sequestration won't affect that simply because your wife is the owner. She basically took out the insurance policy over your life.
Where your wife is the beneficiary, that might be an issue because I assume that you are the owner of the policy. In so far as the policy has a cash value, your trustee might very well cash in the policy in order to get money into your insolvent estate. If there is no cash value, then your trustee might cancel the policy and stop paying the premiums.
Q: If I die before the sequestration date, will the proceeds of the policies form part of my insolvent estate or not as the proceeds are paid directly to her? Yes, if you die before the sequestration date, that is the end of the application to sequestrate you. You can't sequestrate the dead. The proceeds of the policies will then be paid to her.
Q: Should I die after the sequestration date, will the proceeds be included, or excluded from my insolvent estate? Well, in so far as the policies might have a cash value, the trustee could call surrender the policy and elect to receive the cash value. In so far as the policies don't have a cash value, your trustee would simply cancel the policy and stop paying the premiums. If you were sequestrated on Monday, but died on Wednesday, then the policy would have continued and it would pay out according to the named beneficiary. i.e. your Wife. This means that the life insurance policy continues to pay out even if you are sequestrated. And because there is a named beneficiary, the proceeds would not fall into your estate.
Also, you need to realise that if you are sequestrated on Monday, and die on Wednesday, that is the end of the sequestration proceedings. The executor will take over the administration of the estate from the trustee and the executor will deal with the estate in terms of the Administration of Estates Act, instead of in terms of the Insolvency Act.