Mourning the loss of a loved one is difficult enough without the added anxiety of finalising their estate.
The administration of deceased estates is the process of winding up the affairs of the deceased and ensuring that the stipulations in the will are carried out correctly. Each individual’s assets, family and wishes are unique, often resulting in the deceased estate administration being a highly technical and complex process, requiring the assistance of a professional in the field.
A sudden death in the family can be shocking and traumatising. Here’s a guideline on the immediate steps to take following the death:
The administration process for estates of a gross value of R250 000 or more is defined in the Administration of Estates Act, in terms of which executors must follow these guidelines:
| Item | Guideline | Planning Timeframe |
|---|---|---|
| 1 | Notice of estate and appointment of executor | 6 to 10 weeks |
| 2 | Preparatory work for compilation of Liquidation and Distribution account | 6 to 24 weeks |
| 3 | Investigation of Liquidation and Distribution account by the Master | 4 to 8 weeks |
| 4 | Liquidation and Distribution account for inspection | 4 to 6 weeks |
| 5 | Finalisation of the estate (after inspection period and no objections lodged) | 4 to 8 weeks |
| Total Timeframe (of an average estate) | 6 to 13 months |
To appoint an executor in an estate, the Master of the High Court must be officially notified of the death. This is set in action by sending certain prescribed documents to the Master. When the Master receives the reporting documents, he examines them and satisfies himself as to the validity of the will (when applicable). If he is satisfied, he appoints the executor by issuing a “letter of executorship”.
Only on receipt thereof may the executor officially begin to administer the estate. However, while the executor is waiting for the letter of executorship, he obtains all available information and documentary evidence to determine assets and liabilities in the deceased’s estate.
When an executor is appointed in terms of a nomination in a will, the process is known as a “testamentary” appointment. This is a process of appointment which normally runs smoothly.
When a deceased does not leave a will, or does leave a will, but the executor nominated therein has already died, a process must be followed in which an executor is appointed “datively”.
This is a process where the major beneficiaries of the deceased must propose and nominate an executor. The interested beneficiaries written nominations must then be submitted to the Master for consideration. Should the Master approve the nominated executor, he will confirm the appointment.
However, the Master may reject the nominated executor’s application for certain reasons, and may refuse to confirm the appointment. He may even convene a meeting at which he requests the beneficiaries to nominate an executor.
However, it is not advisable not to nominate an executor by will, as a “dative” appointment may cause much valuable time to be lost, to the detriment of creditors and heirs.
In the case of estates, including community estates, with a gross value of less than R125 000 the Master may waive the official appointment of an executor to carry out the prescribed administration process.
This process takes approximately six to ten weeks.
Examination process
The examination process takes four to eight weeks
If there are no objections, the Liquidation and Distribution Account phase takes about four to six weeks.
The process of finalisation takes four to eight weeks.
The executor needs specific documents of the deceased to speed up the administration process. If certain documents, such as title deeds of fixed property or share certificates, cannot be traced, the executor must obtain duplicate documents at the expense of the estate, which may create a delay.
The successful administration of estates depends on the service from various external institutions, such as the South African Revenue Service, Master’s office, insurance companies and many more. The time spent by these institutions to finalise the affairs of the deceased affects the success with which the executor can conclude the affairs of the estate.
The executor must attend to income tax (including CGT) as well as all other tax aspects such as VAT as on the date of death. If the deceased’s tax affairs had not been recorded properly, the executor might experience problems in obtaining all the information and completing the necessary returns. As a result, valuable time could be lost.
The South African Revenue Service must also issue final assessments against the estate, and the processing of the final assessments may also cause valuable time to be lost.
Should the deceased have been involved in litigation before his/her death, the executor must evaluate the risk thereof to the estate, and perhaps continue with the litigation. If the litigation must be tried before a court, much time could be lost in obtaining a court date. It also has the potential that huge expenses will have to be incurred in calling witnesses and to prepare documentation for court purposes.
If the testator has died of unnatural causes, an inquest must be held. For this, witnesses must be called and the SA Police Services must submit their report to the court. The court must then deliver judgement on the circumstances of death. Due to the backlog facing the courts at present, valuable time will be lost. Executors need the judgement of the court to collect certain assets in the estate, such as accident benefits in terms of insurance policies and death benefits under insurance policies younger than two years.
Disputes and discord among the heirs can aggravate things for the executor. This also causes valuable time to be lost in negotiations with the heirs.
To eliminate unforeseen problems with the administration process of estates, it is advisable to have proper and regular estate planning of your affairs done by an expert, your adviser or broker. Proper estate planning will show up deficiencies in your affairs, which can then be addressed timeously. Your will should also be drafted by an expert in conjunction with the estate planning.
Heirs are responsible for the income tax levied on all income collected by the executor from date of death until the date on which the estate is finalised. At finalisation of the estate, the executor will provide the necessary statements reflecting the income accrued during the various fiscal years during which the estate was under administration. The onus rests on the heirs to state the income on their tax returns.
The executor will provide heirs with copies of the Liquidation and Distribution account, as well as the finalisation statements of the estate. Heirs should keep them for purposes of the new capital gains tax.
Disputes and discord among the heirs can also create delays for the executor
The following costs are typically payable from the funds in the estate during its execution:
Only an executor whose appointment has been confirmed by the Master of the High Court may manage the assets and liabilities forming part of the deceased’s estate. An executor’s duties are:
The executor must administer the assets of the deceased with utmost care and protect the interests of the creditors and heirs throughout the administration process. The executor reports to the Master of the High Court during the course of the administration process and the Master may request further particulars and specific documentary evidence from the executor at any time.
Once the executor has completed the administration process, as described in the Administration of Estates Act, they will be able to finalise the estate. This involves handing over the inheritances to the heirs.
